IP BOX relief – what is it and who does it cover?

What is the IP BOX relief?

From 1 January 2019, entrepreneurs generating income from intellectual property rights may benefit from a preferential income tax rate. This is because, pursuant to Article 30ca(1) of the Act of 26 July 1991 on personal income tax (i.e. Journal of Laws of 2024, item 226, as amended; hereinafter: ‘the PIT Act’), the tax on qualified income from qualified intellectual property rights earned by a taxpayer in the course of non-agricultural business activity amounts to 5% of the tax base. The IP Box relief is therefore preferential taxation of income from qualifying intellectual property rights. The PIT Act sets out an exhaustive list of qualifying intellectual property rights. Pursuant to Article 30ca(2) of the PIT Act, these are:

1. patents,
2. utility model rights,
3. industrial design registration rights,
4. rights arising from the registration of an integrated circuit topography,
5. additional protection rights for a patent on a medicinal product or plant protection product,
6. rights arising from the registration of medicinal products and veterinary medicinal products authorised for marketing,
7. exclusive rights referred to in the Act of 26 June 2003 on the legal protection of plant varieties (Journal of Laws of 2021, item 213),
8. copyrights to computer programs

The IP Box relief is designed to encourage entrepreneurs to create innovative solutions and invest in technological development. In particular, companies in the IT, biotechnology, pharmaceutical and engineering sectors may benefit.

When can the IP Box relief be applied?

To be eligible for the IP Box relief, several key conditions must be met. First and foremost, the entrepreneur must:

1. Conduct research and development (R&D) activities – the IP Box relief is available only to taxpayers who carry out R&D activities. This means they must regularly engage in the creation of new or significantly improved products, processes or technologies.
2. Hold eligible intellectual property rights – The relief applies to income derived from rights protected by intellectual property law, such as the aforementioned patents, copyright or utility models.
3. Income must derive from commercialisation – To qualify for the preferential tax rate, income must result from the use or sale of a qualifying intellectual property right. This may include, for example, patent licensing, the sale of computer software, or production based on patented technology.
4. Calculation of the so-called nexus ratio – Businesses must calculate the nexus ratio, which determines what proportion of the income from a given intellectual property right qualifies for the relief. This ratio depends on the extent of the company’s involvement in the development of that right.

Why is it worth taking advantage of the IP Box relief?

The IP Box relief offers a significant opportunity to reduce the tax burden for companies investing in innovation and research and development. By allowing income from intellectual property rights to be taxed at a rate of 5%, taxpayers can save money which they can then reinvest in the development of their business. It is also an excellent tool for supporting competitiveness in the market. If your company is engaged in research and development and you are interested in taking advantage of the IP Box relief, it is worth consulting experts to correctly classify intellectual property rights and carry out the relevant tax calculations.

Author

Mateusz Sołkowicz

Associate

He specializes in tax law, focusing on the liability of taxpayers, payers and collectors, as well as issues related to income taxes and fiscal criminal law. Her master's thesis, defended at the Department of Financial Law at the University of Warsaw, dealt with tax and criminal liability for tax fraud in income taxes.

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