WSA verdict - IP Box relief not just if records are kept

On 28 October 2022, the Voivodeship Administrative Court (WSA) in Bialystok issued a judgement concerning a taxpayer's complaint against a written interpretation by the Director of the National Fiscal Information (KIS). The case concerned the condition indicated by the KIS as a necessary requirement for keeping records entitling to take advantage of the IP Box relief, i.e. preferential taxation of income generated from intellectual property rights on an ongoing basis.

KIS versus the taxpayer

It should be noted that in order to benefit from the IP Box relief, it is necessary to keep records of income, deductible costs and income attributable to each qualified intellectual property right. The taxpayer who challenged the aforementioned interpretation is engaged in a business of creating and developing software, in relation to which he intended to benefit from the preferential taxation at the rate of 5% under the IP Box relief for the years 2019-2021. Since 1 January 2021, the taxpayer has kept records of income, deductible expenses and income attributable to each qualified intellectual property right on an ongoing basis. In contrast, for earlier years, records were not kept up to date.

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The taxpayer applied to the Head of the KIS for an individual tax interpretation confirming the right to apply a reduced tax rate within the IP Box relief to income obtained from intellectual property rights created by him. In the interpretation issued, however, the authority stated that as no separate records had been kept since the beginning of the research and development activity, one of the prerequisites entitling the taxpayer to apply the preferential tax rate to the income obtained for the period before the records were kept, i.e. until 31 December 2020, had not been met.

The taxpayer challenged the decision of the KIS, and the court stated that the tax authority breached Article 30ca in relation to Article 30cb(1) and (2) of the PIT Act and the part of the individual interpretation challenged by the taxpayer was contrary to the legislation.

Consequently, the WSA overturned the individual interpretation in the part in which the tax authority recognised the taxpayer's position and ruled that the KIS, contrary to the express provision of the Act, required records to be kept "on an ongoing basis", i.e. groundlessly introduced an additional condition for benefiting from the IP Box relief.

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