Copyright-protected computer software and IP BOX relief

According to Article 1(1) and (2) point 1 Act on 4 February 1994 about copyright and related rights 1 (hereinafter: p.a.) the subject of copyright is any individual creative activity established in any form, regardless of the value, purpose and manner of expression.

one of the subjects of this law are computer programs which are protected like literary works – it includes all forms of their expression, except the ideas and principles underlying any element of these programs[2].

Preferential rate of taxation 5%, on the income from qualified intellectual property rights (IP BOX) will be applied to computer software if its development, extension or improvement is the result of research and development.

The tax authorities note that in such a situation, the copyright on the computer program should be given functional, purposeful and extenuating meanings, according to the OECD BEPS Report Action Plan No. 5 3 .

1. Introduction

Subject matter issued 27 July 2020 by the Director of National Tax Information tax interpretation was taxing income from commercialisation of intellectual property rights 4 Rate in height 5% The applicant operates a single business, pays a linear tax in Poland (19%) and earns revenue from computer programming.

He owns the software, which he continues to develop for new functionalities, and which under the agreement concluded with X company z o.o. is transferred to that company for the monthly remuneration received.

According to this agreement, the applicant provides its services in person and the software created by him concerns an innovative IT system that enables loan companies and banks to assess the reliability and creditworthiness of X's customers.

In addition, as indicated in the proposal, it is entirely responsible for the results of its R & D activities. By developing and improving the computer program, it gains income from qualified intellectual property rights.

2. Fulfillment of the conditions to benefit from the preferential rate

The applicant, justifying his position that his R & D activities should be subject to the IP BOX relief, referred to the conditions set out in this regard in the tax clarifications of the Ministry of Finance 5 and stated that it met the conditions such as creativity, systematicity, as well as increasing knowledge resources and their use in creating new applications.

The applicant shall not duplicate foreign patents and software.

He also pointed out that each time the result of his work is "a new source code, having an individual and creative character and constituting independent intellectual property and subject to legal protection on the basis of Article 74 p.a.’ Its programming services improve the software created and "any change in the improved or modified computer program involves changes in source codes and algorithms, resulting in the creation of a separate intellectual property right".

In the above-mentioned explanations of the Ministry of Finance, it is noted that if taxpayers want to benefit from the IP Box credit, they must keep separate records of all financial operations relating to the achievement of income from qualified intellectual property rights.[6].

The applicant reported that he kept such records, allowing for the separation of individual rights of this type and the determination of income, income and income costs (losses) for each of these eligible rights.

Director of KIS in an individual interpretation from 20 December 2019 considers that non-compliance with this condition excludes preferential application 5% IP BOX tax rate[7].

The author of the proposal asked whether, due to the existing 1 January 2019 IP Box regulations and tax laws, his work is a research and development activity with a remunerated transfer of copyright and can be applied to income from that activity 5% the tax rate in the annual settlement of the PIT?

According to his assessment, the fiscal response should confirm that opinion.

3. Security software like a literary track

The Director of KIS considered the applicant’s position to be correct and pointed out that it was important to identify the economic activities of the applicant, which could be considered as R & D, and in the present case, ‘the software created for the payer improved/improved and developed/developed the operation of the old programmes or created/created completely new functionalities’. He also pointed out that the software is defined as ‘the total of information in the form of a set of instructions, implemented interfaces and integrated data intended for the computer to achieve its intended purpose’, and that the applicant’s task is to continuously expand his qualifications, constantly acquire and deepen knowledge and skills, and to learn about modern software tools and techniques’.

The Director of KIS also cited paragraph numbered 34 of the OECD BEPS Report Action Plan No.

5, According to which "not only a copyright-protected computer program, but a wider copyright-protected software, may include in the qualified IP directory an act functionally equivalent to a patent (...) is novel, unobvious and useful, and therefore essentially results from innovative research and development activities whose conduct should stimulate IP BOX regulations".

Thus, in the assessment of the tax authority, ‘the software may, according to a reasonable and contextual interpretation (in the OECD Report) be considered eligible IP in the light of the expanding interpretation Article 30ca(2)(8) u.p.d.o.f. if its production, extension or improvement is the result of research and development’.

The applicant, keeping separate event records for IP BOX, also fulfilled one the conditions for applying the preferential tax rate.

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