How the R&D tax relief supports green innovations?

Companies are increasingly investing in sustainable development. Green innovations not only help protect the environment but also bring tangible business benefits. One of the tools supporting companies in this transformation is the Research and Development (R&D) tax relief, which allows for additional deductions of specific expenses from the tax base.

What is the R&D tax relief and how does it support green innovations?

The R&D tax relief is one of the most effective tax incentives, enabling additional deductions of eligible costs related to research and development activities.

Research and development (R&D) activities are defined as creative activities, including scientific research or development work, undertaken systematically to expand knowledge and apply it to create new solutions.

Key benefits of the R&D tax relief:

• The ability to deduct up to 200% of eligible costs.
• Available to companies of all industries and sizes, provided they conduct R&D activities.
• Supports eco-innovations that can enhance energy efficiency and improve companies’ environmental footprint.

What expenses can be deducted under the R&D tax relief?

The R&D tax relief allows for the deduction of up to 200% of eligible costs, depending on the type of expense.

Eligible costs under the R&D tax relief include:

• Employee expenses (including contracts of mandate and contracts for specific work).
• Purchase of specialized equipment (not classified as fixed assets) as well as materials and raw materials directly related to R&D activities.
• Costs of expert opinions, consultancy services, and equivalent services related to R&D.
• Costs of using scientific research equipment used exclusively for R&D activities.
• Costs of obtaining and maintaining patents, utility models, and industrial design rights.

The relief is available to companies regardless of their industry and size, provided they engage in research and development activities.

R&D tax relief and green innovations – project examples

The R&D tax relief covers a broad range of eco-innovation activities. In the energy sector, companies can determine whether their initiatives qualify as R&D activities.

For example, developing innovative methods for locating power cable failures or new structural designs may qualify as R&D activities.

(Tax ruling dated February 23, 2024, ref. 0114-KDIP2-1.4010.705.2023.2.AZ).

In the renewable energy sources (RES) sector, many projects meet the criteria for R&D activities, particularly in developing new technologies or methods that improve resource efficiency.

Examples of activities eligible for the R&D tax relief include:

• Analysis of actual energy consumption and various energy sources in rural areas.
• Development of innovative technologies.
• Advancing renewable energy technologies for underutilized agricultural production spaces.
• Analysis of the environmental impact of new energy sourcing and consumption methods, specifically for different rural areas.
• Work on diverse eco-energy technologies.
• Developing sustainable food production models for rural areas, leading to intelligent management systems for renewable energy production and consumption.

The Director of the National Tax Information confirmed in tax ruling dated March 6, 2024 (ref. 0111-KDIB1-3.4010.770.2023.2.JG), that the above activities meet the criteria for R&D activities.

How to benefit from the R&D tax relief?

Implementing the R&D tax relief in a company and correctly settling it requires proper preparation. We offer support in:

• Identifying R&D activities eligible for the relief.
• Verifying deductible costs.
• Properly documenting incurred expenses.
• Preparing applications for tax rulings to confirm that the conducted activities qualify as R&D.
• Final settlement of the R&D tax relief.

Conclusion

Sustainable development is becoming a key component of many companies’ strategies, and investments in green innovations can yield benefits for both the environment and businesses. The R&D tax relief provides significant support for companies engaged in research and development, allowing them to deduct up to 200% of costs associated with creating new technologies and solutions. Any creative process leading to the development of innovative products and services may qualify for this relief.

Want to check if your company can benefit from the R&D tax relief? Contact us!