Poland engaging in public consultation on reform of R&D incentives

Executive summary

On 21 February 2025, the Polish Ministry of Finance initiated public consultations regarding reform of the research and development (R&D) incentives system. The contemplated changes may help preserve the attractiveness of the R&D incentives in a changing tax environment.

Detailed discussion

Pillar Two effect on R&D incentives

Effective 1 January 2025 (with the option of retrospective application from 1 January 2024), Poland has introduced Pillar Two regulations implementing the requirements of the European Union directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups.

Top-up taxation may apply if the effective tax rate (ETR) in a given jurisdiction falls below 15%. The ETR is calculated taking into account tax incentives and exemptions, including R&D tax relief.

The Ministry of Finance has emphasized that preserving Poland's competitiveness as a business location, ensuring compliance with international standards and maintaining the attractiveness of R&D support, including for taxpayers subject to the top-up tax, are of key importance. Additionally, the Ministry highlights the need for swiftly implementing the changes so they can take effect from 1 January 2026, with possible application to 2025 as well.

Proposed models

The Ministry of Finance aims to develop a tax incentive mechanism that would meet the definition of a Qualified Refundable Tax Credit (QRTC). An incentive structured as a QRTC would be treated as income rather than a tax reduction, which would have a significant impact on the calculation of the ETR for top-up-tax purposes. To qualify as a QRTC, the tax relief should allow taxpayers to obtain a refund in cash or cash equivalent for the unused portion of the relief within a maximum of four years.

At the current stage of consultations, the Ministry of Finance has outlined two potential models. The first model involves developing R&D relief that meets the QRTC definition. Two options are being considered — one in which the relief would be deducted from taxable income, and another where it would be deducted directly from tax liability. A key issue addressed in consultations for this model was the potential cap on the refund.

The second proposed reform model involves two components. Material costs incurred in R&D activities would be settled within corporate income tax and meet the QRTC criteria. Personnel costs related to R&D activities would in turn be covered by a new relief settled solely through personal income tax advances. This part of the relief may not affect the ETR calculation for Pillar Two purposes, as it would reduce tax obligations other than those subject to the global minimum tax.

The Ministry has been open to considering input from the business community on investment decision-making by multinational enterprises. The proposed reform models will require further work and refinement. In this context, input from the business community will be very important in shaping their final form.

Next steps

The Ministry of Finance is continuing consultations, planning to develop a detailed framework in the coming months. Legislative changes are expected to take effect at the beginning of 2026, although the possibility of retroactive application — in a manner beneficial to taxpayers — is being considered already for 2025.

Implications

Given the strategic nature of this reform, it is crucial to monitor its progress and actively participate in the consultation process. It is also worth noting that discussions have also addressed other tax incentives, particularly those related to special economic zones.

Interested parties should reach out to their tax advisors for any assistance that may be needed to participate in the process of designing reformed rules.

For additional information concerning this Alert, please contact:

EY Doradztwo Podatkowe Krupa sp.k., Warsaw

• Andrzej Broda 
• Radoslaw Krupa 
• Michal Lesiuk 
• Marcin Opilowski 
• Magdalena Zalech
• Michal Koper 
• Filip Majdowski 
• Lukasz Gron 

Ernst & Young LLP (United States), Polish Tax Desk, New York

• Sylwia Migdal 

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.