Software must be understood in a broad sense
When determining the eligibility for the IP Box relief, a broad definition of a computer programme must be taken into account, taking into account contemporary software development processes and the views of the case-law, the Supreme Administrative Court ruled in a judgment of 29 November 2023 (ref. II FSK 25/23).
As explained by Marta Chacińska, project manager at Thedy & Partners, the IP Box relief was introduced to the PIT Act and the CIT Act in 2019, it refers to preferential taxation at a 5% tax rate of income earned by a taxpayer from qualified intellectual property rights, including copyright in a computer programme. According to the Tax Explanatory Notes of 15 July 2019 on the IP Box, a taxpayer wishing to benefit from the IP Box preference towards income from an author’s right to a computer programme and receive tax protection in this respect should apply for an individual interpretation.
This was the case in question, the taxpayer wishing to take advantage of the IP Box relief, applied to the Director of the National Fiscal Information with a request for an individual tax interpretation. However, the case did not concern a programmer, but a Project Manager who manages IT projects, obtains requirements from clients and on this basis develops the shape of the solution and creates project documentation, which allows a routine programmer to write source code on this basis.
The director of the Tax Chamber held that such project documentation could not be regarded as a qualified intellectual property right under the PIT Act, as it was not mentioned in the provisions on IP Box relief.
After challenging the interpretation, the WSA in Łódź agreed with the Taxpayer, indicating that understanding a computer program exclusively as a set of instructions that can cause the computer to perform a specific task or produce a specific result is contrary to both the case law and the provisions of Directive 2009/24/EC. The Preamble to the Directive indicates that the term computer program covers programs in any form, including preparatory design work.
Ultimately, the NSA shared the argumentation of the WSA, indicating that it would be an anachronism to limit oneself to a narrow definition of a computer programme. At the same time, the NSA confirmed that the Taxpayer should be deemed the creator of a computer programme, also in a situation where its contribution was the creation of design documentation.
The NSA judgment confirms the prevailing practice in case law, also the currently issued tax interpretations are mostly based on a broad definition of a computer programme, not limiting it only to the emerging source code. We can observe a similar trend with regard to the relief related to 50% tax-deductible costs of income earned for the transfer of copyrights for, inter alia, creative activity in the field of computer programmes.