This is to alert you to a case which was decided by the Supreme Administrative Court (SAC) on 5 February 2021, favourably for taxpayers (case no. II FSK 1038/19). The court dealt with the issue of whether remuneration payable to employees during their holiday or sick leaves constitutes a qualified cost that may be deducted for tax purposes as part of the research and development allowance.

SAC upheld the earlier judgment of the Provincial Administrative Court in Szczecin dated 13 February 2019 (case no. I SA/Sz 835/18). In explaining the reasons for its decision, SAC referred to the Labour Code regulations which provide that employment remuneration includes, among other items, payment for the time of sickness or leave. Therefore, a payment of this kind is part of employment income for the purposes of Article 12(1) of the PIT Act and as such may be treated as a qualified cost related to the remuneration of employees involved in R&D activities.

This is the first taxpayer-friendly judgment the SAC has given in such a case. Yet, tax authorities continue to consistently rule that an employee who is absent for justified reasons, such as a leave, is not engaging in research and development activities so that their remuneration for that time, together with employer-funded statutory contributions, will not be a qualified cost for the purposes of the CIT Act.

The SAC has not issued a written statement of reasons for the judgment yet. We will keep you up-to-date with the development of this case law.

If these issues pertain to your business and you are interested in our assistance, please contact your WTS&SAJA consultant.

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