KUP50 – 50% tax deduction for IT- what requirements must be met?
Employees in the IT industry can benefit from an increased deductible cost. It is as high as 50% and results in much lower taxation. KUP50% tax deduction limits can only be applied to royalties from the transfer of copyrights. This solution is attractive both for the employer’s co-workers because it allows for an increase in the employee’s salary without additional costs for the employer.
Who can benefit from KUP50 – the 50% tax deduction?
Creators such as programmers, graphic designers, computer game designers and other professionals in the creative industry can benefit from the KUp50 tax relief. The application of increased tax deductible costs results in lower taxation for an employee or a person employed under a civil law contract.
Creative activity in IT
The legislator has provided for creative activities to be covered by the regulations, including the creation of computer programmes, game design or research and development activities.
However, it has not included a definition of creative activity. Therefore it is necessary to refer to the Copyright Act which determines creative activity as an activity leading to the creation of a new work that has the characteristic of novelty.
KUP – 50% tax deduction limits
Taxpayers can deduct 50% of their income, but there is a limit. The maximum deduction is PLN 120,000 per year.
KUP50 Requirements
However, taking advantage of the relief is possible after meeting certain conditions. Therefore, in order to avoid tax problems, it is necessary to carefully verify whether one can benefit from it.
The taxpayer should first establish whether the work was created as a result of creative work. The work must be in material form and there should be a transfer of copyright to the purchaser. This transfer must result from an employment contract or a civil law contract.
It is also important to remember about:
- indicating in the contract the amount of remuneration from the transfer of the copyright and the way of transfer of the rights.
- the keeping of appropriate records and registers by the payer, documenting the creation of works,
- having internal regulations concerning the created work (in the case of employees). Contracts should provide for the transfer of copyright to the employer or another entity and indicate the mode of transfer,
- having appropriate documentation to prove the work has been created and to indicate the amount for the transfer of copyright (in the case of a civil law contract).
In addition, the remuneration and how it is calculated should be included in the remuneration regulations. If it is deficient, this information must be regulated in the company’s internal regulations.
It is relevant to ensure that if 50% tax-deductible costs apply under an employment contract, the calculation of the remuneration resulting from the employment contract should meet the requirements specified in labor law.
Remember! Lack of appropriate records or documentation will result in the increased costs of authorship being very easy to challenge. This may put you at risk of not being able to benefit from the relief in case of a possible audit by the tax authorities.
Do you need help with KUP50% tax deduction? Contact our tax advisors for professional support in terms of documentation and compliance with legal requirements. Our experts will be happy to answer your questions and help you optimize your company’s tax processes.