IP Box in practice — how to account for IP-derived income
- #IP Box
- #taxes
- #CIT
- #IT
Who's eligible
Programmers, creators, designers, scientists and IT companies that earn from intellectual property they have created themselves — their own algorithms, code, patents, industrial designs.
Rate: 5% PIT/CIT on qualified income. For comparison: standard scale is 12–32% PIT or 9–19% CIT.
What qualifies as IP
Qualified IP rights (KPWI):
- copyright in computer programs,
- patents,
- registered industrial designs and trademarks,
- supplementary protection certificates for medicinal products,
- exclusive plant variety rights.
Most common: computer program code.
Three conditions, no exceptions
1. Created / developed / improved. Purchased rights don't qualify — it has to be your creative work. Outsourcing core code to a subcontractor doesn't fit either.
2. R&D activity. IP Box comes bundled with R&D. You have to keep an R&D log (who, how many hours, on what) — separate from the IP records.
3. Records of qualified income. A separate "ledger" for each right: how much income, what costs, what result. Without this — no relief.
The nexus ratio
Qualified income is multiplied by the nexus ratio — the share of your own work in total creation costs.
A low ratio = low relief. The ratio drops when:
- a large share of the work is subcontracted (B2B),
- the IP was bought in and only enhanced,
- you have significant licences to third-party IP embedded in your product.
Common mistakes
- No contract split — a developer works on both the IP and on client support. Without a documented split — the whole income loses qualified status.
- Too broad an IP definition in records — e.g. "all 2025 projects". The tax office wants a breakdown by specific code/product/project.
- No individual tax ruling. Without one, every audit is a lottery.
Realistic timeline
- Audit → 2–3 weeks.
- Tax ruling application → 3–6 months waiting.
- First settlement → after the first full year close.
We run IP Box engagements end-to-end, from eligibility audit to writing the ruling application. Typical outcome: 50–70% income tax reduction for IT firms.