In a recently issued judgment, the Supreme Administrative Court (NSA) dealt with the concept of general working time. It is essential in determining what part of employees’ remuneration may constitute an eligible cost for the purposes of the IP BOX relief.

In accordance with tax regulations, eligible costs include, among others, costs incurred in a given month for remuneration under the employment contract and social security contributions financed by the employer, to the extent that the time allocated to the implementation of research and development activities remains in the employee’s total working time in a given month.

NSA stated that the employee’s working time devoted to performing research and development work in a given month cannot include:

• vacation time,
• time of incapacity for work,
• days off for child care and
• other leaves from work.

In a rather unclear argument, NSA stated that it is unfounded to believe that the ratio of working time devoted to research and development activities to the entire time worked ‘can be transferred to the time’ of the employee’s justified absence and such a proportion (in mathematical operations it will be a numerator or a dividend) can be referred to total working time (in mathematical operations it will be the denominator or divisor). According to NSA, the concept of overall working time (in mathematical terms it is the denominator) cannot be influenced by the employee’s absence, i.e. this number is unchanged.

In turn, the correct understanding of the “general working time” term results in the fact that in each case the divisor (denominator) of the proportion should include a value corresponding to the nominal (total) working time (i.e. including various justified absences).

According to the Supreme Administrative Court, if it is recognized that the total working time means the time actually worked (i.e. excluding various justified absences), the value of “zero” could appear in the divisor (denominator) of this proportion (e.g. the employee was on sick leave for the entire month). . As the NSA pointed out, zero can never be a divisor because such a mathematical operation ‘does not make numerical sense’ and is impossible.

The opinion of NSA is questionable, because in such a case the number included in the numeral would be zero, too. The uniform interpretation of a given regulation and its uniform application for all real-life cases based on an unrealistic example (0 : 0 = 0) is controversial.

If the NSA is convinced that it is impossible to create a mathematical formula in which the divisor is zero, it is even more necessary to oppose a formula that would include zero both in the divisor and in the dividend.

Bernard Łukomski
Attorney-at-law
Tax advisor