Polish R&D Tax Relief in a Tax Capital Group: A Loss-Making R&D Subsidiary No Longer Blocks the Deduction

Supreme Administrative Court (NSA), judgment of 18 June 2026, case no. II FSK 1006/23 — what it means for foreign-owned groups in Poland

Key takeaways for investors

▪ In a Polish tax capital group (PGK), the group is the CIT taxpayer — so the R&D relief is measured against the group’s consolidated income, not the result of the company that does the research.

▪ A tax loss (or low income) in the R&D subsidiary does not limit the group’s right to deduct that subsidiary’s qualifying R&D costs in the same year.

▪ The R&D subsidiary must still keep the separate R&D cost records required by Art. 9(1b) of the CIT Act — the group relies on them.

▪ Consolidation is available only to Polish-seated companies. A foreign parent cannot join a PGK directly; a Polish holding or operating company must act as the group parent.

Status of the ruling — read before relying on it

The judgment was issued in an individual case and formally binds only in that case; it is not a resolution of an enlarged NSA bench. It does, however, come from the highest administrative court, dismisses the cassation appeal of the Director of National Tax Information (KIS) and confirms the earlier taxpayer-friendly judgment of the Voivodeship Administrative Court in Warsaw (VIII SA/Wa 36/23). Groups that plan to rely on it should still document their position carefully — tax authorities are not bound by it in other cases.

Why this matters for foreign-owned groups

International investors often set up their Polish operations in two or more companies: a manufacturing, sales or shared-services entity that generates profit, and a separate engineering or technology company that develops products, software or processes for the group. The second entity typically carries heavy costs — engineering salaries, prototypes, testing, laboratory equipment — long before its work produces matching revenue. On a stand-alone basis it therefore reports a tax loss or only a small profit.

Poland’s R&D relief (ulga B+R, Art. 18d of the CIT Act) allows qualifying R&D costs to be deducted a second time from the tax base, on top of their ordinary deduction as tax-deductible costs. However, the deduction may not exceed the taxpayer’s income in a given year. For a loss-making R&D company operating alone, the relief can only be carried forward for up to six years — the cash benefit is deferred.

Grouping the profitable and the R&D-intensive companies in a Polish tax capital group (podatkowa grupa kapitałowa, PGK) is one way to use the relief immediately. Until now, however, the tax authorities argued that this benefit was largely blocked. The NSA has now rejected that view.

A short primer: the Polish tax capital group (PGK)

A PGK is Poland’s form of CIT consolidation. Unlike fiscal unity regimes in some other jurisdictions, it is a separate taxpayer in its own right (Art. 1a of the CIT Act). The main conditions are summarised below.

Eligible entities	At least two Polish-seated companies with legal personality: sp. z o.o. (LLC), S.A. (joint-stock company) or P.S.A. (simple joint-stock company).
Ownership link	A parent company holding directly at least 75% of the share capital of each subsidiary.
Capital	Average share capital of at least PLN 250,000 per company.
Formalities	Written agreement for at least three tax years, registered with the head of the competent tax office; no tax arrears in the member companies.
Key consequence	The group, not its members, is the CIT taxpayer: income and losses of all members are netted into one tax base.

For a foreign investor, the practical point is structural: the foreign parent itself cannot be a member of the group. Consolidation requires a Polish company at the top of the Polish sub-structure that holds at least 75% of each subsidiary directly. Groups that own their Polish companies in parallel from abroad would need to reorganise first — which has its own tax and corporate consequences and should be analysed in advance.

The dispute: whose result caps the R&D deduction?

The case concerned a PGK made up of two companies: a parent carrying on production and service activities, which generated the group’s income, and a subsidiary that conducted R&D and incurred the qualifying costs, while reporting a tax loss. The group asked for a tax ruling confirming that it could deduct the subsidiary’s qualifying costs from the tax base calculated for the group as a whole.

The tax authority’s position

In its individual tax ruling of 23 November 2022 (0111-KDIB1-3.4010.733.2022.1.IZ), the Director of KIS accepted that the PGK is the taxpayer but made the relief dependent on the result of the company actually carrying out R&D. In the authority’s view:

if the R&D company made a loss in a given year, the group could not deduct its qualifying costs at all in that year;
if the R&D company made income lower than its qualifying costs, the deduction would be limited to that income.

The authority relied on Art. 18d(8) of the CIT Act, which allows unused relief to be carried forward when the “taxpayer” incurs a loss or its income is insufficient.

The group’s position

The group argued that because the PGK — not the individual companies — is the CIT taxpayer, every limitation referring to the “taxpayer” must be applied to the group’s result. Both the Voivodeship Administrative Court in Warsaw and, now, the NSA agreed.

The court’s reasoning in four steps

The group is the taxpayer. Under Art. 1a(1) of the CIT Act, a properly formed PGK is a single, separate CIT taxpayer. During the life of the group, member companies are not independent taxpayers.
Members calculate income or loss — not a tax base. Under Art. 7a(1), the group’s income is the surplus of the sum of the members’ income over the sum of their losses. Each member computes only its income or loss, which feeds into the group result; the tax base is determined solely for the group.
The relief is deducted from the tax base. 18d(1) allows qualifying costs to be deducted from the tax base determined under Art. 18, and for a PGK that base is derived from the consolidated income under Art. 7a. The deduction therefore takes place only at group level; the member company itself cannot claim the relief.
The cap follows the taxpayer. Both the annual cap in Art. 18d(1) and the carry-forward mechanism in Art. 18d(8) refer to the “taxpayer”. Since the taxpayer is the group, the group’s income is decisive. Reading a company-level limit into the provision would add a condition the legislator did not enact.

The NSA also criticised the authority’s approach as a selective, purely literal reading that ignored systemic and purposive interpretation, and found that the authority had not convincingly explained why a member company’s loss should cap the group’s deduction — a breach of the principle that proceedings must build trust in the tax authorities.

Illustration: what is at stake

The simplified example below shows the difference between the two readings for a group consisting of a profitable manufacturing parent and a loss-making R&D subsidiary. It assumes the standard 19% CIT rate and, for clarity, applies the deduction at 100% of qualifying costs (ignoring any enhanced rate for personnel costs).

	Tax authority’s view	NSA’s view
Taxable income of the parent (manufacturing)	PLN 10,000,000	PLN 10,000,000
Tax loss of the R&D subsidiary	(PLN 2,000,000)	(PLN 2,000,000)
Consolidated income of the group	PLN 8,000,000	PLN 8,000,000
Qualifying R&D costs of the subsidiary	PLN 3,000,000	PLN 3,000,000
R&D deduction allowed in the year	PLN 0	PLN 3,000,000
Tax base after the deduction	PLN 8,000,000	PLN 5,000,000
CIT at 19%	PLN 1,520,000	PLN 950,000

Under the authority’s reading, the PLN 3 million deduction would not be available in the year the costs were incurred and could at best be carried forward. Under the NSA’s reading, the group saves PLN 570,000 of CIT in the same year — a direct cash-flow effect, which is particularly valuable during the development phase of a new product or technology.

What the judgment does not change

Documentation stays at company level. The R&D subsidiary must keep separate records of its R&D costs under Art. 9(1b) of the CIT Act. The court expressly noted that the group uses these records to calculate its tax. Weak records at the subsidiary remain the most common reason for challenges on audit.
The group-level cap still applies. The deduction cannot exceed the group’s income (other than capital gains income). If the group as a whole has insufficient income, the unused relief is carried forward for up to six years.
Qualifying-cost rules are unchanged. Only the costs listed in Art. 18d(2)–(3) qualify; costs reimbursed to the taxpayer in any form or deducted under other preferences cannot be deducted twice.
Contract R&D needs separate analysis. Where a Polish company performs R&D as a service for a foreign group entity that bears the economic risk and owns the results, the right to the relief and the transfer pricing position must be reviewed on their own terms — the PGK judgment does not address this.

Practical checklist

Map where R&D activity and qualifying costs sit in your Polish structure, and which entities generate taxable income.
If the companies are not yet grouped, test whether a PGK is feasible (Polish parent, 75% direct holding, capital, no tax arrears) and whether its wider effects — e.g. on special economic zone or Polish Investment Zone exemptions and intra-group transactions — are acceptable.
If you already operate a PGK and limited the R&D deduction to the R&D company’s own income in past years, consider whether earlier CIT returns can be corrected, subject to the limitation period.
Review the R&D cost records at the level of each member company and make sure they reconcile with the CIT/BR schedule filed by the group.
For significant amounts, consider an individual tax ruling that refers to the NSA judgment to secure the position.

How ATL Law can help

We advise international groups on using Polish R&D relief safely within tax capital groups and other structures. Our work includes:

auditing R&D relief settlements within a PGK and reviewing how qualifying costs are identified at company level and deducted at group level;
designing and organising the statutory R&D cost records so they withstand a tax audit;
structuring innovation activities within the group, including concentrating R&D in a dedicated company and assessing whether a PGK makes sense for your Polish operations;
representing clients in tax ruling proceedings and in disputes before tax authorities and administrative courts, based on the current case law.

About ATL Law

ATL Law — Anna Błaszak Kancelaria Radcy Prawnego is a Polish commercial law firm with offices in Kraków, Warsaw and Katowice, advising foreign investors on corporate, tax, employment and cross-border matters. We support clients from market entry and structuring through day-to-day compliance to representation before Polish authorities and courts.

office@atl-law.pl

This article is for general information only and does not constitute legal or tax advice. Legal status as at September 2026.