Investment in modern technologies
The provisions of the Corporate Income Tax Act allow companies to benefit from tax relief on investments in modern technology, which also includes ERP systems. Unfortunately, many companies planning to invest in an integrated system decide not to use the relief, among other things, due to a lack of knowledge on the subject, thus missing out on the opportunity to lower the cost of SAP ERP implementation. Robert Stiller, Sales Director at Hicron provides information about the main terms of tax relief and the principles according to which it is granted.
Integrated systems such as SAP ERP have been successfully used in Polish enterprises for several years. Their widespread use has led to the common point of view among policy makers that an IT system has ceased to function as an innovation. Hence the concern of companies to ask if systems may indeed be regarded as new technologies, and thus the cost of SAP ERP implementation can be reduced by the use of relief. Based on the guidelines issued by the Ministry of Finance, companies that have decided to implement an ERP system can take advantage of tax relief for investments in modern technology.
“In the legal sense, modern technology is defined as an intangible or legal asset, the application allows the improvement of existing products or the creation of new ones. The main criterion for including a technology into a group of modern ones is the period of its existence. According to the existing regulations, the technology can be considered modern if it has been used for no longer than five years. In the case of systems this condition refers to a specific version of the software. So the company acquiring the software in the new version, released not earlier than five years before, is entitled to relief on this solution and thus can reduce the cost of implementing SAP or another ERP system“.- explains Robert Stiller.
For whom is the tax relief?
Apart from the period the information system has been available on the market, one of the criteria to be met in order to benefit from relief on its implementation is to get an objective opinion on the specific software being the subject of implementation. The published opinion must confirm the positive impact of the applied solutions on the quality of the services or products provided by the company and determine the degree of its innovation.
“The implementation partner and the software house can be helpful in obtaining such opinion. With the right tools at hand, they will help in estimating the rate of return on investment. Moreover, based on actual company data, they will enable the identification of areas of its activities in which the implementation will bring the greatest improvements. We perform this type of analysis for our customers repeatedly, providing legitimacy of the SAP ERP system implementation”. – says Robert Stiller.
“Another type of review required to obtain permission to use the tax relief is the opinion of a scientific body dealing with innovative solutions. In this respect, a SAP system meets all the formal requirements. In 2009, representatives of the Jagiellonian University issued such an opinion for the eSOA technological solution which is the basis for business SAP software and has full documentation”. – he added.
Most importantly, the relief can also be applied retrospectively by companies which have implemented computer systems in the past; in this case a correction to the tax returns is required.
Companies operating in special economic zones cannot benefit from the tax relief for investments in new technologies.
How much lower will be the cost of SAP ERP implementation?
“The relief allows a company to recover a part of this amount by paying lower taxes, giving tax relief to the value of 50 per cent of the expenditure incurred by the acquisition of new technology. For example, purchasing a system of a value of 1mn PLN, a company can include in the tax costs additional 500,000 PLN, which reduces income tax by 19% x 500,000 PLN which makes 95,000 PLN”. – explains Robert Stiller.
If you would like to receive additional information about the rules for granting the tax relief and other issues related to the financing of investments in the SAP ERP system or lowering the cost of implementation, please contact Hicron, using the contact form.