The nexus indicator determines what part of the income from a qualified intellectual-property right may be taxed at the 5% rate under IP Box. It ranges from 0 to 1 and depends on who carried out the research and development work: the taxpayer themselves and unrelated entities raise the indicator, while related entities and the purchase of a finished right lower it. A programmer working alone usually achieves a nexus of 1, but a single contract with a family member's firm can reduce it heavily.
The formula and its logic
Article 30ca(4) of the PIT Act defines qualified income as the product of income from the qualified right and the indicator:
nexus = (a + b) × 1.3 / (a + b + c + d)
The letters denote costs actually incurred by the taxpayer on: a — own research and development activity, b — results of work bought from unrelated entities, c — results of work bought from related entities, d — purchase of a qualified right. If the result exceeds 1, it is capped at 1.
The formula comes from the OECD recommendations on preferences for intellectual property. Their aim is for the low rate to be received by the one who actually carries out the creative work, not by the one who buys finished results in a group of related firms. The 1.3 multiplier gives a certain buffer: a small share of c and d costs need not reduce the indicator below 1.
The other conditions of the relief — R&D activity, form of taxation, settlement in the return — are discussed in the article IP Box — 5% relief for programmers.
Which specific outlays go into particular letters and which are excluded from the formula is described in the article Direct costs in IP Box.
Three rules of calculation
Separately for each right
Nexus is calculated separately for income from each qualified right. Where attributing income to individual rights is not possible, the Act allows calculating it for the same type of product or service or a group of them. With several programs developed for different clients, several indicators of different values may therefore arise.
Cumulatively over the years
According to the Ministry of Finance's guidelines of 15 July 2019, the indicator is calculated cumulatively: costs from successive years of developing a given right enter the formula, not only those of the current year. Costs incurred after 31 December 2012 may also be taken into account, if they relate to the same right and are documented. High letter-c costs in one year will therefore reduce the indicator in subsequent years too.
Only costs paid
The guidelines understand "cost actually incurred" as a settled liability, including by set-off. A subcontractor's invoice unpaid as at 31 December will enter the formula only in the year of payment.
Four examples
| Situation | a | b | c | d | Nexus |
|---|---|---|---|---|---|
| Programmer works alone, buys equipment and licences | PLN 15,000 | 0 | 0 | 0 | 1 |
| Part of the code is written by an independent subcontractor | PLN 15,000 | PLN 25,000 | 0 | 0 | 1 |
| Part of the code is written by the spouse's firm (related entity) | PLN 15,000 | 0 | PLN 25,000 | 0 | 0.49 |
| Programmer buys rights to a library and develops it | PLN 15,000 | 0 | 0 | PLN 10,000 | 0.78 |
In the third row: 15,000 × 1.3 = PLN 19,500, divided by PLN 40,000 gives 0.4875, or rounded 0.49. In the fourth: 19,500 / 25,000 = 0.78.
What it costs in tax
Assume that income from the qualified right in 2026 is PLN 200,000, and the entrepreneur settles other income at 19% flat tax.
- Nexus 1: the entire PLN 200,000 is taxed at 5%, i.e. PLN 10,000 of tax.
- Nexus 0.49: PLN 98,000 at 5% (PLN 4,900) and PLN 102,000 at 19% (PLN 19,380) — in total PLN 24,280.
The difference exceeds PLN 14,000 per year, and because of the cumulative count it may repeat in subsequent years. Before commissioning work from a related entity, it is therefore worth calculating the impact on the indicator. Prices in such transactions must also match market conditions.
What if there are almost no costs
Where a programmer's only input is their own work, the numerator and denominator may be close to zero. Own work is not a cost and does not enter the formula. In the guidelines the Ministry assumes that for natural persons whose work is based mainly on their own labour the indicator will most often be equal or close to 1, because they incur no costs under letters c and d.
The Act does not, however, resolve the situation of no cost at all. It is safer to ensure that documented letter-a costs appear in the register — equipment, software, tools used in creating the right — and in case of doubt to confirm the method of calculation in an individual tax interpretation.
Most common mistakes in calculation
- Calculating the indicator only from the current year's costs instead of cumulatively.
- A single indicator for the entire activity despite several separate rights.
- Putting a related subcontractor under letter b, because "they have their own firm".
- Including office rent, interest or bank commissions in the formula.
- Recognising invoices unpaid at year-end.
The data for the formula should follow directly from the separate register described in the article The IP Box register.
How Good Balance can help
We calculate the nexus indicator cumulatively for each right, check the links with subcontractors and prepare the data for the return. In atypical situations, e.g. with zero costs or the purchase of rights, we prepare an application for an individual tax interpretation.