Poland: Polish Investment Zone Launched

The Polish Investment Zone (PSI), the new system of tax incentives for investors replacing the previous system of special economic zones (SSE), was effectively inaugurated on 5 September 2018 with the long awaited key secondary legislation implementing the Act on Support for New Investments published in the Official Journal (items 1698 and 1713) and coming into force on that date. Also published were regulations delegating the powers to grant support and monitor investors’ compliance with the aid decisions to the authorities managing the various regions forming the PSI.

There are now no legal obstacles to those wishing to formally apply for support from the PSI or to decisions being made in this regard. The decision-granting procedure is expected to take no more than one or two months, but this is early days yet and only time will tell just how long and complicated the procedure will actually prove to be.

Work to draft the regulations started in 2017 and details of the solutions eventually adopted evolved significantly over the course of the legislative process, so it makes sense for us to outline the changes (compared to earlier drafts) that found their way into the final version of the regulations setting out the terms and conditions for granting state aid and indicate the major elements that remained unchanged.

  • The minimum capital expenditure thresholds were left unchanged at PLN 10m in counties with unemployment levels exceeding 250 percent of the average level, up to PLN 100m in counties with unemployment levels of no more than 60 percent.
  • A new rule is that the lowest capital expenditure threshold (PLN 10m for large undertakings) will also apply to investment projects implemented in mid-sized towns experiencing a downturn in their social and economic functions (a list of which is attached to the regulation) and municipalities bordering on such towns.
  • The description of the services referred to in the original draft as “modern services for business and research and development work” for which the minimum capital expenditure threshold is reduced (also in the case of large undertakings) was elaborated with references to the Polish Classification of Products and Services (PKWiU) and statutory definitions, with this reduction now being hiked to a hefty 95 percent for these services (compared to the originally envisaged 80 percent).
  • Retained was the previously proposed clear-cut rule that the maximum eligible costs of the project declared by the investor may not exceed 130 percent of the minimum costs the investor is required to incur under the decision to grant support.
  • The rules for awarding points in the investment quality assessment procedure were thoroughly overhauled. The previously contemplated four assessment criteria (structural, scientific, sustainable and human resources development) were replaced with just two (sustainable economic development and sustainable social development) incorporating the detailed criteria proposed earlier — now defined with greater precision and to some extent differently (or very differently in places, such as where clusters are concerned). Some new criteria were also introduced, including the low environmental impact criterion.
  • Another new rule is that the proposed investment project must score at least one point for each of the two basic criteria in the quality assessment procedure (i.e., for sustainable economic development and sustainable social development) in addition to the required minimum number of points overall.
  • The rules for aid cumulation in cases where more than one decision to grant support was obtained were set out with greater precision, in a manner more advantageous to taxpayers.

Worth noting, further, is that rules with regard to the incentive effect have been retained largely unchanged in the new PSI system. Thus, if work on an investment project is commenced before applying for support under the new regime, this may render the project entirely ineligible for tax PSI relief (or other forms of state aid) or at least render some of the outlays on the project ineligible for support.

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Source: mondaq.com

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