Investment encouragments back
Investment incentives in SEZ
Special Economic Zone (SEZ) is part of Polish territory which is administered separately, allocated for the running of businesses on preferential terms. The SEZ is a place which is subject to special treatment and tax exemptions where an entrepreneur can establish a business on a specially prepared site and run it without paying income tax.
If a company decides to invest in one of the SEZ’s, the income which it receives from business carried out on its terrain will be exempt from income tax (CIT - from legal persons or PIT – on physical persons, depending on the legal form used to run the business).
In an SEZ the entrepreneur can obtain the following privileges
Exemption from income tax granted in the SEZ is regarded as publicly funded regional aid, which serves to speed up the development of the most poorly developed EU regions; by supporting new investments and creating new workplaces linked to these new investments.
Investment in fixed stock and also intangible or legal costs, involved with the formation of anew or the expansion of an existing business, the diversification of a firm’s production or the introduction of new additional products, or in the fundamental change of a complete production process of an existing business. The acquisition of an existing business which is in receivership or would have been wound up, if it had not been acquired by a new and independent investor - is also deemed a new investment.
The creation of new jobs in connection with new investments
The net growth in jobs of a given enterprise in connection with the realisation of a new investment, is in relation to the average employment in the firm, during the 12 months prior to the day that acceptance was granted.
New employees are those employed after the day on which acceptance of the new investment is granted, however, no later than three years from that time. The number of employees are those employed full time, together with those employed part time and also seasonal workers, calculated on a full time basis.
The permission to operate in SEZ:
The administrative-legal basis for being able to receive public assistance in a SEZ, is permission to set up a business in the SEZ, which is granted by the SEZ board.
The permitted level of regional aid available to the entrepreneur is dependant on:
The right of access to tax exemptions under the terms of a new investment in an SEZ, may be granted to an entrepreneur, on condition that:
1. there can be no transfer of any kind in the ownership of fixed assets, which are connected to investment expenditure – for a period of 5 years from the date of their entry into the inventory of fixed assets and intangible or legal expenses, according to the provisions on income tax, in the case of small and medium sized businesses for a period of 3 years;
2. the business will be conducted for a period of no less than 5 years, whilst in the case of small and medium sized businesses no less than 3 years;
3. new workplaces will be maintained for no less than 5 years, 3 years in the case of small and medium sized businesses.
Regional State Aid Map in Poland 2014-2020
The maximum permitted level of aid in each Polish region is shown on the map of regional aid. From the 1st July 2014 a new map of regional aid is in force for the years 2014 – 2020. In accordance with the map, the basic maximum level of regional public aid is expressed in percentages of the amount of aid which qualifies for the receipt of assistance, amounting to:
1. 35% - in area of the Świętokrzyskie region
The costs qualifying for cover under regional aid in a SEZ, i.e. costs forming the basis for calculating the maximum amount to be exempted from tax, could be:
depending on whether the tax exemption is in the form of aid for a new investment or as aid for new workplaces.
There is also the possibility of utilising both forms of aid simultaneously, on a condition that the joint amount of aid does not exceed the permitted maximum in a given investment; so that the maximum aid level is determined by the ratio of the aid’s intensity to the highest level of costs: the new investment, or two year costs of the newly employed staff.
Costs of new investment
- expenditure which make up the costs of realising a new investment, reduced by the deductible input VAT and by excise duties, if the possibility for the deduction is based on separate provisions, incurred in the area of the after receiving the permission for operate in SEZ, for:
1. purchase of land or the right to its perpetual use,
2. purchase or acquisition within their own scope of fixed assets on condition of their inclusion, in accordance with separate provisions, to the estate of the taxpayer,
3. development or modernisation of existing fixed assets,
4. purchase of intangible assets by the transfer of technology through the acquisition of patent rights, licenses, know-how or unpatented technical knowledge.
Costs linked to the acquisition of assets that are hired or leased, other than land or buildings, can only be taken into consideration, when the hire or lease is in the form of a financial lease and includes the obligation to acquire the assets at the end of the period of hire or leasing.
Fixed assets acquired by entrepreneurs - that are not for small or medium sized businesses - should be new.
The minimal level of investment enabling a firm to utilise the public aid under a SEZ is EUR 100 000.
The cost of work of newly employed staff is the gross cost over a two year period, increased by the mandatory payments linked with their employment, incurred by the employer from their first day of employment.
The maximum level of regional aid which can be granted for the realisation of a large investment project is limited in relation to its basic scope and is calculated by the following formula:
I = R x ( 50 million EUR + 0.5 x B + 0.34 x C),
Where the given symbols are:
I – the maximum amount of aid for a large investment project,
R – intensity of aid (depending on the area in which the investment is to be located),
B – size of the costs qualifying for the allocation of aid, over the equivalent of 50 million EUR – but not exceeding 100 million EUR,
C – size of costs qualifying for the allocation of aid over the amount of 100 million EUR.
A large investment project – is a new investment, undertaken over a period of three years by one or more investors, in the case where fixed assets are linked together, which are economically indivisible and where the qualifying costs for aid are jointly valued at over 50 million EUR, as calculated according to the prices and exchange rates, on the day permission is granted.
In the case of investment projects which do not exceed 50 million EUR, the aid ceiling for small businesses may be raised by 20 percentage points, medium sized businesses may receive aid increased by 10 percentage points.
Small businesses are defined as - a business which employs fewer than 50 workers, the annual turnover of which or the annual balance does not exceed 10 million EUR.
Medium sized businesses – those which are not small businesses, which employ fewer than 250 workers, the annual turnover of which does not exceed 50 million EUR, or whose annual balance does not exceed 43 million EUR.
Note:
The method of ascertaining whether a business qualifies in the category of SME (small and medium enterprise) is more complicated. The European Commission has issued a special booklet defining SME (you may downloading it from the bottom of the side).
Governmental grants
Scheme for the promotion of investments of priority interest for the Polish economy
Foreign investors carrying out new investments in Poland can count on receiving support under the “Scheme for the promotion of investments of priority interest for the Polish economy” (hereinafter referred to as the Scheme), a document adopted by the Council of Ministers on 23 September 2008. The main objective of the Scheme is to boost innovation and productivity of the Polish economy by increasing the inflow of technologically advanced investments and creating highly productive jobs.
Form of support
Support is provided in the form of a grant on the basis of a bilateral agreement concluded between the Minister of Economy and the investor, pursuant to the Council of Ministers’ resolution on the establishment of a multi-annual programme of support for the completion of the investment. The agreement lays down detailed conditions for the payment of the grant whilst respecting the principle that the grant is paid proportionately to the degree of fulfilling one’s commitments.
State aid
State aid offered under the Scheme is consistent with the rules on the award of state aid in the EU, that is with the Guidelines on national regional aid for 2007-2013 (Official Journal of the European Communities C 54 of 4 March 2006, page 13) and Commission Regulation (EC) no. 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General Block Exemption Regulation) (Official Journal of the European Communities L 214 of 9 August 2008, page 3).
The state aid awarded under the Scheme falls under the category of regional ad hoc aid and therefore it must, as a general rule, be notified to the European Commission before it is granted. In the case when ad hoc aid only supplements the aid granted under regional investment and employment aid schemes (e.g. income tax exemptions in the special economic zone) and does not exceed 50 % of the total amount of aid granted for a given investment, it is not subject to the mandatory notification.
The basis for the adoption by the Council of Ministers of a resolution on the establishment of a multi-annual programme of support for a given investment is Article 117 of the Act of 30 June 2005 on public finances (Journal of Laws No. 249, item 2104 with subsequent amendments).
Beneficiaries
Support can be applied for exclusively by entrepreneurs planning investments in the following priority sectors:
1. automotive sector,
2. electronic sector,
3. aviation sector,
4. modern services sector,
5. research and development,
6. biotechnology.
The Scheme is to provide support for initial investments under the two following categories:
1. Aid intended to cover the costs associated with the creation of new jobs.
Sector
New jobs
and
Eligible costs of the new investment
Amount of aid
Aid intended to cover the costs of job creation
automotive, electronics, aviation, biotechnology
250
PLN 40 million
PLN from 3 200 PLN to 18 700
modern services
250
-
R&D
35
PLN 3 million
significant investment in other sectors
500
PLN 1 million
2. Aid intended to cover eligible costs of a new investment.
Sector
New jobs
and
Eligible costs of the new investment
Amount of aid
Aid intended to cover eligible costs of the new investment.
automotive, electronics, aviation, biotechnology
50
PLN 160 million
1-10% of eligible costs
significant investment in other sectors
500
PLN 1 million
Under the Scheme, aid is provided exclusively for investment projects whose completion in Poland is conditional on receiving a financial grant from the State budget.
The operator of the Scheme and the authority granting state aid is the Minister of Economy. The Polish Information & Foreign Investment Agency (Polska Agencja Informacji i Inwestycji Zagranicznych S.A. - PAIiIZ) is responsible for preparing and providing the Interdepartmental Team for Foreign Investment (hereinafter referred to as the Team) with the dossier of investment projects and for preparing all documents required to carry out the entire procedure of providing financial support.
The Team is headed by a member of the directorate of the Ministry of the Economy responsible for matters of investment support.
Each project is subject to an individual assessment by the Team on the basis of detailed criteria laid down in the Scheme.
Procedure for the award of support:
1. The investor submits to PAIiIZ information on the planned project, using a standard form signed by persons authorized to represent the investor.
2. PAIiIZ provides the Chairman of the Team with standard information about the project and a draft offer of financial support, with a justification, or a negative recommendation as to the provision of support.
3. New proposals on support for investment projects are forwarded by PAIiIZ to the Chairman of the Team within three timeframes – by the end of February, by the end of June and by the end of October of a given year and in cases justified by the interest of the State also at different times and then the proposal may be examined by the Team at an ad hoc meeting. A decision on convening such a meeting is taken by the Chairman of the Team.
4. PAIiIZ informs the investor of the Team’s recommendation. The Investor takes a decision on accepting or rejecting the offer.
5. After accepting the offer, the investor applies to the Minister of Economy for a letter of intent confirming that the investment may commence.
6. The Minister of Economy sends to the investor a letter of intent confirming that the investment may commence and asks the President of the Council of Ministers for permission to establish a multi-annual support programme and carries out the required legislative procedure. Upon receipt of the letter of intent, the investor may start the investment.
7. After the adoption of the multi-annual support programme by the Council of Ministers, the Minister of Economy, as the authority awarding the aid, concludes with the investor an agreement on the award of a grant for the completion of the investment project.
The obligation to provide support to the investor arises after the investor and the Minister of Economy sign an agreement pursuant to the resolution adopted by the Council of Ministers on the establishment of a multi-annual programme of support for the completion of the investment.
Investment incentives in gminas (municipalities) - real estate tax exemption
One of the basic investment incentives which are available for entrepreneurs in gminas (municipalities) is the exemption from local taxes and charges. Pursuant to the Act of 12 January 1991 on local taxes and charges (hereinafter referred to as A.l.t.), municipalities have the right to fix tax rates and establish the above-mentioned exemptions from taxes and charges foreseen therein. What is of fundamental importance for entrepreneurs is the exemption from the real estate tax.
Items subject to the real estate tax
The following is subject to the real estate tax:
1. land,
2. buildings or parts thereof,
3. buildings or parts of buildings associated with conducting an economic activity.
Real estate tax payers
Real estate tax payers are natural persons, legal persons, organizational entities, including companies without the status of a legal person, which are owners or autonomous possessors of real estate or civil structures, perpetual usufructuaries or owners of State-owned real estate or parts thereof or civil structures or parts of civil structures belonging to the State or a local authority, if ownership results from an agreement concluded with the owner, Agricultural Property Agency or under a different legal title, and also without a legal title.
The amount of the real estate tax is set by a resolution of the municipal council, however, annual rates cannot exceed the limits specified in the A.l.t.
Exemption from real property tax
The municipal council (gmina council) may, by way of a resolution, establish exemption from real estate tax for entrepreneurs as one of the forms of state aid.
The aid provided in the form of exemption from real estate tax is equivalent to the value of the tax exemption. What is worth emphasizing is that the tax aid granted under resolutions of municipal councils constitutes the so-called “automatic aid”, which means that an entrepreneur is automatically entitled to exemption after fulfilling the conditions set out in the resolution of the municipal council. However, the intention to use aid always has to be notified in accordance with the model notification, which should be specified in the resolution of the municipal council. All investment expenditure incurred before the exemption cannot be regarded as eligible costs.
Exemptions from local taxes and charges may be introduced taking into account the conditions specified in:
Most often, municipal councils (gmina councils) introduce exemptions under the Decree of the Council of Ministers laying down the national aid scheme and within the framework of de minimis aid.
The exemption from the real estate tax under the Decree of the Council of Ministers
The Decree of the Council of Ministers on the conditions for exemptions from the real estate tax and the tax on means of transport, constituting regional investment aid, lays down framework conditions that a taxpayer must fulfil to benefit from regional investment aid in the form of exemption from the real estate tax.
Aid calculation method
The amount of aid may be calculated in relation to:
1. costs of investment in fixed assets and tangible and legal assets which are connected with the completion of a new investment, or
2. the costs of creating jobs associated with the completion of the new investment.
Conditions for the provision of aid:
1. informing the relevant tax authority, before the investment begins, of the intention to use aid. The resolution of the municipal council should specify the manner and form in which a notification should be made. Only the costs incurred after the submission of a notification can be included in the costs covered by the aid,
2. undertaking by the entrepreneur to cover at least 25 % of the costs qualifying for aid from his own funds or from external funding sources (other than public aid),
3. maintaining the investment in a given region for a period of at least 5 years, and in the case of SMEs for at least 3 years from the date of its completion,
4. in the case of aid calculated on the basis of the costs of creating new jobs, these jobs must be set up within 3 years of the completion of the investment, with the level of employment not lower that the average from the 12 months preceding the creation of jobs, and the newly-created jobs must be retained for at least 5 years, and in the case of SMEs for at least 3 years from the date on which they were set up.
De minimis aid in the form of exemption from real estate tax
The municipal council (gmina council) may introduce, by way of a resolution on an aid programme, tax exemptions in line with the solutions based on the Community legislation on de minimis aid, which releases the aid from the notification obligation, yet the content of the resolution must be communicated to the President of the Office for Competition and Consumer Protection.
The basic legal act governing the award of de minimis aid is the Commission Regulation (EC) No. 1998/2006 of 15 December 2006 on the application of Article 87 and 88 of the Treaty (Official Journal of the European Communities L.06.379.5), under which aid may also be granted in the road transport sector.
Ceilings for de minimis aid
The Regulation sets the ceiling for de minimis aid granted to any one undertaking, which cannot exceed EUR 200 000 and EUR 100 000 in the road transport sector over a period of three successive fiscal years. This aid is calculated by adding other aid received during the fiscal year concerned and the two previous fiscal years.
The scope of application
Resolutions on exemptions under the de minimis aid regulations may, in principle, relate to all local taxes and charges and they may be adopted irrespective of resolutions providing for different types of aid (regional aid, aid under group exemptions). In such a situation, however, separate rules for the application of exemptions should be used to avoid their duplication.
The obligation to issue de minimis aid certificates
The Act on the procedure in matters relating to public aid introduces the obligation to issue certificates stating that the awarded public aid is de minimis aid.
Update:08.12.2014
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