Challenges and opportunities - new rules in the Polish Investment Zone

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Challenges and opportunities - new rules in the Polish Investment Zone

Sponsored by

sponsored-firms-mddp.png
coins-948603 resized.jpg

Bartosz Głowacki of MDDP analyses the new rules surrounding the Polish Investment Zone, with significant tax windfalls to be found by intrepid investors.

From January 1 2023 there are new rules on regional investment state aid in the Polish Investment Zone. The Polish Investment Zone provides corporate income tax exemption in return for investment in specific regions. It applies to all types of taxpayers, such as individuals, partnerships, companies and other corporate bodies.

Part of the expenses incurred by making new investments returns via the personal income tax/ corporate income tax exemption. One may also ask for a state aid decision, valid for between 10 to 15 years. The amount of the exemption depends on the region, the value of the investment and the size of the enterprise. In general, the smaller the enterprise and the poorer the region, the bigger the exemption.

The most important change is that now the exemption applies only after the declared investment is completed, and it must be finished within three years. Previously, investors were allowed to benefit from the exemption right after first investment costs had been incurred and profit earned. That worked if the investment was made in parts that could operate separately before the process ended (like one production line out of many planned). Thanks to that approach the Polish Investment Zone (PIZ) allowance was more efficient. Now the exemption period will be shorter, and investors will be taxed if the investment starts to operate but is not formally finished. Further, even if the investment is completed before the deadline outlined in the support decision, this will not make the tax exemption available earlier.

Although the PIZ is available in most of Poland, there are some regions where it is not. Large enterprises will not be granted support for investments in the Wielkopolskie and Dolnośląskie regions as well as communes in Mazowieckie.

The list of sectors which do not qualify for PIZ exemptions has been also extended. For example, no-one will obtain support to produce weapons and ammunition.

What may be welcomed is that the minimum required investment value in the development of already existing business is now reduced by 50% for all. Previously, only medium and large enterprises could qualify for that discount. Considering that other discounts are still applicable (up to 98% for micro-enterprises), today the entry level for development investments is quite low.

Speaking of discounts – the 95% discount that used to apply to new investments by medium and large enterprises into modern business services now will apply if modern business services are the main function of the enterprise. Previously, modern business services had to be the only function of the enterprise. At present, this means a medium-sized entrepreneur may ask for support, such as some new IT investment, and a 95% discount will be granted even if there is some other activity possible.

Though consistently limited, the PIZ remains the most efficient instrument of tax support for development. Besides the PIZ, taxpayers are allowed additional deductions like the R&D allowance, robots allowance, test production and prototypes or CSR allowance. These however, in principle, cannot be combined with the PIZ exemption.

more across site & bottom lb ros

More from across our site

US partner Matthew Chen was named as potentially the first overseas PwC staffer implicated in the tax leaks scandal, in a dramatic week for the ‘big four’ firm
PwC alleged it has suffered identifiable loss and damage arising out of a former partner's unauthorised use of confidential information; in other news, Forvis Mazars unveiled its next UK CEO
Luxembourg saw the highest increase in tax-to-GDP ratio out of OECD countries in 2023, according to the organisation’s new Revenue Statistics report
Ryan’s VAT practice leader for Europe tells ITR about promoting kindness, playing the violincello and why tax being boring is a ‘ridiculous’ idea
Technology is on the way to relieve tax advisers tired by onerous pillar two preparations, says Russell Gammon of Tax Systems
A high number of granted APAs demonstrates the Italian tax authorities' commitment to resolving TP issues proactively, experts say
Malta risks ceding tax revenues to jurisdictions that adopt the global minimum tax sooner, the IMF said
The UK and what has been dubbed its ‘second empire’ have been found to be responsible for 26% of all countries’ tax losses by the Tax Justice Network
Ireland offers more than just its competitive corporate tax environment but a reduction in the US rate under a Trump administration could affect the country, experts tell ITR
The ‘big four’ firm was originally prohibited from tendering for government work until December 1 due to its tax leaks scandal, but ongoing investigations into the matter have seen the date extended
Gift this article