Tax exemptions for foreign investors in Poland 2020
Zaktualizowano: 9 paź 2019
With the Polish Investment Zone, Poland remains a very competitive tax location haven for foreign investors. From this article, you will learn what the "Polish Investment Zone" programme is and which tax incentives can receive foreign companies investing in Poland?
What is "Polish Investment Zone"?
The "Polish Investment Zone" is a tax exemption programme for companies making new investments in Poland. The programme was introduced in 2018 by the Act of 10 May 2018 on support for new investments. In practice, the programme started in autumn 2018, when the implementing provisions of the law were adopted.
The program is available to both Polish and foreign companies. The support consists in granting tax exemptions in respect to investments carried out in Poland. Both large small/medium-sized companies can benefit from the support.
Previous tax exemptions - Special Economic Zones (SSE) in Poland
The "Polish Investment Zone" programme is based on the idea of special economic zones, which have been operating in Poland since 1995. The idea of economic zones was based on the establishment of special zones in Poland, where companies could invest and receive support in the form of tax exemption. The best known economic zones include Katowice Special Economic Zone (KSSE), Legnica Special Economic Zone (LSSE), Cracow Technology Park (KPT) and Euro-Park Mielec.
Such companies as Opel (formerly GM) in Gliwice, DaimlerAG/Mercedes-Benz in Jawor (Lower Silesia), LG in Kobierzyce, Toyota in Wałbrzych or IBM in Katowice (Katowice) have benefited from support in the special economic zones.
Support which could be obtained in the special economic zones was granted in form of exemptions from Polish corporation tax (CIT) or income tax (PIT) on income (profit) earned in a special economic zone in Poland.
However, this support was only available in certain locations, i.e. only on a land plot or office building that was included in the economic zones.
A total of 14 special economic zones have been created in Poland, the current area of which is over 22 000 ha. To illustrate it, the following figures can be compared - Poland is a country with an area of about 312,000 km2 and the special economic zones cover only about 22,000 hectares being 220 km2. The total area of the economic zones thus represented less than 0.0007% of the area of Poland.
The most important problem was that investors could invest only on a limited area. The accessibility of the areas was also problematic. In some zones, there was a lack of small plots, in others there was a lack of large plots. For service companies (e.g. call-centres or outsourcing centres) there have been only few available office spaces in special economic zones.
What does the "Polish Investment Zone" change for foreign investors?
The main change in the Polish Investment Zone programme is that the whole of Poland is now regarded as a special economic zone. For companies, this means that they no longer have to invest within the special economic zones. Investors can invest practically anywhere in Poland - even on a plot of land or in an office building that has never belonged to a special economic zone.
The support that investors receive has the form of tax exemptions. The amount of the exemption depends on the size of the investment, the size of the company and the level of economic development of the region where the investment is made.
The basis for calculating the corresponding exemption is the size of the investment. This takes into accountinvestment costs such as land, construction work, production machinery, equipment, etc. or the employment costs of new employees.
The support is calculated as a ratio of the investment size (from 5% to 75%).
Account is also be taken of the region, in which the investment will be carried out.
Depending on the strength of the regional economy, support ranges from 10% (only the capital Warsaw) to 25%(e.g. Silesia, Wielkopolskie or Lower Silesia), 35% (e.g. Lesser Poland, Opolskie, Lubuskie, Łódzkie, Świetokrzyskie or Kujawsko-Pomorskie) or up to 50% (Podkarpacie, Lublin, Podlasie or Warmia-Masuria).
The programme provides additional incentives for SMEs. Medium-sized companies (up to 250 employees) receive an additional 10% support and small companies (up to 50 employees) receive an additional 20% support.
The companies can then deduct the calculated tax credit (exemption) amount from the owed tax. For example, if an investor is granted a tax exemption of EUR 1,000,000, this amount can be deducted from the amount of the income tax or corporate income tax (PIT or CIT) which the investor would have to pay in Poland.
In practice, the tax exemption for foreign companies means that they will pay no tax in Poland for a certain period of time, even they will make profits. This exemption lasts until the amount of the exemption (eg. EUR 1,000,000) is exhausted.
In order for the companies to be able to benefit from the incentive, they must receive an administrative decision (so-called notice of support).
In the decision, the location of the investment, its scope, the cost amount and conditions that the investor should meet are explicitly stated.
Those decisions are issued by the management companies of Polish economic zones. Each of the 14 companies has been assigned an exclusive area for which it will issue notices of support. For example:
the Katowice Special Economic Zone (KSSE) is responsible for the Silesian Voivodeship,
in Lesser Poland (Małopolska) most of the decisions are issued by the Cracow Technology Park KPT,
for the Opole Voivodeship, the Katowice Special Economic Zone (eastern part of the voivodeship) or the Wałbrzych Special Economic Zone INVEST-PARK (western part of the voivodeship) will be responsible,
in Lower Silesia (Dolny Śląsk), the decisions are issued by the Kamiennogórska Special Economic Zone, the Wałbrzych Special Economic Zone or the Legnica Special Economic Zone,
for the voivodeship Lódź the special economic zone Lódź LSSE will be responsible and
in the Podkarpackie and Świętokrzystkie, most decisions are issued by the Special Economic Zone Euro-Park Mielec.
The tax exemption can be claimed for 10 to 15 years from the date of the decision of support.
The time for which exemption is granted depends on the level of economic development of the region:
in the voivodships of Mazovia (excluding Ciechanów-Plock region), Silesia, Lower Silesia, Wielkopolska - the decision is valid for 10 years,
in the voivodships of Opole, Lesser Poland (Małopolska), Lódź, Lubuskie, Świętokrzystkie, Kujawsko-Pomorskie, Pomerania, West Pomerania and Mazovia (the Ciechanów-Plock region) - the decision is valid for 12 years,
in the Podkarpackie, Lublin, Podlasie and Warmia-Masuria voivodships - the decision is valid for 15 years.
What exact tax exemption can foreign investors expect in Poland in 2020 and what are the conditions?
Within the framework of the "Polish Investment Zone" programme, entrepreneurs can count on significant tax exemptions.
Big companies, on the other hand, can expect support of 10% to 50% of the investment value.
Midsize companies receive a support between 20% and 60% of the investment costs.
For small companies, tax exemptions for new investments can range from 30% to 70%.
Investors will also benefit from what is meant by a "new investment". The following investments are eligible for tax exemptions:
establishment of a new business premises or opening of a new branch office
increasing the production capacity of an active company or extending workforce in a service center
diversification of production (introduction of a product not yet manufactured in the factory)
fundamental change of the production process in an already operating company.
All companies belonging to the industrial production and services sector may apply for tax exemptions for new investments.
Investment subsidies may also be granted to companies operating in the so-called sector of modern services. This includes classic call-centers, outsourcing centers, IT companies and engineering companies involved in technical research and analysis, as well as research and development centers (R&D).
The "Polish Investment Zone" programme sets out additional requirements regarding the conditions that investors must meet in order to obtain tax exemptions for investments.
The programme provides for two types of criteria - qualitative and quantitative.
In the case of quantitative criteria, minimum limits are laid down for the size of the investment. Tax exemptions are available only for investments whose size exceeds these minimum thresholds.
The limits are variable and depend on the local economy of the investment location - or more precisely on the level of unemployment at the time of the application for the notice of support.
The minimum size of the investment also depends on the size of the company itself.
And so companies have to invest according to region and company size:
Big companies must invest at least PLN 10 million / around EUR 2,32 million (in less developed regions) up to PLN 100 million / around EUR 23,2 million (in more developed regions).
Medium-sized companies must invest at least PLN 2 million / around EUR 0,46 million (in less developed regions) up to PLN 20 million / around EUR 4,65 million (in more developed regions),
Small enterprises must invest at least PLN 500,000 / around EUR 116,000 (in less developed regions) up to PLN 5 million / around EUR 1.16 million (in more developed regions).
The limits have been set, so that they apply to individual cities and communes. Therefore, even in the case of a voivodship, the level of the borders is very different. For example, in the Silesian Voivodeship (woj. śląskie) alone, there are places where exceeding the lowest limit is sufficient for the investment (depending on the size of the company, 0.5 million / 2 million / 10 million PLN) as well as places where it is a bit more difficult to achieve exemption for the investment (depending on the size of the company, at least 5 million / 20 million / 100 million PLN).
In addition to exceeding the minimum investment size, companies must also meet quality criteria.
In order to meet the quality criteria, the achievement of the minimum score in the criteria set by the legislator is required. The border again depends on the level of development of the region:
in the voivodships of Mazovia (excluding Ciechanów-Plock region), Silesia, Lower Silesia, Wielkopolska - companies need at least 6 points,
in the voivodships Opole, Lesser Poland, Lódź, Lubuskie, Świętokrzystkie, Kujawsko-Pomorskie, Pomerania, West Pomerania and Mazovia (Ciechanów-Plock region) - companies need 5 points,
in the Podkarpackie, Lublin, Podlaskie and Warmia-Masuria voivodships - companies need 4 points.
At the most an investor can obtain 10 points. The points will be awarded in the following categories:
research and development activities
location of the investment
promotion of employee development or the educational system
employee protection or
the creation of specialised or well-paid jobs.
In addition, an additional point is given to companies that are active (also as subcontractors) in so-called development industries - i.e. in industries that are particularly promoted by the Polish state, eg.:
production of passenger cars, trucks, buses, trams and trains
production of electrical and electronic equipment
production of hygiene articles, medicines and medical products
professional services for the business.
The "Polish Investment Zone" increases Poland's investment attractiveness
The "Polish Investment Zone" strengthens the attractiveness of Poland as a location for foreign investments. The support is available for both investors wishing to make a green-field investment or expand an existing investment in Poland.
With the programme, investors can now choose any place in Poland for their investment, not only the land plots and office spaces included in one of the Special Economic Zones.
It is equally important that the whole procedure for granting tax exemptions has been considerably simplified. This means, that the investors will be granted the exemption faster and they will need less time for the preparation of documents. This shortens the time between the decision to invest and the start of the investment.
The programme follows also the idea of supporting investments in profesional service centers (like SSC, outsourcing, IT, R&D, call-centers) in Poland as well small and medium-sized foreign companies wishing to invest in Poland.