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Changes in state aid in Poland – implementing regulations

7 February 2018

A draft regulation of the Council of Ministers on state aid for enterprises doing business in special economic zones in Poland has been published on the website of the Government Legislation Centre. It is the key implementing regulation to the planned legislation on supporting new investments.

Scope of the regulation on state aid (SEZ)

The regulation covers the following issues:

lines of business not eligible for state aid,
the rules for verifying the requirements which the investor will have to meet to receive a positive state aid decision,
the conditions for granting state aid in the form of tax exemption and the maximum state aid amount which can be granted to an enterprise,
costs eligible for aid for a new investment project,
how to organisationally separate the business covered by the decision on state aid and how to account for costs and expenses if the enterprise conducts also a business activity which is not subject to state aid,
how to discount the investment costs and the amount of the state aid as of the state aid decision date,
detailed (quality and quantity) criteria for issuing state aid decisions,
a template of the state aid application form.

Pursuant to the draft regulation, the decision granting the state aid will be issued after meeting quality and quantity criteria.

Quantity criteria and state aid in the SEZ

Quantity criteria are the minimum costs of an investment project in a municipality with a specific unemployment rate. The higher the unemployment rate in the municipality, the lower investment is required. Furthermore, in the case of investment projects in modern business services and micro, small and medium-sized enterprises, the detailed conditions related to quantity criteria are lower, respectively, by: 98% for micro enterprises, 95% for small enterprises, and 80% for medium-sized enterprises and modern business services.

Depending on the unemployment rate in the municipality in which the new investment project is to be implemented and on the enterprise size, an enterprise applying for state aid must meet one of the following quantity criteria:

in the municipality with the unemployment rate equal to or lower than 60% of the average national unemployment rate the enterprise undertakes to incur at least PLN 100 million of the project's eligible costs,
in the municipality with the unemployment rate higher than 60% of the average national unemployment rate but not higher than the national average, the enterprise undertakes to incur at least PLN 80 million of the project's eligible costs,
in the municipality with the unemployment rate higher than the average national unemployment rate but not higher than 130% of the national average the enterprise undertakes to incur at least PLN 60 million of the project's eligible costs,
in the municipality with the unemployment rate is higher than 130% of the average national unemployment rate but not higher than 160% the enterprise undertakes to incur at least PLN 40 million of the project's eligible costs,
in the municipality with the unemployment rate higher than 160% of the average national unemployment rate but not higher than 200% the enterprise undertakes to incur at least PLN 20 million of the project's eligible costs,
in the municipality with the unemployment rate higher than 200% of the average national unemployment rate but not higher than 250% the enterprise undertakes to incur at least PLN 15 million of the project's eligible costs,
in the municipality with the unemployment rate higher than 250% of the average national unemployment rate the enterprise undertakes to incur at least PLN 10 million of the project's eligible costs.

Quality criteria and state aid in the SEZ

The quality criteria follow from the Growth Policy Act (Journal of Laws of 2016, item 383, as amended).
They include:

creating high-paying jobs and offering steady employment,
investing in service projects in industries which fit the current national development policy and in which Poland may gain competitive advantage,
specific export levels,
collaboration with R&D centres or scientific units,
creating a modern business service centre operating also outside Poland,
investing in high-unemployment areas,
having a status of a micro, small or medium-sized enterprise,
investment project location,
contributing to the development of industry clusters,
carrying out R&D activity,
supporting employees in education and professional development,
taking additional care of the employee, e.g. offering additional medical plans to the employees.

For fulfilling each of the above criteria the enterprise scores 1 point. The maximum score is 10. To qualify for further processing the enterprise must get at least 6 points. If the investment project is located in the areas with the state aid intensity of 35%, the required score is 5, and if the investment project is located in the areas with the state aid intensity of 50%, the required score is 4.

Tax exemption – on what terms?

State aid will be granted in the form of tax exemptions under Article 17(1)(34a) of the Corporate Income Tax Act of 15 February 1992 or under Article 21(1)(63b) of the Personal Income Tax Act of 26 July 1991.

Like so far, the state aid will be calculated on the basis of:

the costs of the new investment project – the amount is calculated as the product of the maximum state aid intensity specified for the area and the incurred costs of investment projects eligible for the aid not higher than the eligible costs specified in the state aid decision; or
the number of new jobs – calculated as the product of the maximum state aid intensity specified for the area and two-year costs of labour of the new employees, which include the costs of gross wages of the employees, plus obligatory contributions such as social insurance contributions, incurred by the enterprise since the day of hiring the employees.

If the enterprise is awarded state aid under more than one state aid decision, the maximum amount of the aid may not be higher than the maximum amount of the aid following from each decision separately. Then, the aid available under each decision is determined pro rata to the share of the tax-exempt income under a given decision in the total tax-exempt income.

Depending on the investment project's location the decision is issued for 10, 12 or 15 years.

It has been suggested that the draft resolution should enter into force upon its promulgation, together with the legislation on supporting new investments. Both instruments are currently in the Legal Committee (January 2018).

In case of further questions, please do not hesitate to contact us. Our tax advisers in Rödl & Partner offices in Cracow, Gdansk, Gliwice, Poznan, Warsaw and Wroclaw will gladly review your documentation related to your investment in the Special Economic Zone in Poland and propose a solution to minimise your tax risks. We are also on hand to answer any other tax-related questions you may have. Our offices offer legal support in conducting business within a SEZ and in any other aspects of your operations.

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Katarzyna Judkowiak

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