New rules governing special economic zones and state aid procedures in Poland are on the horizon

On 20 February 2018, the Polish Council of Ministers adopted a bill amending rules that govern business operations benefiting from CIT and PIT exemptions. Amendments had been announced some time ago, but their details remained unknown until recently. According to governmental sources, if work on new legislation runs as scheduled and detailed regulations are enacted this year, new rules applicable to special economic zone taxpayers will become effective in January 2019.

Amendments have been made to many special economic zone (SEZ) regulations, including the rating system and the procedure of issuing SEZ permits by SEZ managers. Entrepreneurs will also be able to apply for investment allowances in any location across the country.

Major changes include the introduction of qualitative and quantitative evaluation criteria for investment projects of entrepreneurs applying for state aid. Under current regulations entrepreneurs apply for permits to operate in the territory of an SEZ, but under new regulations they will apply for state aid to obtain CIT or PIT exemptions in the future. These qualitative and quantitative criteria will have a direct impact on the chances of being granted tax exemptions.

There are some drawbacks, though. Under new regulations, tax exemptions will depend on investment location and the size of a company applying for an exemption. Flexible periods of tax exemptions, ranging from ten up to fifteen years, are definitely a positive evolution. And so is the short procedure of obtaining decisions on state aid in contrast to the past procedure of having lands covered by SEZ status. However, due to the formal requirement of minimum capital expenditure, tax exemptions will be less available in well-developed regions with low unemployment rates. According to investment statistics, as many as 40% of entrepreneurs would not obtain a SEZ permit if they applied for state aid for projects under the new proposed regulations. Therefore, the economic picture of direct investments in Poland is likely to transform in 2019 with access to state aid being put to the test.

SEZ managers are taking on an increasing number of tasks in Poland’s regions. Not only do they support investors, but they also work closely with local governments and the Polish Investment and Trade Agency. They also engage in close cooperation with educational institutions to lend them support in workforce training for SEZ businesses and prepare many business-related projects relevant to further growth of regions where SEZ investors operate.

Author: Michał Sikora, Land, Technical and Special Economic Zone Consultant, Industrial and Logistics Agency, Cushman & Wakefield