The Regulation of the Council of Ministers on state aid granted to some entrepreneurs for the new investments of 28 August 2018 came into force on September 5th, 2018. It implemented the Act of May 10th, 2018 on supporting new investments, which is valid from June 29th, 2018. So far the submission of applications for this type of support was not possible due to lack of other regulations of the new instrument. On the other hand, the possibility of applying for exemption in accordance with the SSE regulations has been blocked for over two months. Therefore the entrepreneurs did not have a chance to be granted state aid for the investment in that time.
Due to the Regulation the investors are now able to apply for tax exemptions under the new regulations.
The new instrument is also available for micro, small and medium-sized companies that will benefit from certain preferences in the process of granting income tax exemptions.
Already issued special economic zone (SEZ) permits will still function according to the previous SEZ regulations, including the act on special economic zones. However, enterprises planning to implement a new investment and obtaining an income tax exemption on this account will be required to follow the new regulations. They may be completely new investors, who have not operated in SEZ before or entities that have already benefited from state aid within the SEZ, but are planning further investment projects within or outside the SEZ.
For over 20 years obtaining a tax exemption was possible only in the areas covered by the status of a special economic zone, the new law expands it throughout Poland. Eliminating territorial restrictions in the location of the investments along with shortening the procedure of granting aid is particularly important for the investors.
Investment’s location will affect the time period during which investor can use the tax exemption.:
The investments in the areas of existing SEZ regardless of the general intensity of state aid in a given region will also receive support for maximum 15 years. Determining a fixed, maximum deadline for using the tax exemption is a favorable change compared to the current SEZ system, in which entrepreneurs can only benefit from the exemption until the end of 2026.
The amount of tax exemption granted will depend on the value of the investment, its location and the size of the company itself. The smaller the company and the further to the east the investment is located (i.e. in voivodships of Eastern Poland), the higher the intensity of aid. The above-mentioned basic aid intensities refer to large companies, while for micro-, small- and medium-sized companies, these intensities are respectively 20% and 10% higher.
However, income tax exemptions for the implementation of a new investment are not available for all the investors planning such projects. Assessing whether an investment may benefit from the support, the fulfillment of quantitative criteria (i.e. the minimum investment value) along with a number of qualitative criteria will be verified. Consequently, meeting numerous criteria may be difficult or even unachievable for some projects.
The required minimum investment value will depend primarily on the location of the investment, the size of the enterprise and the type of the business activity covered by the project. As a general rule, the higher the unemployment rate in a given area, the lower the minimum investment value. It will range from PLN 10 to 100 million. For example, the lowest value of 10 million will apply to large companies implementing investment in a poviat with an unemployment rate higher than 250% of the average unemployment rate in the country. IT will be also applied to investments in one of the 122 preferred cities and communes bordering such a city.
For medium-, small- and micro- enterprises, much lower quantitative criteria were introduced (the required minimum investment value was reduced by 80%, 95% and 98% respectively in comparison to the criteria applied to large companies). The quantitative criterion, alleviated by as much as 95%, will also apply to investments in modern business services and research and development activities, even if they are implemented by large companies, regardless of their location.
In addition to the quantitative criterion, the investment will be awarded with points for fulfilling the following quality criteria:
An additional criterion for industrial projects will be:
For the projects in the services sector, two additional criteria are provided:
The minimum point limit in the quality criteria is from 4 to 6 points out of 10. The limit required to be obtained depends on the location of the investment - preferences are provided for investments in less developed voivodships.
In order to obtain a tax exemption under the new support instrument, an appropriate application for support should be submitted. An administrative decision will be issued by the special economic zones within 1-2 months. Until the decision is obtained, the investor cannot start the investment.
„The change of SEZ provisions is an opportunity for development, especially for small and medium-sized enterprises, modern business services and R & D sectors, as well as for medium-sized cities, since the changed system provides them with the highest preferences”
“Analyzing the project evaluation criteria, it seems that obtaining the CIT exemption may be more difficult in comparison to the previous system of special economic zones. The required minimum investment value may be a potential problem. While the SME sector is provided with quite large limits, even up to 98% relative to the value required from large companies, for large companies, they can reach up to 100 million PLN. Even for a large investor, such a value may be difficult to achieve.”