skip to Main Content

What new brings us another amended draft bill on supporting new investments?

Another amended draft bill on supporting new investments, supplemented with draft implementing regulations confirms the general direction in which the changes pursued by the Ministry of Finance and Economy are going. Despite a considerable delay in legislative works, the “package” of changes which the Ministry prepared for 2018 will feature an additional vehicle which can become a meaningful form of support for entrepreneurs and an incentive to carry out investment activities.

A draft of the implementing regulation on “state aid provided to entrepreneurs in areas” sets out the scope of economic activities which can be made subject to the decision to grant aid. The investment must conform to the requirements of the mid-term development strategy as provided by the Act of 6 December 2006 on the principles of conducting the policy of development, defined as “qualitative” criteria. Conformity with the requirements is evaluated based on the “Assessment Criteria for Investment Projects” (Appendix 1 to the implementing regulation).

Entrepreneurs applying for state aid for their investments will also have to comply with the “quantitative” criteria stipulated in the implementing regulation. These are dependent on:

  • the percentage ratio of the average unemployment rate in the district (powiat) to the average unemployment rate in the country
  • the entrepreneur undertaking to incur a minimum amount of eligible costs.

For example, in the case of districts which are characterized by unemployment rates in excess of 60% of the average countrywide unemployment rate (but not higher than the average countrywide unemployment rate) entrepreneurs will be required to undertake to incur eligible costs amounting to at least PLN80m. In districts with higher unemployment rates the amount of eligible costs will drop accordingly, e.g. a rate in excess of 250% of average countrywide unemployment rate will require eligible costs of at least PLN10m.

When it comes to investments in the field of modern business services (relevant criteria stipulated in Appendix 1 to the implementing regulation) made by micro, small, and mid-sized entrepreneurs, the specific requirements relating to the amount of eligible costs of investments will be reduced by 98, 95 and 80% respectively.

Consequently, in the case of districts where the unemployment rate is higher than the average unemployment rate in the country, but not higher than 130% of the average countrywide unemployment rate, entrepreneurs will be required to incur eligible costs in the amount of at least PLN60m. However, investments in modern business services will entail reduced amounts of eligible costs which will stand at PLN1.2m for micro entrepreneurs, PLN3m for small entrepreneurs, and PLN12m for mid-sized ones.

State aid granted to entrepreneurs in the form of tax exemptions constitutes regional investment support for the costs of new investments whose maximum size is calculated by multiplying the maximum aid intensity for a given area by the investment costs incurred that are eligible for being subject to aid, not higher than the eligible costs set out in the decision to support or create new workplaces whose size is calculated by multiplying the maximum aid intensity for a given area by two-year labor costs for newly hired employees.

Granting state aid for a new investment is contingent on entrepreneurs’ share of own funds, construed as funds that have not been obtained as parts of the aid granted, amounting to at least 25% of the total eligible cost of an investment. Expenses that can be made subject to support for new investments are deemed to comprise investments costs reduced by input VAT and excise tax if the right to deduct them stems from separate provisions of the law.

In order to obtain income tax exemption entrepreneurs must meet a number of conditions. First of all, the ownership of assets to which the investment costs were related must be maintained for the period of five years from the day they were entered into the register of fixed assets and intangibles, within the meaning of the provisions on income tax. When it comes to small and mid-sized entrepreneurs the period amounts to 3 years, but considering the fast pace of technological progress replacing obsolete installations and equipment is not disallowed. What is more, the investment is to remain in the region in which aid was granted for a minimum of five years from the moment when the entire investment is completed. In the case of micro, small and mid-sized entrepreneurs the minimum period amounts to three years.

Hubert Hajdukiewicz
Tax Specialist

Back To Top