Some 15 tax mechanisms are to be amended or added to the existing fiscal incentives to investment and R&D initiatives provided for in the Polish Deal plan, with the view to further bolster development and innovation in businesses in post-pandemic times.

All businesses, whether huge internationals or small Polish companies, may find something attractive for them in the proposed package and your organization may want to consider using at least some of its elements. The new fiscal incentives are still in the legislative pipeline and, depending on how the legislative process goes and what decisions politicians take regarding the Polish Deal, they are expected to become reality in 2022 at the latest.

Incentive 1: Tax relief for robotization

How will it work?

Businesses will be able to deduct 50 percent of eligible tax deductible costs incurred for robotization (more on this in Tax Alert: New and Expanded Investment and Innovation Tax Credits in the Draft Polish Deal). Not applicable for SEZ/PIZ beneficiaries.

What costs are deemed eligible costs?

The costs of:

• new industrial robots as well as machinery and peripheral devices (examples of which are provided in the applicable regulations) for industrial robots which are functionally related to the robots;
• new machinery, equipment and other things functionally related to industrial robots and serving to create an ergonomic and safe work environments where humans interact with industrial robots, including in particular sensors, controllers, relays, safety locks, physical barriers (fences, guards) and optoelectronic protective devices (light curtains, area scanners);
• new machinery, equipment or systems for remote management, diagnostics, monitoring and servicing of industrial robots, including in particular sensors and cameras, and new devices used in context where human-machine interaction occur;
• intangible assets essential to properly install and commission industrial robots and the other fixed assets referred to above;
• training services relating to industrial robots and the other tangible and intangible assets referred to above;
• financial leasing of industrial robots and the other fixed assets referred to above, where the financing party transfers ownership of these assets to their user at the end of the basic lease term.

Are there any caps on the deductible amounts?

No.

When will the incentive be available?

In the period from 2022 to 2026.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 2: New terms and conditions in the Polish Investment Zone

How will it work?

• The option to reduce the eligible costs threshold by 50 percent will be available for a three-year period in the case of reinvestments by large and medium businesses.
• The investment cost threshold will be lowered for medium-sized businesses from 20 to 10 percent of base value for three years.
• The eligible costs threshold to be set at PLN 10 million regardless of the unemployment rate where most of the investment area lies in a municipality that encompass a declining city listed in the legislation within its boundaries (the current threshold only affects municipalities bordering such cities) or in municipalities bordering such a municipality (rather than in municipalities bordering the city, as is currently the case).
• Elimination of the maximum eligible investment costs mechanism (currently allowing for deductions of 130 percent of the minimum eligible costs set out in the PIZ decision).
• The number of declining cities to be increased from 122 to 139.
• Application of the PIZ tax exemption only to the income gained directly from the new investment (and not to the taxpayer's total income).Ineligibility for the PIZ exemption of areas of undeveloped mineral deposits
• Confirmation of the possibility to cumulate the tax exemption in the Polish Investment Zone and the IP Box
• Limiting the possibility to decrease employment to 20% of the initial value (while currently it is possible to amend a PIZ decision by reducing the employment target by any percentage).

When will the incentive be available?

Probably starting from 2021/2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 3: New regional aid map

How will it work?

The maximum amounts of regional aid available will be changed — increased in some regions.

When will the incentive be available?

In the period from 2022 to 2027.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 4: Investment deals

How will it work?

Investment deals with Polish tax authorities (for a fee) will be available spelling out the tax consequences of new investments planned or started in Poland, worth at least PLN 100 million (or PLN 50 million, starting from 2025), including elements of tax rulings, GAAR opinions, Advance Pricing Agreements, Binding Excise Duty Information and Binding VAT Rate Information (more on this in Tax Alert: Polish Holding Companies, investment agreements and another development tax credit).

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 5: Relief for innovative employees

How will it work?

It will be possible to settle eligible R&D costs that will not be used under the R&D Relief in a given tax year by appropriately reducing the PIT advances due on remuneration paid to qualified R&D personnel by the product of the unused costs and the income tax rate applicable to the taxpayer using the relief. R&D personnel is defined to include persons who spend at least 50% of their total working time on R&D activities (more on this in Tax Alert: New and Expanded Investment and Innovation Tax Credits in the Draft Polish Deal).

Are there any caps on the deductible amounts?

No.

When will the incentive be available?

Probably starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 6: Relief on prototypes

How will it work?

Thirty percent of eligible costs of trial production of new products (excluding services) and placing them on the market to be deductible from income (no cumulation allowed with the Polish Investment Zone; more on this in Tax Alert: New and Expanded Investment and Innovation Tax Credits in the Draft Polish Deal).

What are the eligible costs?

The costs of trial production:

• the purchase price (or manufacturing cost) of certain factory-new fixed assets required to start trial production of the new product, as well as
• the costs of improvements incurred to adjust specific fixed assets for the purposes of starting trial production of a new product, and
• the costs of materials and raw materials purchased solely for the purpose of trial production of a new product.

The cost of placing a new product on the market:

• the costs of research, expert opinions, drawing up of documentation required to obtain certification, approval, CE mark and safety mark;
• the costs of obtaining or maintaining a marketing authorization or other mandatory documents or markings related to the marketing authorization or clearance for use;
• the cost of fees charged to obtain, renew or extend any of the above; and
• the costs of life cycle assessment (LCA) and the environmental technology verification (ETV) system.

Are there any caps on the deductible amounts?

Deduction not to exceed ten percent of business income.

When will the incentive be available?

Probably starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 7: Better terms and conditions of the R&D tax relief

How will it work?

The amount deductible under the R&D Relief is to be increased from 100 to 200 percent of the costs of R&D personnel incurred by the taxpayer under employment contracts, contracts of mandate [umowy zlecenia] or contracts for specific work [umowy o dzieło].

Increasing the levels of deductions of eligible costs for research and development centers.

What are the eligible costs?

As defined in the regulations currently in force.

Are there any caps on the deductible amounts?

No.

When will the incentive be available?

Probably starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 8: Option to combine the R&D Relief with IP Box

How will it work?

It will be possible to cumulate the R&D Relief with the IP Box by deducting the eligible R&D costs recognized in accordance with the regulations governing the R&D Relief from income earned from eligible intellectual property (IP) rights. Consequently, the income from specific IP rights calculated for the purposes of the IP Box will not only be taxed at the preferential rate of five percent but will also be reduced by the costs recognized as eligible (and hence deductible) under the R&D Relief incurred in respect of the given IP right.

Are there any caps on the deductible amounts?

No.

When will the incentive be available?

Probably starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 9: Polish Holding Company

(More on this in Tax Alert: Polish Holding Companies, investment agreements and another development tax credit).

How will it work?

• Subject to certain conditions, 95 percent of dividends received by a holding company from a domestic or foreign subsidiary will be tax-exempt.
• Capital gains achieved by a holding company from the sale of shares (stocks) in a domestic or foreign subsidiary to an unrelated entity will be tax-exempt.
• This scheme will not cover companies benefiting from Special Economic Zones/the Polish Investment Zone.

Are there any caps on the deductible amounts?

No.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 10: IPO relief

How will it work?

Expenses incurred directly for the purposes of making an initial public offering with the intention of applying for admission to trading on a regulated market or via an alternative trading system will be income-deductible.

What are the eligible costs?

Expenses incurred directly for the purposes of making the initial public offering:

• the costs of producing the prospectus, notarial and court fees, stamp duty, fees charged by the stock exchange, and the cost of drawing up and publication of notices/announcements;
• the cost of legal services, including tax and financial advisory services.

Are there any caps on the deductible amounts?

No restrictions in principle. The deductions for legal and financial advisory services are capped at PLN 50,000.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 11: Consolidation relief

How will it work?

Taxpayers acquiring shares/stocks in a foreign limited liability company or joint-stock company – unrelated, existing for at least 2 years, with the same or supporting business activity – may be able to deduct the costs of such transactions (excluding the cost of the stocks/shares themselves and the costs of financing) from their income. It will be necessary to retain the ownership of the acquired shares/stocks for 3 years, otherwise the tax base will be increased by the amount of the deduction.

What are the eligible costs?

The costs of:

• legal services rendered in connection with the acquisition of shares/stocks, including their valuation (due diligence);
• taxes directly levied on that transaction, and
• notarial and court fees, as well as stamp duty.

Are there any caps on the deductible amounts?

Up to PLN 250,000 may be deducted.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 12: Development relief

How will it work?

One hundred percent of eligible tax deductible costs incurred to increase revenue from the sale of products will be income deductible in two consecutive tax years, provided that:

• the taxpayer records an increase in revenue from the sale of products compared to the same revenue as at the last day of the tax year preceding the year in which the cost was incurred, or
• it achieves revenue from the sale of products not previously offered, or
• it achieves revenue from the sale of products not previously offered in a given country.
• Only revenues generated from sales to unrelated entities on Polish and foreign markets will be taken into account. This relief is not subject to cumulation with relief under the Polish Investment Zone scheme.

(More on this in Tax Alert: Polish Holding Companies, investment agreements and another development tax credit).

What are the eligible costs?

The costs of:

• participation in trade fairs, incurred to organize exhibition space, air travel, accommodation and meals for employees;
• promotional and informational activities, including the purchase of advertising space, website development, press publications, brochures, information catalogs and fliers relating to the products;
• adapting product packaging to the requirements of contractors;
• producing documentation enabling the sale of products, relating in particular to goods certification and registration of trademarks;
• producing documentation required in tender procedures and for the purposes of submitting offers to other entities.

Are there any caps on the deductible amounts?

Up to PLN 1 million may be deducted.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 13: Venture Capital relief

How will it work?

Fifty percent of the costs of acquiring (subscribing for) shares/stocks in an alternative investment company or a company in which an alternative investment company holds at least five percent of shares/stocks are to be income-deductible, provided the shares/stocks are held for at least two years.

Are there any caps on the deductible amounts?

Up to PLN 250,000 may be deducted.

When will the incentive be available?

Probably starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 14: Corporate Social Responsibility (CSR) relief

How will it work?

Fifty percent of eligible CSR costs are to be income-deductible.

What are the eligible costs?

All eligible tax-deductible costs of:

• sports activities, such as the costs of financing a sports club, sports scholarship or non-mass sports events;
• cultural activities, such as the financing of registered cultural institutions, cultural activities of arts universities and public arts schools;
• supporting higher education and science, i.e., the cost of scholarships, remuneration paid to interns and trainees, funding of dual studies, including the costs of internships and six months’ remuneration to graduates employed through career offices.

Are there any caps on the deductible amounts?

The deducted amount may not exceed the amount of business income.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 15: Relief for returning expats

How will it work?

Persons returning to Poland after spending at least three years living abroad will be eligible to a 50-percent PIT reduction over a period of four years, provided that they achieve income in Poland from specific sources (work, activity performed personally, non-agricultural business activity or activity under copyrights/ancillary copyrights).

When will the incentive be available?

Beginning in 2022 for taxpayers who relocated to Poland after 31 December 2020.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 16: Lump sum tax for new investors (maximum tax)

How will it work?

Persons transferring their tax residence to Poland (who have not been Polish tax residents for at least five out of the last six years) will pay a maximum tax of PLN 200,000 on income earned outside Poland (for a maximum period of 10 years) in return for investing in a venture of special social significance in Poland (of PLN 100,000 per annum). Income earned in Poland will be taxed according to the generally applicable rules.

When will the incentive be available?

Starting from 2022.

What stage of the legislative process are the regulations at?

Draft legislation proposal.

Incentive 17: Safe return of capital (transitional flat tax rate)

How will it work?

Undisclosed income will be subject to a flat tax at the low rate of eight percent. Also, if a business person invests in Poland an amount equal to the income they disclosed, 30 percent of the transitional flat tax will be reimbursed.

When will the incentive be available?

Beginning in 2022 (with the untaxed income to be disclosed from July through December 2022).

What stage of the legislative process are the regulations at?

Draft legislation proposal.