A long-awaited major amendment to the regulation governing the conditions for tax exemption in the Polish Investment Zone (PIZ) was published at the end of 2021. This is separate to the Polish Deal and the parallel changes to the regional aid map (both also in force as of 2022).

These changes were made through the amendment to the regulation on state aid for certain entrepreneurs for the implementation of new investments and constitute its first modification since its entry into force in 2018. In its final form, the aforementioned amending regulation significantly differs from the original draft of changes published in June 2021.

Much of the said modifications are definitely beneficial for PIZ investors, while some may adversely affect the conditions for obtaining PIZ decisions. Consequently, due to the increase in the intensity of regional aid in many regions of Poland from 2022, the PIZ system is becoming an even more attractive incentive for investment in Poland while, on the downside, there are additional restrictions and obstacles in its application, not only in connection with the amending regulation, but also in connection with the Polish Deal.

The new rules for tax exemptions in the PIZ system apply to all new applications for support submitted from January 1, 2022 and generally also to outstanding cases initiated in 2021. Since, due to the transitional provisions contained in the Polish Deal, the terms on which tax exemptions will be granted in the PIZ system after 2022 are unclear, there is no reason to delay with making the most of the positive solutions introduced by the said amendment in 2022. All businesses considering investments and application for a tax exemption under the PIZ system, including additional investments in existing plants, should therefore consider the new rules briefly outlined below.

Beneficial changes:

• lowering the minimum eligible costs of a new investment:

a. by 50% of the required level - for reinvestments by large and mid-sized enterprises,

b. by 10% - for mid-sized enterprises,

• increasing the number of medium-sized cities losing their socio-economic functions from 122 to 139,
• extending the possibility of applying the lowest threshold of eligible costs at the level of PLN 10 million (independent of the regional unemployment rate) to investments near medium-sized cities losing their socio-economic functions,
• introducing the following additional quality criteria for investments in the service sector and in the industrial sector:

a. using the potential of human resources (regarding professional activation by facilitating / financing childcare or employing disabled people),

b. creating regional connections by transferring fixed assets to unrelated cooperators and cooperation with local businesses,

c. robotization and automatization of processes carried out as part of the new investment,

• extending the possibility of support for large entrepreneurs operating in the Warsaw capital region in the case of an initial investment (this option was previously available only for investments in a new business class),
• option to choose between strategic sectors or intelligent specializations of particular voivodeships.

Adverse changes:

• deletion of the mechanism for determining the additional (maximum) threshold of eligible costs (currently equal to 130% of the minimum eligible costs specified in the decision on support), which previously greatly facilitated the flexible planning of investment obligations related to the PIZ tax exemptions,
• no support for large businesses operating in the Dolnośląskie and Wielkopolskie voivodships, except for an initial investment,
• limiting eligibility of the costs related to the rental or lease of land, buildings and structures only to the period of 5 years for large businesses and 3 years for SMEs (previously, eligible expenses included such costs incurred during the entire period of validity of the decision),
• applying a 95% reduction in the threshold of eligible costs provided for investments in modern business services only to large and mid-sized businesses (with the new proviso that only such services are subject to a PIZ decision),
• no possibility of lowering the eligible costs threshold by 95% for investments in R&D,
• no qualitative criterion for investments in the service sector and the industrial sector in the form of achieving an appropriate level of sales outside Poland,
• no quality criterion for investments in the services sector in the form of creating a modern business services center with a range beyond Poland,
• no possibility of combining the costs of a new investment and two years’ payroll costs for newly hired employees, which previously facilitated the achievement of the minimum cost threshold applicable in a given location,
• changes in the scope of strategic sectors.

Other changes:

• adjusting the minimum number of points required from the investor as part of the qualitative criteria for evaluating the investment and the duration of the decision on support to the new regional aid map applicable as of 2022,
• a new application form for a PIZ decision, containing more detailed information about the investor and the investment.

Want to know more? Join our webinar on the changes to the Polish Investment Zone in 2022

We will soon be holding a completely free-of-charge webinar on the changes to the conditions for tax exemptions in the PIZ system, as well as the parallel changes in the Polish Deal and the regional aid map. You will learn how to prepare for the application and investment process under the new conditions and how to minimize the risks associated with the changes in practice. The date and organizational details of the webinar will be announced shortly.