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The impact of the COVID-19 pandemic on the conditions on support for new investments
24. June 2021
Businesses who intend to invest in certain types of activities in Poland may be able to receive government support in the form of tax relief. The conditions attached to this support are set out in the laws on CIT or PIT.
A relief decision is issued pursuant to the Act on Support for New Investments of 10 May 2018 (consolidated text in the Journal of Laws of 2020, item 1752), which replaced the former Act on Special Economic Zones. Businesses have welcomed the opportunity to receive support, regardless of whether a given investment project is within a special economic zone or not.
A new investment means reallocating funds or resources into fixed assets or intangible assets. The assets must be used to establish a new facility, increase the production capacity of an existing facility, diversify production by including new products, or substantially change the production process or purchase assets owned by a facility that was closed or would have closed if the purchase had not been made. The assets must be acquired by a business not related to the seller. Therefore, the acquisition of shares is not an eligible investment. A decision to grant tax relief depends on whether specific qualitative and quantitative criteria are met and is issued for a period of 10 to 15 years, depending on the intensity of public aid in a given area.
Qualitative criteria are determined separately for the services sector and for the industrial sector. The criteria include investments in services supporting certain sectors in line with the current national development policy (in which Poland may gain a competitive advantage), establishing a centre of modern business services with a coverage extending beyond Poland and the creation of well-paid jobs and offering support for the acquisition of knowledge and vocational qualification and cooperating with sectoral vocational schools, membership in the National Key Cluster, R&D activity or economic activity with a low environmental impact, and many more.
In order to satisfy the criteria, an applicant must receive a specific number of points, the minimum of which is determined based on the intensity of public aid in the area in which the investment is being made.
In turn, the quantitative criteria include the amount of qualified expenses to be incurred on the new investment. The minimum level of qualified expenses is determined based on the unemployment rate in a given powiat. The applicant is required to maintain the investment for the period of at least three to five years from completion. Additionally, an applicant is required to employ a specific number of employees for a period of three or five years.
The COVID-19 pandemic will undoubtedly affect the criteria set out above. It happens that the law allows to change a relief decision, but such change cannot result in increasing the maximum amount of the qualified expenses. An affected investor may apply for extension of the deadline for satisfaction of the criteria, as such extension does not mean exceeding the maximum amount of qualified expenses. It is important that the new deadline must set within the term for which the decision was issued (from 10 to 15 years).
An investor who is certain that it will not be able to satisfy the conditions may apply for revocation or expiry of the relief decision. In such case, such investor must return the aid money.