General incentives, from which investors in the I&L sector in CEE-17 can benefit, if no specific ones are available
In Poland, there are two main categories of support, employment grants and support for new investments. These two incentives may be granted simultaneously only if certain conditions are met (the maximum amount of the granted aid, a certain threshold of capital expenditures, or a minimum number of new jobs created). In order to obtain the incentive, both the minimum investment and new jobs figures need to be met. Furthermore, an R&D tax relief is available.
Another important feature of business support are special economic zones. A Special Economic Zone (SEZ) is a dedicated area where investors may operate their businesses under preferential conditions, varying locally. These preferential conditions include mainly corporate income tax (CIT) relief. In 2018, the Polish parliament introduced the New Investment Support Act due to which 100% of Poland's area operates as one special economic zone in which companies benefit from tax advantages. The level of tax exemption depends on
the location of the investment project and the size of the company. It is possible to obtain CIT or PIT exemption for different periods of time.
Another type of support constitutes industrial and technology parks - places which, due to the
concentration of firms from one sector and supporting science and research facilities, are on the fast track of development. Each park has different characteristics, depending on specific regional, social, cultural and economic factors, together with the facilities, materials and human resources available. A technology park is created with the aim of attracting an influx of knowledge and technology for scientific bodies and businesses. The benefits are offered for businesses using innovative technologies and such entities may enjoy mainly the following services: consultancy, transfer of technology, transfer of results from scientific research and
development work, into technological innovation, creating favourable conditions for businesses.
Industrial and technology parks are formed with the assistance of local authorities and are aimed at providing preferential conditions for businesses, in particular for small and medium sized firms. The goals for industrial and technology parks are primarily for providing offers
of workspace for commercially viable companies that use new or innovative technologies, attracting investors and creating jobs.
Available tax exemptions or preferences for investors specifically in the I&L sector in CEE-17
A CIT relief for R&D is available in Poland. The tax relief is available to taxpayers earning revenue other than revenues from capital gains. The relief allows the deduction of costs for R&D from the CIT tax base (however, the deduction cannot be higher than the income earned from revenues other than capital gains). The deduction does not affect the taxpayer’s right to treat the costs of R&D as tax deductible costs for CIT purposes.
From a Polish CIT perspective, R&D includes both scientific research and development works and covers, inter alia, creating improved or new products, processes or services (with the exception of activities involving routine and periodic changes to the products, processes or services).
R&D costs which may be deducted from the CIT tax base include for example the wages of employees (proportionally to the part of their overall working time dedicated to R&D), the purchase of materials directly linked to R&D or, the purchase of specialist equipment.
Taxpayers may deduct 100% of the R&D costs. However, if certain conditions are met (e.g. the taxpayer is an R&D centre), the deduction may increase to 150%.
Other support instruments are: Innovation Box, governmental R&D grants as well as several programmes co-financed with EU funds. Innovation Box introduces a preferential 5% PIT rate applicable to income from qualifying intellectual property rights generated by sole proprietors (instead of the standard 17%-32% and 19% flat PIT rates).
Another type of incentive is the real estate tax exemption available in specific municipalities. Municipal councils may establish an exemption from real estate tax for businesses. In order to benefit from the exemption businesses usually need to fulfil a number of criteria provided in the municipal council’s resolution. Foe example, this may involve making an investment of a specific size or maintaining the investment for a certain period of time.
General tax exemptions or preferences for investors in CEE-17 that would apply to the I&L sector
A CIT exemption is available for new investments provided that a taxpayer receives a Support Decision according to the regulations on Act of 10 May 2018 on supporting new investments. The CIT exemption applies to revenues obtained from the activity specified in the Support Decision.
The Support Decision may be issued in relation to new investments i.e. investments in tangible and intangible assets related to the establishment of a new plant, increasing the production capacity of an existing plant, diversification of the plant's production by introducing new products or fundamental changes in the production process of an existing plant; or an acquisition of assets from an unrelated party belonging to an establishment that has closed or would have closed had it not been purchased (excluding purchase of shares).