1. Investing in Poland Selected tax aspects
6 November 2013
Tel Aviv, Israel POLISH-ISRAELI ECONOMY & BUSINESS FORUM

2. General overview

3. Introduction of Poland
Basic triggers for investment:
Access to new markets
Optimize costs
Last 10 years in the European Union:
Creation of investor friendly tax regimes
Various investment incentives schemes
Tax free cash flows within European Union,
in case of related entities;
No customs barriers on movement of the goods.
Benefits for investing:
political stability,
favorable macroeconomic indicators,
growing markets,
proximity to the customer base of “old” Europe,
availability of highly skilled and inexpensive labour force
Investing in Poland. Selected tax aspects

4. Favourable Tax Environment
Many CE countries have sharply slashed their tax rates to attract foreign investment, this includes Poland.
Significant CIT reductions are driving factors behind the relocation of manufacturing and service oriented business activities into this region.
Corporate income tax in Poland is 19%.
2013
Poland
Personal Tax
18% / 32% 1
Corporate Tax
19%
VAT
23%
VAT reduced rate
8% / 5% 2
The main taxes in Poland
Corporate income tax
Personal income tax
Transaction tax
VAT
Real estate tax
Excise duty
1 Income of up to PLN 85,528 is taxed at a rate of 18%, whereas above this amount the tax rate of 32% applies.
2 For example, the reduced 8% VAT rate applies to hotel services, books, newspapers and medicines. The reduced 5% rate applies to buildings supply.
Investing in Poland. Selected tax aspects

5. Corporate income tax Tax losses carry forward
If tax deductible costs exceed the amount of revenues, the difference constitutes a loss.
Tax losses incurred in previous tax years may reduce a taxable income of a taxpayer.
A loss may be carried forward for 5 years following the year in which it was incurred, however the amount deducted in a given year shall not exceed 50% of the loss value (i.e. the shortest period of a one-year loss settlement is 2 years)
2013
2014
2015
revenues
100
tax deductible costs
150
income -
tax loss 50
revenues
200
tax deductible costs
150
income 50
tax loss from 2012 25
tax base
revenues
150
tax deductible costs
125
income 25
tax loss from 2012
tax base
This tax loss may be utilized up to 2018 (maximum ½ of the loss in one tax year).
½ of the tax loss from 2013 may be used to reduce the taxable income in 2014.
Tax due to be calculated on PLN 25.
The outstanding amount of tax loss from 2013 (PLN 25) may be used to reduce the tax base to PLN 0.
Investing in Poland. Selected tax aspects

6. Availability of Investment Incentives
Poland provides financial support to foreign investment
one of the key tools used to attract foreign investments
fiscal incentives in the form of tax relief or favorable trade provision.
R&D tax incentives:
deduct from their CIT base up to 50% of expenditure incurred for the acquisition of new technologies in the form of intangible assets. In the case of loss the tax benefit may be used during the subsequent 3 tax years
14 Special Economic Zone
SEZ – territories of Poland in which business activities can be conducted on preferential terms. It has already attracted more than 1450 investments
It should be noted that all forms of investment incentives constitute state aid and should be provided in line with European Union regulations.
country
EU Funds
Government grants
CIT reliefs
R&D reliefs
Other
benefits
Required cumulativeness
Poland 
YES
Investing in Poland. Selected tax aspects

7. Special Economic Zones

8. Special Economic Zone incentives General rules (1/2)
Major incentive = 100% CIT exemption on profits generated by a business located in the SEZ territory (in general income form production activities, trading activities are excluded from the exemption)
In case of the new investment project relevant permit (so called SEZ permit) is necessary to benefit from the tax incentives available in the SEZ (public aid in the form of CIT exemption).
SEZ permit might be obtained if implementing new investment within the SEZ territory – impossible to apply for the SEZ permit in relation to the projects already launched.
SEZ functioning has been recently prolonged from December 31, 2020 to December 31, 2026, subject specific limit (so called state aid limit)
CONDITIONS & REQUIREMENTS specified in the SEZ permit
The SEZ permit specifies the investment conditions (needs to be fulfilled in order to secure the right to the tax exemption):
minimum level of investment costs to be incurred until the date of investment completion (at least EUR 100k).
minimum level of employment on the SEZ territory, which must be maintained during the specified period (in most cases for 5 years). This condition might be subject to negotiations with SEZ Management.
Investing in Poland. Selected tax aspects

9. Special Economic Zone incentives General rules (2/2)
Public aid limit (in the form of CIT exemption) =
Value of eligible costs of investment project x
Aid
intensity
Eligible costs – two year labor costs of new employees OR eligible investment expenditures (e.g. new fixed assets, modernization of existing assets, rental costs under specific conditions).
Aid intensity – for large investors
50%
40%
30%
Investing in Poland. Selected tax aspects

10. Special Economic Zone incentives (II) Forthcoming changes (1/2)
Major change – lowered aid intensity (date of SEZ permit issuance is crucial)
Examples for Śląsk and Opole region (eligible costs = EUR 10M)
Until
From to
50%
50%
40%
30%
35%
25%
20%
15% until ; 10% from
Tax exemption limit
Śląsk region
Opole region
SEZ permit issued before
EUR 4M
EUR 5M
SEZ permit issued after
EUR 2,5M
EUR 3,5M
Investing in Poland. Selected tax aspects

11. Special Economic Zone incentives (III) Forthcoming changes (2/2)
Ban on granting SEZ permits in relation to investment being transferred from other EU countries to Poland (so called delocalization criterion);
More restrictive requirements concerning incentive effect (necessity of preparing very detailed argumentation confirming that project would not be implemented in Poland in case of public aid absence).
New definition of „initial investment” - more restrictive regulations applicable for assessing whether a few investment project in fact does not constitute single investment large project artificially divided (same, lowered aid intensity might be applicable).
Investing in Poland. Selected tax aspects

12. Why Poland?

13. Why here? Benefits from EU membership – open European market
Low corporate tax rates, with limited taxation on new investment (e.g., special economic zones) – no income tax on production activity
Lower employment / shipment costs – higher profitability
Customs formalities abolished for the movement of goods inside the EU = production in the plant located in SEZ and sale to other countries of European Union with limited taxation
Investing in Poland. Selected tax aspects

14. Contact Adam Wacławczyk Director / Tax Advisor no 10148
Tel.: +48 (0)
Mobile:
Investing in Poland. Selected tax aspects

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