Poland aims to boost investment with reduced bureaucracy, but procedure lengths may increase

Poland is set to streamline its investment support system, aiming to reduce bureaucratic hurdles and bolster the construction of new factories and the expansion of existing ones. The proposed amendments to the law on supporting new investments are designed to make the incentive mechanism more attractive to businesses.

Experts acknowledge the government's step in the right direction but point out that the changes do not entirely address all challenges associated with Poland's Special Economic Zone (SSE) and its interaction with the global minimum tax. The Ministry of Development and Technology's draft legislation includes plans to digitize the application process for support decisions, extend their validity from 15 to 20 years, and clarify tax regulations related to SSE reliefs.

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This extension will allow for more effective use of income tax relief, especially for investors who need more time to achieve investment profitability.

Kiejstut Żagun, a partner at KPMG, noted that the extended support period will allow investors to utilize tax reliefs more effectively, especially those requiring longer periods to achieve profitability. This change is also seen as beneficial for industries facing global difficulties, such as the automotive sector. The assessment of regulatory impact suggests this extension could aid companies potentially subject to the global minimum tax by allowing them to better utilize available public aid within their support decisions.

However, Łukasz Kumkowski, a tax advisor at MDDP, cautioned that the extended duration does not resolve the issue of the global tax. He explained that using SSE reliefs could still lead to a situation where Poland's effective tax rate becomes low enough to trigger supplementary tax payments. Investors operating within the SSE and subject to this global tax are awaiting a systemic solution, which is not present in the current project.

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The risk remains that using the SSE relief may, in simple terms, cause the effective tax rate in Poland to be so low that a supplementary tax payment becomes necessary.

Experts generally view the clarification of tax provisions positively, allowing tax relief for profits from both new investments and expansions, often referred to as reinvestments. Katarzyna Knapik, a tax advisor and partner at Taxpoint, mentioned that the regulations, previously tightened under the "Polish Deal," are returning to their pre-2022 state. Importantly, transitional provisions will apply these more liberal rules to income earned from 2022 onwards.

Conversely, the requirement for the Head of the National Tax Administration to provide opinions on support decisions is met with less enthusiasm. Experts consider this an unnecessary bureaucratic burden that could lengthen procedures.

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The tax relief is returning to its pre-2022 form, and through transitional provisions, the new, more liberal approach will also apply to income earned by taxpayers from 2022.