Appropriate legislative changes could facilitate a 25% increase in investments over the next five years, but their absence could lead to a drop of 40%, according to PwC analysis. Polish Investment Zone (PIZ) contributed to the support of small and medium-sized enterprises’ investments, with 65% of all decisions made benefiting SMEs and 74% benefiting companies with Polish capital. So far, the Polish Investment Zone has brought in 109.5 billion PLN, as revealed by the report “Polish Investment Zone: time for change” by PwC Poland. PwC experts add that the correction should include, among other things, the reorganization of the tax exemption mechanism, introduction of the definition of investment costs incurred according to the cash method into regulations, or standardizing the process of assessing compliance with quality criteria.
Among the advantages of the PIZ mechanism are the increase in the number of investments, increased access to support for micro and SME entrepreneurs, and availability of tax exemption throughout the country. However, this is not a flawless mechanism. The process of accounting for public aid received is complicated, especially in the case of investment implementations related to the expansion of production capacities of existing plants. The time to effectively utilise the established pool of public support is too short, and some quality criteria are not adequate for evaluating the attractiveness of investments submitted to the PIZ. Investment distribution in Poland is not even, with so-called ‘white spots’ of under-investment persisting in areas of West Pomeranian, Podlaskie, Świętokrzyskie and Lublin Province. At the same time, quantity-wise, Polish investments are about twice more than foreign investments.
“It is necessary to constantly take care of the competitiveness of the Polish support instrument. Income tax exemption is a common incentive offered in various European countries. The introduction of incorrect regulations and a lack of protective mechanisms in the implementation of Pillar 2 in Poland may cause PIZ not to effectively attract investors, and Poland may lose competition for investment locations with other countries of Central and Eastern Europe. A delay in introducing changes to the incentive system in Poland may soon cause our country to become an unattractive investment location,” warns Mieczysław Gonta, PwC Poland partner and leader of the grants and tax relief team.
Competition for investment in the region is strong. Investors in Lithuanian SSEs, in addition to complete or partial CIT tax exemption (depending on the value of the investment), are also entitled to property tax relief, as well as a 50% discount on land lease tax. Meanwhile, in the Czech Republic, investment incentives are available in the manufacturing industry and to support technology centres, strategic services, data centres and customer service centres. The maximum amount of support within investment incentives ranges from 20% to 50% of qualified costs. In Slovakia, provided certain conditions are met, a taxpayer may apply a tax relief for a period of ten years following the tax period in which the relief was granted. In Hungary, just like in Poland, investments located in the capital do not qualify for regional investment aid, while the intensity of public support in other regions ranges from 30% to 50%. PIZ could lose its appeal if changes are not implemented that would maintain Poland’s attractiveness on the international stage. Over the next few weeks, the greatest challenge will be to protect tax reliefs from the negative implications resulting from the global minimum tax (Pillar 2) regulations. One solution is to protect the Polish investment support system and possibly reorganise the SSE/PIZ tax exemption mechanism, e.g. by introducing so-called “refundable, transferable tax credits”, or changing the character of the instrument to a subsidy.
“The legislator should hurry to introduce appropriate regulations concerning the global minimum tax into Polish law. If such actions are not taken soon, foreign investors may opt out of implementing investments in Poland, and the pro-investment nature of this tool will disappear. The risk that the tax exemption offered under the PIZ will no longer be a real investment incentive for large enterprises belonging to international capital groups cannot be ruled out. Directing the support instrument only towards the local, Polish, small business market will mean a slowdown in investment expenditure growth and the creation of new jobs,” says Dorota Wolna, PwC Poland partner, Tax, Legal & People department.
It is also necessary to introduce changes that specify unclear provisions about PIZ in the act and the regulation. Our predictions for the most important investment support instrument are presented in two scenarios – optimistic and pessimistic. Much depends on whether the legislator introduces changes to the law, which will allow for the further development of PIZ and an increase in investment value by 25%. Otherwise, we predict a drop in investment value by as much as 40%. Simultaneously, in terms of the number of decisions of support issued, in the optimistic scenario, we note that it will be difficult to repeat the success of 2021 in terms of the number of decisions issued, but it seems that their increase over the next 5 years by 25% compared to 2023 is achievable. The pessimistic scenario also assumes an increase in the number of decisions issued, but only by 10%.
Source: https://managerplus.pl/pwc-bez-reform-polska-strefa-inwestycji-straci-na-atrakcyjnosci-dla-inwestorow-49825
