investing in poland selected tax aspects 6 november 2013 tel aviv, israel polish-israeli economy...

Investing in PolandSelected tax aspects

6 November 2013

Tel Aviv, IsraelPOLISH-ISRAELI ECONOMY & BUSINESS FORUM

General overview

© 2013 Deloitte Poland

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

3 Investing in Poland. Selected tax aspects


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

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.

The main taxes in Poland

Corporate income tax

Personal income tax

Transaction tax

VAT

Real estate tax

Excise duty



Corporate income taxTax losses carry forward

2013 2014 2015

revenues 100

tax deductible costs

150

income -

tax loss 50

This tax loss may be utilized up to 2018 (maximum ½ of the loss in one tax year).

revenues 200

tax deductible costs 150

income 50

tax loss from 2012 25

tax base 25

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.

revenues 150

tax deductible costs 125

income 25

tax loss from 2012 25

tax base 0

The outstanding amount of tax loss from 2013 (PLN 25) may be used to reduce the tax base to PLN 0.

• 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)

Investing in Poland. Selected tax aspects5


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

Otherbenefits

Required cumulativeness

Poland YES

Investing in Poland. Selected tax aspects6

Special Economic Zones


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.


© 2013 Deloitte Poland9 Investing in Poland. Selected tax aspects

Special Economic Zone incentivesGeneral rules (2/2)

• 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%

Public aid limit (in the form of CIT exemption) = Value of eligible costs

of investment project xAid

intensity


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 1.07.2014

50%

40%

30%

From 01.07.2014 to 31.12.2020

35%

50%

25%

20%

15% until 01.08.2017; 10% from 01.08.2017

Tax exemption limit

Śląsk region Opole region

SEZ permit issued before 1.07.2014 EUR 4M EUR 5M

SEZ permit issued after 1.07.2014 EUR 2,5M EUR 3,5M


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).

Why Poland?

© 2013 Deloitte Poland13

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


Contact

Adam WacławczykDirector / Tax Advisor no 10148e-mail: [email protected].: +48 (0) 12 394 43 30Mobile: +48 695 668 437


mailto:[email protected]

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investing in poland selected tax aspects 6 november 2013 tel aviv, israel polish-israeli economy...

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