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What next with Special Economic Zones?

The Polish Investment Zone Act is proceeded in the Parliament and is likely to be passed within the next few weeks. It is currently at the preparatory stage in the Committee on Economic Affairs and Development.

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The Act radically changes the system of support for new investments in Poland, both domestic and foreign. At present, support in the form of income tax exemption is available only for investments in areas covered by Special Economic Zones. Every entrepreneur investing in these areas may apply for a permit to operate in SEZ due to a new investment project, and the amount of public aid depends on capital investment or two-year labour costs. In Lublin, the aid intensity is the highest in Poland and amounts to 50% for large entities, while the SME sector may apply for even higher support - up to 70%.

The new act allows for this form of assistance to be used in any investment plot, not only in the areas of the present Special Economic Zones. In the case of Lublin, this is the most important as at present all properties in the SEZ Lublin Subzone have been sold and are in the hands of private investors - the only possibility to obtain a permit is to lease production, warehouse or office space in existing buildings within the Zone. The introduction of new regulations will significantly broaden investment opportunities in the city and at the same time will allow the city to retain its investment advantage, which is the possibility to obtain income tax exemption.

Of course, the new rules contain much higher requirements for obtaining support in this form. In addition to quantitative criteria for investments, qualitative measures will be introduced for, among other things, the creation of high-skill, high-wage jobs. In addition, the minimum investment parameters will be increased, especially in relation to large companies. An entrepreneur who wants to receive a decision on support under the new regulations will have to invest at least PLN 10 to 100 million. The minimum size of the investment depends on the relation of the average unemployment rate in the administrative unit where the investment will be located to the average unemployment rate in the country. If the new regulations were to come into force now, a large company interested in investing in Lublin and taking advantage of the exemption would have to declare an investment of at least PLN 80 million. The new regulations in their current form reduce the required capital investment for micro, small and medium-sized enterprises by 98%, 95% and 80%, respectively. In the case of Lublin, this means that an entrepreneur with an average status would have to invest at least PLN 16 million, a small one - PLN 4 million, and a micro one - PLN 1.6 million. It is also worth mentioning that for projects in the field of modern business services and investments in R&D, the requirement of minimum investment outlays is also lowered by 80%.

The decision on support will be granted for a period from 5 to 10 years - depending on the type and size of the investment. For investments within the current Special Economic Zones, this period will be extended by an additional five years.

The new regulations will make it more difficult and at the same time easier to obtain support in the form of income tax exemption in Lublin. Such aid will be available in any investment area, which is an undeniable advantage for the city. However, the minimum amount of investment outlays will constitute a certain obstacle to new investments.

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