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The Warsaw Voice » Real Estate » October 1, 2010
Advice from Fortak & Karasiński Law Firm
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Foreign Investment in Special Economic Zones
October 1, 2010   
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Despite the global economic downturn, Poland is still perceived by foreign investors as an attractive investment destination due to its central location in the European Union, low costs of production, highly-qualified employees, substantial internal market with growing demand and an effective policy of attracting foreign investors. This policy is executed through a system of incentives and preferences regulated in the Special Economic Zones Act of 20 October 1994 (unified text Journal of Laws of 2007, No 42, Item 274, as amended, “the SEZ Act”) and several government regulations.

The Special Economic Zone (SEZ), is a part of the territory of Poland, separated in accordance with the provisions of the SEZ Act, within which business may be conducted on preferential terms. An entrepreneur who wants to operate in the SEZ has to apply to the Minister of Economy for a permit, which will be granted only if the business that is to be conducted qualifies as being in the SEZ. In addition, the investor will need to choose one of the 14 Polish SEZs to operate in, declare an investment value of at least 100,000 euros and take part in, and succeed in winning, a tender held by the SEZ authorities. The permit will determine the scope of the investor’s operations, as well as other conditions such as the level of the investor’s employment, the implementation of the declared value of investment, the deadline for completing the project and the maximum amount of qualified costs of the project and qualified costs of work for a period of two years. The permit is valid for the length of time for which the SEZ was founded and expires upon its completion. Additionally, the authorities may withdraw the permit if the investor does not carry out the permitted operations or has failed to remedy defects identified during inspection.

The foreign investor, once qualified to run a business in a SEZ, will be subject to favorable tax treatment and will be offered a fully prepared site, as well as help with bureaucracy. The income generated by the investor from business operations carried out in the SEZ will not be taxed at the full income tax level; one benefit of investing in such a zone is the possibility of obtaining a partial income tax exemption. The exemption from income tax granted in the SEZ is defined as public aid supporting the development of the least developed EU countries through preferential treatment regarding new investments.

The maximum income tax exemption the investor in the SEZ can be granted depends on the value of state aid available to the investor for a chosen business operation. The tax exemption value will be set according to the project location, the size of the investor’s business and the amount of money invested. This value varies from 30 percent to 70 percent of the eligible costs depending on the size of the investor’s enterprise. Obviously, the tax benefits are subject to investment stability conditions that have to be continuously met by the investor.

Apart from income tax allowance, the foreign investor can also benefit from a real estate tax exemption. However, this will only be available to investors in those regions where the local authorities pass a resolution granting this allowance.

The Polish regulations on SEZs have proved to be a success story in achieving their goals. Polish SEZs have already attracted some of the largest multinational corporations, and continue to attract innovative business, sending a clear signal to the Polish authorities that economic zones fully address the increasing needs of foreign investors. To meet this growing demand among investors, the Polish authorities regularly expand SEZs, adding new subzone locations.

Although Special Economic Zones will operate only until the end of 2020, the future of the Polish SEZ seems to be bright. Polish SEZs are considered to be among the most promising in the world, according to an extensive report published by the Financial Times. The report analyzed 700 economic zones across the world and ranked the ŁódĽ SEZ 11th in its global league table and second in Europe, underlining that in many categories covered by the report, the Special Economic Zone in ŁódĽ was the only European zone that made in onto the list.

Fortak & Karasiński Radcowie Prawni Sp.P. ul. Gdańska 77a/3, 90-613 ŁódĽ; Tel: +48 (042)6769020
ul. Ksi±żęca 4, 00-498 Warszawa; Budynek Giełdy Papierów Warto¶ciowych; +48 (0-22) 537 70 65, www.fandk.com.pl
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