Special economic zone all over Poland? What will the new law bring for logistics?
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Soon, Poland may become a single huge economic zone. Earlier this month, the higher chamber of the Polish parliament approved an act which is to replace the system of tax exemptions and credits currently applicable in 14 special economic zones. The ultimate goal is to implement general business support measures which so far have been dedicated only to a limited scope of entities.
Special Economic Zones have been present in Poland for years. Currently, there are 14 such zones. By offering different tax privileges to companies investing there, they support certain types of activities and selected sectors of the economy.
The logistics industry is not among key beneficiaries of special economic zones. Quite the reverse, it is on the bottom of the long list of those benefiting from the system.
According to analysts from Colliers International, storage and transport related services amount to only 2 percent of cumulative investments in SEZs.
The percentage is not impressive, but globally it stands for a significant amount, considering the fact that so far there have been over 2.2 approvals for investments in SEZs, and their total value was over 25,5 billion euros.
A nation-wide special economic zone will create new markets
The general rule of SEZ is that investors put their projects in the areas where the government creates tax preferences. For the logistics facilities (terminals, warehouses) this motivation rarely works. The “tax criterion” is important, but it definitely will not win with rationality, which says that production warehouses should be built not where the taxes are low but where production is located, and other warehouses and logistics centres should be built in the areas suitable for optimal distribution of products, with available trade network and communication routes. And it will not change.
Marek Foryński, Managing Director of BTS Group in Panattoni Europe, underlines that in logistics industry the new situation may create new local markets which currently function as a backup for big cities and lead to establishing new centers essential for a supply chain.
Thus, new rules of investment support may stimulate the development of investments in logistics industry.
The new rules will include changes in assessments and approvals granted by companies managing special economic zones. The entrepreneur also gains a possibility to obtain tax credits for the investment in a location of his choice within the whole territory of Poland” – says Michał Sikora, Lands, Technical Matters and SEZ Consultant, Department of Industrial and Logistics Areas, Cushman & Wakefield.
This is a material change. Applying for tax credits available for SEZ will be now possible within the whole territory of Poland (on the areas where economic activity is allowed), irrespective of the location of the project planned. It means the reduction of lengthy procedures for extending SEZ limits when the investor intends to invest outside such zones.
Tax credits will be finally available in the areas where logistics investments are carried out, and not only in selected places.
Therefore, the companies developing the logistics industry will easier obtain additional funds in the areas where they really invest. The main public aid will come in a form of exemptions for new investments from income tax, within regional aid.
The government will reward innovations
The existing permission to conduct business activity in SEZ will be replaced with the decision to grant support. It will be issued by the company managing SEZ as authorized by the Ministry of Development after prior assessment of the investment project.
The most important changes include introducing qualitative and quantitative criteria, which will be applied during the assessment of the project submitted by the entrepreneur applying for the decision to grant support. This decision will allow the entrepreneur to get exemption from CIT or PIT. The newly introduced qualitative and quantitative criteria will directly impact the possibility to obtain tax credits” – says Sikora.
Quantitative criteria show that a special support will be offered to regions with high unemployment. Also small and medium-sized enterprises will be able to enjoy less stringent requirements, which may significantly enhance their development. However, the analysis of qualitative criteria shows that public aid aimed at limiting structural unemployment will be highly limited. The focus is on promoting initiatives characterized by innovativeness, creating specialist jobs and supporting R&D.
The law extending SEZ over the whole country may be a chance for the development of medium, small and micro-enterprises. It also creates attractive economic support, similar to this available in other EU member states” – claim the experts of the legal firm Ecovis.
Tax exemptions depending on location
Also, the period of support for which the decision is granted will be changed. It will not depend on the period for which SEZ is established, and the investor will receive a tax credit for 10 to 15 years, depending on the location of the new investment.
According to experts, the new law aims at broadening the range of attractive investment areas. There is a strong chance that warehouses and terminals will be built in new cheaper locations. The preference for modern technologies may encourage companies to build more advanced facilities, including dedicated facilities such as BTS (built-to-suit), tailored to individual and often highly specific needs of a future user.
Unfortunately, there’s no rose without a thorn. Pursuant to the new legal provisions, getting exemptions depends on the region selected for investment and the size of the company applying for exemptions. Definitely, the flexible period of 10 to 15 years when the company can enjoy exemptions is one of the biggest pluses” – says Michał Sikora.
He also claims that speed of the procedure of granting the support is yet another positive change, as opposed to the previous lengthy procedure to give a status of an economic zone to certain lands.
Too high threshold for investment capital?
Unfortunately, the required level of investment capital, especially in highly developed regions with the low unemployment rate, will reduce the availability of exemptions. According to our knowledge, even 40 percent of enterprises, as regards investment statistics, would not be granted exemptions if they applied for public aid for their project under the conditions stipulated in the new law. The year 2019 may bring a completely new picture of direct investments in Poland and verify the entrepreneurs’ chances for getting support from the government” – says Sikora.
The general forecasts are rather positive. According to Marek Foryński, the amendments to the law on SEZs should create more opportunities than threats.
The new law will offer prospects not only to investors but also to local governments. They will be able to obtain funds necessary to prepare new areas for investments” – concluded Marek Foryński.