On 27 December 2023, the Council of Ministers adopted amendments to the so-called 2023 PIZ regulation, one of the key acts regulating the rules for granting tax exemptions in the Polish Investment Zone. The amendments are already in force as of 30 December 2023 and apply to all PIZ decisions issued as of that date (unless an application for a decision has already been submitted before 30 December 2023).

These PIZ regulation changes are partly due to the adaptation of Polish law to the recent amendment of EU state aid regulations (Regulation 651/2014), as well as to the intentions of the Polish legislator. A significant part of these changes are beneficial for investors, including large capital groups, but some will require additional analyses and caution by entrepreneurs considering to apply for tax exemptions.

The most significant changes to the PIZ regulation, effective from 30 December 2023, include:

• clear specification in the Polish regulations that aid in the Polish Investment Zone cannot be granted for "replacement investments", a concept that is not explicitly defined in the legislation; however, the justification for the new rules mentions that replacement investments consist in: replacing old and worn-out equipment with new, more efficient equipment, allowing production to be maintained at a constant level or, in addition, improving the quality of products, and as examples of replacement investments it mentions: repairs, renovations, outlays necessary to restore assets and the replacement of individual elements of the production process without changing it in its entirety,
• extending the period of validity of PIZ decisions in the case of decisions granted for 10 years to 12 years and those granted for 12 years to 14 years, the purpose of this modification being, inter alia, to partially compensate investors for the earlier unfavorable change in the regulations (already in force since 1 January 2023) consisting in postponing the start of the use of the PIZ exemption until the expiry of the investment period specified in the PIZ decision,
• an increase in the maximum level of permissible state aid for large investment projects, by increasing the thresholds above which aid for such projects is adjusted (i.e. reduced compared to the normal aid intensity applicable in the area concerned) from €50 millions to €55 millions and from €100 millions to €110 millions,
• facilitation of realization by capital groups of subsequent investments in the same area – at present, a single investment project will cover a subsequent investment started by the same entrepreneur or another entrepreneur from the same capital group within a period of 3 years in the same NUTS 3 sub-region only if this subsequent investment is related to the same or similar activities (within the meaning of the EU regulations); as a consequence, a new investment undertaken within a period of 3 years by a group in the same NUTS 3 sub-region will not be covered by the scope of a single investment project (and will therefore not be subject to the restrictions on the granting of regional aid), if this new investment will relate to an activity different from the activity to which the group's previous investments in that sub-region related,
• harmonise the understanding of the concept of 'market conditions' by referring throughout the PIZ regulation to the definition of this concept in force (from 1 July 2023) under EU rules, according to which market conditions mean conditions (i) that do not differ from those that would be defined by independent undertakings and (ii) that do not contain any element of collusion; it is understood that any transaction that results from an open, transparent and non-discriminatory procedure is considered as meeting the market conditions principle,
• extending also to micro, small and medium-sized entrepreneurs (SMEs) an additional condition for obtaining a PIZ exemption for the diversification of production of an existing plant, according to which the costs eligible for aid must exceed the book value of the reused assets by at least 200 percent (until now, this condition only applied to large entrepreneurs).

The above new PIZ rules, as well as other changes concerning the Polish Investment Zone or the direct tax environment for PIZ investors, will be discussed soon in detail during our webinar conducted on 17 January 2024 together with the Katowice Special Economic Zone. Detailed information about this event and the link to register will be available soon.