Special economic zones in Poland – timing implications

Even world class companies are attracted to Poland by the many incentives offered for investors that locate manufacturing or distribution centers in the country. One of the biggest reasons why businesses are considering Poland for investments is its extensive series of special economic zones. There are fourteen SEZs in Poland and regardless of their geographic locations special zones remain open to a wide range of investments.

SEZs are defined as geographically designated areas of Polish territory that are set aside for specifically targeted economic activities and supported through special arrangements that are different from those that apply to the rest of the country. SEZs seem to be also a good tool for building cooperation networks. Firms can form clusters in zones and benefit from network effects and economies of scale.

SEZs have grown rapidly in the past 20 years, they have contributed to economic development in several countries, while being utterly unsuccessful in others. Explanations of their success or failure often concern the quality of the infrastructure, location, zones size, government policy and so on. The activity of Polish SEZs to date has resulted in investments worth over GBP 18 billion, which says it all. Besides, four Polish SEZs were classified in the ranking of top thirteen European zones prepared by the British fDi Magazine of the Financial Times – FDI Free Zones of the Year 2014, Europe.

The main benefit for a SEZ investor in Poland is an exemption from income tax (CIT for legal entities and PIT for non-legal entities) binding for the period of operating in a zone. An entrepreneur who is undertaking a business activity in SEZ is also entitled to free support of the investment process. Teams running SEZs help investors negotiate the bureaucracy, as well as finding sites and ensuring necessary services and infrastructure are provided.

SEZs are built with the help of government capital and they have ready infrastructural facilities such as transportation, power supply, electricity supply etc. Therefore companies do not need to build or make provision for new infrastructure, thus resulting in saving costs. Besides, legal, financial, insurance and shipping firms, as well as many others, are well established in special zones and ready to assist.

The history of Polish SEZs dates back to mid 1990s. The special zones were initially intended to cease in 2020. The European Commission has not hampered Polish attempts to extend the period of SEZ functioning and new regulations which came into force in September 2013 prolonged their existence up to December 31, 2026.

While this might seem long period for many, in reality even short term investments can still last several years or more. Starting a business in special zones in Poland now you will have almost a twelve-year perspective to take advantage of extra income tax exemption.

Tomasz Machelski
www.legalmoneyreport.com