Contact
Michał Gosek

Steuerberater (Polen)
Senior Associate
Phone: +48 61 624 49 39
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The special economic zones in Poland ("SEZ") are an extremely complex issue as they function where competences of two ministers converge (tax reliefs in Poland belong to the Finance Minister's remit, whereas permits for investments in special economic zones in Poland are issued and revoked by the Minister of Economy). With such a distribution of competences taxpayers who wish to obtain an advance tax ruling on their intended actions in a SEZ must often waste their time proving that it is the Minister of Finance who is in charge of answering their question. It also happens that the ruling which a taxpayer obtains from the Minister of Finance does not meet the approval of the Minister of Economy and, consequently, makes the decision-making and the taxpayer's situation more difficult.

Such a collision may occur in an attempt to obtain an answer to the question if an enterprise may move tangible assets between individual projects within one special economic zone and/or projects carried out in different special economic zones – within 5 years from the date when those tangible assets are entered in the records of tangible and intangible assets (or 3 years in the case of small and medium-sized enterprises).

Pursuant to Article 17(1)(34) of the Corporate Income Tax Act ("CIT Act"), tax exemption applies to the income earned on a business activity pursued in a special economic zone on the basis of a relevant permit. In case the permit is revoked, the taxpayer forfeits the entitlement to the exemption and is required to pay the tax for the entire period in which he enjoyed the tax exemption.

According to Article 19(3) of the Special Economic Zones Act of 20 October 1994 ("SEZ Act"), the Minister of Economy may revoke the permit if an enterprise:

  • discontinues in the special economic zone the business for which it obtained the permit;
  • is in gross breach of the conditions specified in the permit;
  • fails to fix irregularities found during an inspection referred to in Article 18 SEZ Act within the time limit set in a notice from the minister in charge of economy.

In the context of permit revocation we also need to mention §5(2) of the regulation of 10 December 2008 on state aid granted to enterprises operating under a permit to conduct a business activity in special economic zones (the "Regulation") which sets out the terms and conditions of using the permit (by argument based on the contrary, the failure to meet those conditions will revoke the permit). According to that provision, to enjoy an exemption from income tax an enterprise must:

  • maintain the ownership title to the capital expenditure-related assets for 5 years from the date the assets were entered into the records of tangible assets and/or intangible assets in the meaning of income tax regulations (or for 3 years in case of small and medium-sized enterprises);
  • continue operations in the area where the aid was granted for at least 5 years from the moment the investment was completed (or for at least 3 years in case of small and medium-sized enterprises).

It is clear that none of those conditions is automatically breached just by moving the tangible assets. This is, of course, assuming that the enterprise does not discontinue its operations in a special economic zone and does not transfer ownership title to the moved assets. Following the movement of the enterprise's tangible assets only the place where they are used will change. Given that the list of grounds for revoking the permit is close-ended, we may conclude that there are no reasons for an enterprise to lose a permit to operate in a SEZ and thus the exemption from tax just by moving tangible assets among investment projects.

Such an approach is confirmed by, among other things, advance tax rulings issued by tax authorities, for instance the recent ruling of 14/01/2014 by the Director of Tax Chamber in Katowice (file no. IBPBI/2/423-1351/13/AK) or the ruling of 28/12/2012 by the Director of Tax Chamber in Łódź (file no. IPTPB3/423-328/12-4/KJ).

However, the Ministry of Economy does not share this opinion claiming that free movement of assets purchased under a permit would contradict the whole idea of special economic zones. The permit is issued for a specific business in a specific area. Consequently, the Ministry of Economy is of the opinion that assets must not be moved between different special economic zones and even within a single zone, regardless of the distance between two locations.

Still, we are not buying this argumentation. Above all we need to point out the very title of the permit which in no way indicates the address within the zone but only specifies the special economic zone where the business should be carried on.

Neither do the permit conditions refer to any specific location; they use only the term "within the zone". Consequently, even though moving assets between different special economic zones may indeed be controversial from the point of view of the permit contents, we must conclude that there are no obstacles to moving assets between locations within a single special economic zone for which the permits are issued.

Although we believe it lacks legal substantiation, the standpoint of the Ministry of Economy does have its rationale. One of the principal goals of SEZs is to combat unemployment in a given area. Allowing enterprises to freely move their assets could, under extreme circumstances, make a completely different region on the opposite end of Poland benefit from the state aid. The problem is that following the rigorous approach of the Ministry of Economy would prevent moving assets between locations mere kilometres away, often within the same sub-zone.

Since this issue has not been settled by the lawmakers, there is a risk of a dispute with the Ministry of Economy. And if the Minister of Economy challenges the right to move the assets, he may revoke the permit claiming that the conditions of operating in special economic zones are not fulfilled. In case the permit is revoked, Article 17(5) of the CIT Act stipulates that the taxpayer forfeits the entitlement to the exemption and is required to pay the tax for the entire period in which he enjoyed the tax exemption. Furthermore, invoking the protective function of an advance tax ruling may not work in this case. The tax authorities issue such a ruling for a specific case or a future event, and while issuing it the authorities assume that the taxpayer has a valid permit for operating in a special economic zone. If an enterprise loses the permit, the circumstances would change dramatically and the taxpayer's advance tax ruling would have no protective power.

Summing up, entities that run a business in a special economic zone should agree on the tax consequences of their actions and decisions not only with the Ministry of Finance but also with the Ministry of Economy. An enterprise which relies exclusively on advance tax rulings issued by the authority of the Minister of Finance may be oblivious to the risks it faces and suffer grave financial consequences in the future

Our advisers would be glad to review your documentation of projects in special economic zones in Poland and will help you minimise the tax risks.