The American Silicon Valley is the center of the high-tech sector and is the seat of many multinationals such as Facebook and Google. The region is characterized by its proximity to universities and government research centers, a large number of educated employees and access to venture capital. Of course, these features are not unique to the Silicon Valley, which is why many countries would like to repeat the success of the Silicon Valley. One of these countries is Poland.
One of the largest American venture capitalists, Tim Draper, says now is the perfect time to invest in Poland. Tim Draper became interested in Poland after he heard about the Polish satellite technology ICEYE. ICEYE is a world leader in microsatellites and already works with many global companies and governments from around the world. According to Tim Draper, now is the perfect time to look at investments in Poland, which is one generation ahead of other CEE countries in terms of the market system.
Over the past few years, Poland has started to be perceived as a country with extraordinary investment potential. This is evidenced by the growing number of foreign direct investments, despite the fact that in the world this trend is definitely the opposite. It is worth mentioning the amount of capital invested, for example, by American companies in Poland, USD 62.7 billion – in new technologies (from cloud solutions, systems including CRM supporting e-commerce, online entertainment products, cybersecutira, AI, IoT and blockchain, by nanotechnologies, bioTech, bioMed, to process automation solutions). Therefore, it can be safely said that Poland has a very good chance of becoming a European Silicon Valley for foreign investors who focus on its convenient central location in Europe, a large domestic market with domestic demand, a competitive workforce and qualified management. However, that’s not all. Let’s take a look at 10 reasons why it is worth investing in Poland.
- Income tax exemption from 15% -50% on income from business activity in Special Economic Zones (SEZ) There are fourteen special economic zones (SEZ) in convenient locations throughout Poland. The minimum value of an investment in SEZ is PLN 100,000. EUR, and the share of the entrepreneur’s own funds should constitute at least 25% of the total eligible investment costs.
The advantages of running a business in an SEZ include:
- exemption from income tax (CIT or PIT, depending on the form of conducting business by the investor) on income from activities conducted in the SEZ and specified in the permit up to the amount of 15 to 50%;
- availability of attractive land with all necessary infrastructure;
- the possibility of purchasing or renting real estates in the SEZ;
- the possibility of using also other investment incentives offered in the SEZ, including in particular real estate tax exemption (often offered to new investors by municipalities), investment grants from the government, subsidies of poviat labor offices and support from EU funds (public aid sums up i.e. the total level of support for the company from all sources cannot exceed the above-mentioned 30-70% of the capital expenditure);
- administrative support from companies managing SEZ in legal and organizational issues related to the implementation of investments (media suppliers, local authorities, etc.) and the so-called post-investment care.
A characteristic feature of SEZs is their territoriality, i.e. limited availability of incentives only to certain areas of Poland. However, foreign and Polish investors can apply for the so-called “Extension of SEZ” eg in the area of an already operating enterprise.
- Income tax exemption for the implementation of a new investment in the Polish Investment Zone
Pursuant to the provisions of the Act on supporting new investments, the Polish Investment Zone was created, under which, after meeting certain criteria, it is possible to obtain CIT or PIT exemptions in almost the entire country, and not only in the SEZ. Support in the form of income tax exemption is granted by way of a decision on support issued for the benefit of an entrepreneur implementing a new investment. The decision to support the investment with the tax exemption will be issued for a period of 10 to 15 years, depending on the intensity of public aid in a given area. In the case of investments located in the existing SEZ, the period of using the exemption will be 15 years.
- A subsidy for the development of the automotive, electronic, aviation, biotechnology, modern services and research and development sectors
The subsidy for the development of the automotive, electronic, aviation, biotechnology, modern services and research and development sectors is granted on the basis of an agreement concluded between the minister competent for economy and a Polish or foreign investor. The agreement specifies the conditions for the payment of the subsidy, which is paid in proportion to the degree of fulfillment of the investor’s obligations. The amount of the subsidy may be increased if employees are offered training programs.
- Up to EUR 10 million non-returnable investment subsidy for the implementation of innovative investments and more
Foreign companies that recognize Poland as an interesting place for investment may benefit, among others from structural funds and national programs offering in Poland non-returnable subsidies for research and development (R&D), implementation of innovative investments, digitization of business entities, environmental protection, logistics and renewable energy sources. The grant is non-returnable and gives the possibility of partial financing of up to 70% of eligible costs and may amount to up to EUR 10 million.
Considering that we have September 2020, this is the last call to be able to get funding under the current conditions. Details of the competitions that can be entered by the end of the year can be found on the website of the European Funds Portal.
- Property tax exemption at local level
One of the basic investment incentives available to companies at the local level is the exemption from local taxes and fees. Pursuant to the Act of January 12, 1991 on Local Taxes and Fees, municipalities have the right to set tax rates and to establish tax reliefs. Here, of key importance for companies is the exemption from real estate tax, which is granted on the basis of resolutions of the commune council and constitutes the so-called “automatic assistance”. This means that the entrepreneur is automatically entitled to an exemption after meeting the conditions specified in the resolution of the commune council.
- Support for investors using modern technologies in industrial and technology parks
The technology park is intended for companies using modern technologies. They offer services in the field of consulting in the creation and development of enterprises, technology transfer, transforming the results of scientific research and development into technological innovations and creating favorable conditions for running a business.
On the other hand, the industrial and technological park is created with the participation of local government authorities in order to ensure preferential conditions for running a business, in particular for small and medium-sized enterprises. Their goal is to fill the offered space with companies using modern technologies, attract investors and create jobs. What’s more interesting, in order for a company to be able to take advantage of the privileges offered by parks, it does not have to physically locate its office in their area. Some parks have introduced an e-park service, and for companies operating for less than a year – an e-incubator.
- The lowest tax rate in Europe on income from the Innovation Box (“IP Box”)
Using IP BOX will allow foreign investors to have a positive impact on the financial results of their biotechnology and gaming companies, and of course IT companies. IP Box introduces a preferential 5% tax rate on eligible income from qualifying intellectual property rights, such as patents, utility models, registered industrial designs, registered medicinal products and, importantly, software copyrights. The Polish catalog of intellectual property rights is one of the widest in the world, and the reduced 5% tax rate is one of the lowest among all developed countries. Poland also offers support instruments for investors conducting R&D activity, including R&D relief and government R&D grants. One of such R&D support instruments is the possibility of additional deduction of expenses related to R&D activity from the tax base ( up to 150%) by taxpayers.
- Deduction of expenses incurred for the purchase of new technologies
According to Art. 26 of the PIT Act, entrepreneurs may deduct from the tax base expenses incurred by them for the purchase of “new technologies”. The deduction limit is 50% of the expenses incurred. In order to take advantage of the tax relief, it must be shown that the new technology purchased is in fact a new technology. What does this mean in practice? This means that it should be a technological solution that has not been used in the world for more than the last 5 years. New technologies must be in the form of intangible assets (e.g. the results of research and development) that will enable the production of new or improved products or services. They should be acquired on the basis of a contract for their transfer along with the possibility of using these rights.
- Highly skilled workforce and competitive employment costs
The potential of Polish employees is demonstrated, among others, by Microsoft’s plan to implement a digital investment worth $ 1 billion for the first data center providing cloud services for business and administration in Poland. Polish economists, engineers, IT specialists and scientists are appreciated by employers who employ them in IT companies, research and development centers and scientific institutes. Additionally, wages in Poland are four times lower than in Western Europe. Easily available highly qualified staff means that many investors perceive Poland as the best location for their production projects.
- The cheapest holding company in Europe that you can set up in 24 hours!
From March 1, 2021, it will be possible to establish a simple joint stock company (SJSC). It will be characterized by a minimum of formalities and the electronicisation of procedures. The main features of SJSC are: no entry barriers (PLN 1 of capital to start); fast electronic registration (in 24 hours using the form, in addition to the option of registration using the “traditional” method); simplification and electronicisation of procedures in the company (including the possibility of adopting resolutions via e-mail or during videoconferences); simplified electronic register of shareholders, kept e.g. by an investment company or a notary public; lack of the status of a public company and the related restrictive obligations; uncomplicated and flexible structure of the bodies (no obligatory supervisory board and the possibility of appointing a board of directors); simplified liquidation of SJSC, and additionally it will be possible to dissolve the company without liquidation – by taking over it assets and liabilities by the shareholder.
Considering that Poland has a convenient location – it is in the center of Europe, at the crossroads of major communication routes – it is like a bridge between Western and Eastern Europe. This mix of knowledge and a multi-area, unique experience related to the knowledge of Eastern European culture and Western expectations and standards makes the entry of foreign investors to Poland not so much promising as it is simply safe. An additional advantage is the benefits of Poland’s participation in various global organizations, such as the European Union, UN or NATO. Poland is thus potentially politically stable and occupies a significant position on the international arena. From an economic point of view, Poland is also trustworthy, the economy has not been affected by the global crisis as much as other European countries.
Therefore, HERE and NOW should take advantage of the high investment potential of the new European silicon valley, which Poland is becoming.