Can expenditures on ancillary production infrastructure constitute eligible costs under the Polish Investment Zone?

There are questions in the context of the Polish Investment Zone that tend to provoke a fairly predictable initial reaction from market practitioners: “well, surely that’s already settled.”

One such question concerns expenditures on ancillary production infrastructure. Can they constitute eligible costs? Can welfare facilities, administrative areas, sanitary installations, internal roads, yards, technical systems, security monitoring, or site development increase the pool of state aid?

Intuitively, the answer is yes. It is, after all, difficult to conceive of a modern production facility without the supporting infrastructure that enables it to actually function. A facility is not merely a production hall and a machine. It also encompasses storage space, internal logistics, utilities, fire safety systems, employee welfare facilities, lighting, technical installations, manoeuvring yards, and the entire infrastructure that does not always “produce” but very often makes production possible.

For a long time, however, this intuitive answer was not sufficient in tax practice.

The typical path looked as follows: the taxpayer submitted a request for a tax ruling, received a negative response, challenged the ruling before the Regional Administrative Court, and sometimes the case would proceed further to the Supreme Administrative Court – where a favourable outcome was finally obtained.

I would therefore like to note one development. I have just received a positive individual tax ruling on expenditures relating to ancillary production infrastructure – without having to pursue the matter through the administrative courts.

I would not yet draw the far-reaching conclusion that we are witnessing a lasting shift in the interpretive approach. It is too early for that. But this case clearly illustrates where the burden of argumentation lies in practice, and why the manner in which an investment is described at the application stage for an investment support decision can be of considerable importance.

What is the dispute actually about?

The problem originated in an approach under which not every expenditure falling within the catalogue of eligible costs should automatically increase the pool of state aid.

In its Explanatory Notes accompanying a general tax ruling, the Minister of Finance did not limit itself to setting out its position on the allocation of income in reinvestment scenarios. When addressing the eligible costs of a new investment as the basis for regional investment aid, the Minister stated that “not every cost falling within the catalogue of eligible costs may be recognized as qualifying.” In the Minister’s view, “if the investment being implemented does not result in an increase in the production capacity of the existing enterprise, diversification of production, or a fundamental change to the production process, it does not satisfy the requirements set out in the definition of a new investment.” The explanatory notes also used the example of an entrepreneur planning to construct a new administrative building. In other words, in the view of the Minister of Finance, every expenditure falling within the pool of qualifying costs would additionally need to be tested against the requirements that the legislature has established for new investments in respect of which support decisions are issued.

Tax authorities began examining not only whether a given expenditure falls within the statutory catalogue, but also whether it independently contributes to an increase in production capacity, diversification of production, or a fundamental change to the production process.

In practice, this meant an additional test for each component of the investment. Where expenditure related to a production hall or machinery, its connection to the investment was relatively straightforward to demonstrate. Where, however, it concerned welfare or administrative areas, roads, yards, fencing, installations, or technical support facilities, the authorities were sometimes prepared to conclude that the expenditure did not have a sufficiently direct impact on the production process.

In my view, this approach was excessive from the outset.

A new investment must be assessed as a whole. And it is the entity issuing the investment support decision that should carry out this assessment — at that very stage. It is the project as a whole that must satisfy the conditions prescribed for the Polish Investment Zone. Not every individual component is required to independently increase production capacity. Not every component needs to “produce.” Not every component needs to have a separate, measurable impact on operational performance.

A sanitary facility does not, in isolation, increase production capacity. Neither does an internal road. Nor does a fire suppression system. But without them, a facility very often cannot operate lawfully, safely, or functionally.

And it is precisely here that the real distinction between a formal and an economic understanding of investment begins.

Ancillary production infrastructure is not an add-on

In practice, production does not take place in a vacuum. Even the most advanced production line requires an environment that allows it to be commissioned and operated. It needs power supply, technical installations, appropriate material flow, storage space, access roads, manoeuvring yards, safety systems, and people who must be provided with minimum working conditions.

Ancillary production infrastructure is therefore not an add-on detached from the investment. It is part of the mechanism that allows the investment to function.

In the case in which I received the positive ruling, the expenditures concerned included, among other things, the welfare and administrative section of a high-bay storage warehouse, the reorganization and expansion of warehouse and dispatch areas, sanitary installations and associated systems, site development, security monitoring systems, and water and sewage, fire protection, lighting, and telecommunications installations.

These are not incidental elements. Each fulfils a specific function within the facility. Some serve safety purposes. Others support work organisation. Still others relate to logistics, warehousing, dispatch operations, or the fulfilment of technical and regulatory requirements.

One could, of course, attempt to examine each of these items individually and ask whether it independently increases production capacity. But that question leads down the wrong path. The better question is: are these elements functionally connected to the investment and are they necessary for its commissioning or proper operation?

In my assessment, that is precisely how expenditures of this nature should be analysed.

The courts have been restoring order to this area

Encouragingly, in recent years the administrative courts have been correcting the authorities’ increasingly narrow approach with growing clarity.

In its judgment of 6 October 2023 (case reference II FSK 527/23), the Supreme Administrative Court indicated that a literal interpretation of the provisions does not provide a basis for excluding from eligible costs expenditures on office and administrative facilities, welfare areas, and common parts solely on the grounds that they do not form part of the production line itself. The Court also emphasised that it is difficult in the modern context to conceive of production operations without administrative and storage support facilities, and that conducting business without welfare facilities for employees would be contrary to the requirements of applicable law.

A similar position was adopted by the Supreme Administrative Court in its judgment of 6 February 2024 (case reference II FSK 608/21). That case concerned expenditures including office and administrative areas, welfare facilities, office equipment, space development, car parks, and access roads. The Court endorsed an approach under which expenditures of this nature may be taken into account in calculating the tax exemption, provided they are connected to the new investment.

It is also worth drawing attention to the Supreme Administrative Court’s judgment of 17 March 2025 (case reference II FSK 890/22). The adjudicating panel observed that calling into question — as an element of a new investment — the provision of rest rooms where production employees may take their meals and access to sanitary facilities might be an approach more characteristic of the nineteenth century than of the present day.

This is a pointed formulation, but it captures the essence of the problem aptly.

Production is not just the machine. Production also encompasses the organisational, technical, and human conditions that allow the machine to operate within a real enterprise.

A positive ruling without court proceedings — a shift in trend?

Against this backdrop, a positive tax ruling obtained without the need to refer the matter to the courts is noteworthy.

Not because the eligibility of ancillary production infrastructure should, at this stage, give rise to fundamental doubt. Following the favourable Supreme Administrative Court judgments, the taxpayer’s position is considerably stronger than it was several years ago.

What is noteworthy, rather, is that the authority accepted this approach at the ruling stage itself.

Does this signal a shift in trend? Possibly. But I would be cautious. A single ruling does not yet constitute stable practice – particularly in an area where the authorities have, for many years, maintained a fairly restrictive approach.

In this case, however, there was a detail that I consider to be of practical significance. The authority inquired whether the expenditures on ancillary production infrastructure had been described in the application for the investment support decision and in the business plan.

They had been.

At the application preparation stage, the investment was described in sufficient detail — not merely as the acquisition of specific fixed assets or the expansion of selected floor areas, but as a broader undertaking encompassing the expenditures necessary for the commissioning and proper operation of the facility.

I subscribe to the school of thought that says it is worth describing the application for an investment support decision in reasonably comprehensive terms. The point is not, of course, for the business plan to become a technical cost estimate of every cable, light fitting, sanitary fixture, or monitoring point — that is not its function. But the documentation should make it sufficiently clear what the investment actually consists of, what areas it covers, and what elements are required for its commissioning.

Should the description in the business plan be determinative?

An important caveat is necessary here.

In my view, the fact that a given expenditure has been described in the application or the business plan should not be the decisive argument as to its eligibility. The regulations do not make the qualification of a cost conditional upon every individual element having been identified in the documentation in a detailed, case-by-case manner.

If a given expenditure falls within the catalogue of eligible costs, is incurred within the validity period of the decision, is connected to the new investment, and satisfies the remaining conditions, it should not fall outside the eligible pool merely because the business plan did not separately identify it as a “sanitary installation,” “perimeter fence,” or “telecommunications system.”

Investment documentation and the business plan define the investment at the level of generality appropriate to proceedings for the issuance of an investment support decision. They do not serve the purpose of providing a technically exhaustive enumeration of every individual executive component of the investment.

Accordingly, the absence of a literal reference to every element of ancillary infrastructure should not, in itself, mean that such an element falls outside the scope of the investment. If it is functionally, technically, and budgetarily consistent with the described categories of capital expenditure, it should be assessed as a component of the investment covered by the decision.

But practice is practice.

A well-drafted application is of great assistance – not because it creates an entitlement to treat a given expenditure as eligible, but because it limits the scope for disputes as to whether a particular element was genuinely part of the investment or emerged later as an additional, independent, or loosely connected cost.

Practical conclusion

Expenditures on ancillary production infrastructure may constitute eligible costs under the Polish Investment Zone.

This applies in particular to elements such as welfare and administrative areas, sanitary installations, technical support facilities, internal roads, manoeuvring yards, perimeter fencing, fire protection, water and sewage, lighting and telecommunications installations, security monitoring systems, and site development — provided they are functionally connected to the new investment and fall within the catalogue of eligible costs.

Not every such element is required to independently increase production capacity. It is sufficient for it to form part of an undertaking which, as a whole, leads to the achievement of the investment objective.

At the same time, from a practical standpoint, it is worth addressing this at the application preparation stage. The description of the investment should present not only the core production assets but also the infrastructure that enables their effective utilization.

It should be borne in mind that obtaining an investment support decision is only the beginning of the journey. And it is well worth embarking on that journey accompanied by a tax adviser with hands-on experience in this area — one who understands the practical challenges that arise for the taxpayer after the investment support decision has been issued.