Polish Investment Zone in tax practice

In this fast-paced world, however, there are some things that remain unchanged. One of these is that the Polish Investment Zone (hereinafter: PSI) – even though it has been in operation for several years now – still raises very specific practical questions.

On 10 March in Zielona Góra and 11 March in Kostrzyn nad Odrą, I had the pleasure of leading training sessions organised by Kostrzyńsko-Słubicka Specjalna Strefa Ekonomiczna S.A. As always – excellent organisation and great commitment from the participants. Thank you for all the discussions, including those behind the scenes – it is from these that the most interesting topics usually emerge.

The topic of the meetings: “The Polish Investment Zone in tax practice” seems to many to be well-known by now. And yet one question keeps coming up:

When can I start the investment?

This is not a procedural detail. The answer to this question very often determines whether a project will be eligible for support at all. At first glance, the matter seems intuitive – as long as the investment has not “formally” started, everything should be fine. The problem is that the legal boundary runs differently than many entrepreneurs assume.

The incentive effect is not a formality

From the PSI’s perspective, the so-called incentive effect is of key importance. The rule is simple: state aid may only be granted if the entrepreneur submits an application for support before work on the project or activity begins.

If this rule is breached, the consequences are serious – the entrepreneur may lose the right to aid for the entire investment.

In practice, this means that the moment at which the investment is deemed to have commenced must be determined very precisely.

What does “commencement of works” mean?

This concept is not limited solely to the construction team entering the site.

In practice, it refers to the moment when the first of the following events occurs:

• the commencement of construction works,
• the first legally binding commitment to order equipment,
• or any other commitment that renders the investment irreversible.

It is precisely this “first event” that marks the safety threshold.

This is very important, because in many projects the problem does not arise at the start of construction work, but much earlier – at the stage of signing contracts, placing orders or initiating payments.

Not everything constitutes the start of an investment

At the same time, it is worth remembering that not every action taken before submitting an application will be treated as the start of an investment.

As a rule, the following activities remain neutral:

• purchase of land,
• obtaining administrative decisions and permits,
• preparation of analyses, concepts or documentation.

However, this does not mean complete freedom. What is key is not so much how we label a given activity, but whether it renders the project irreversible.

In practice, irreversibility is the deciding factor

And this is where the most important practical aspect comes into play.

If the action taken makes it difficult to withdraw from the investment without significant legal or economic consequences, the risk of undermining the incentive effect increases substantially.

This applies primarily to:

• signing contracts with contractors or suppliers,
• placing binding orders,
• making payments,
• setting a schedule in a way that launches the project even before the application is submitted.

This is why the sequence of actions is so crucial in PSI projects. It is not just what we do, but also when we do it.

The most common mistake: the project starts earlier than the entrepreneur anticipates

In practice, the risk very often does not stem from a lack of knowledge of the regulations themselves, but from the incorrect structuring of the first phase of the project.

The entrepreneur wants to act efficiently, so:

• first they sign the contract,
• initiate the advance payment,
• arrange the delivery details,
• and only later deal with the formalities related to the funding decision.

From a business perspective, this sequence may seem natural. From the PSI’s perspective, however, it can be very dangerous.

Additionally, it is important to remember that the moment an expense is incurred is, as a rule, understood on a cash basis, i.e. as the moment of payment. This means that cash flows at the start of an investment require particular caution. Minor details such as:

• signing the contract too early,
• making a payment before submitting the application,
• an incorrectly set schedule,

can result in the loss of funding.

How should one approach this stage of the project?

Put simply, the logic should be as follows:

first, prepare the investment → then submit a complete application → only then take binding actions

It is precisely in this sequence that the entrepreneur maintains security from the perspective of the incentive effect.

The start of the investment is a stage that is sometimes treated as purely formal, yet in reality it is one of the most sensitive moments of the entire process. It is at this point – often even before the actual investment begins – that it is decided whether the project will be eligible for support at all.

That is why it is worth paying particular attention to it. Here, the order really does matter.

Summary

The incentive effect is not a technical add-on to an investment project. It is one of the conditions that can determine the success of the entire investment under the PSI.

That is why, in practice, it is worth viewing the initial phase of the project not as a “preparatory period of little significance“, but as a moment when one must pay particular attention to the sequence of actions.

Because in PSI, it is often not whether the investment will go ahead that matters, but the order in which the entrepreneur takes the first steps.