What impact does the purchase of implementation services from a related party have on eligible costs?

Intangible assets in the Polish Investment Zone – revisited. What impact does the purchase of implementation services from a related party have on eligible costs?

In my previous post, I addressed the situation in which intangible assets were acquired from an unrelated party, but through a related group company. The central question in that scenario was whether the mere involvement of a related party in organizing the purchase and recharging the cost automatically precludes the expenditure from being treated as an eligible cost under the Polish Investment Zone. In my view, it does not necessarily do so.

In practice, however, a more complex variant frequently arises.

The issue is no longer simply a matter of the purchase being organized “at group level.” The analysis becomes considerably more nuanced when the licence or software itself still originates from an external supplier, part of the implementation services are likewise procured from unrelated parties – but part of the implementation work is carried out by a related group company.

And it is precisely at that point that a question arises which, in practice, carries far greater weight than one might initially assume:

Does only the portion of the expenditure attributable to the related party fall outside eligible costs – or does the risk potentially extend to the intangible asset as a whole?

This is not a purely technical question. In many projects, the answer may have very concrete financial consequences.

The starting point: a single carrying amount

Let us begin with what is, relatively speaking, the least contentious aspect.

For accounting and tax purposes, the entrepreneur may be dealing with a single carrying amount for the intangible asset. If, for example:

• 50 represents the price of the software or licence acquired from an external supplier,
• 30 represents implementation services from unrelated parties, and
• 20 represents implementation services from a related group company,

then for the purposes of establishing the carrying amount, that asset may have a total value of 100.

Why? Because the acquisition cost of an asset is not limited to the bare purchase price alone. The Accounting Act requires a broader interpretation – encompassing the purchase price plus costs directly connected with the acquisition and preparation of the asset for its intended use. In practice, this is precisely why various implementation, configuration, integration, and go-live costs incurred prior to the asset being brought into use may be incorporated into the carrying amount of the intangible asset.

At this level, everything appears reasonably coherent.

The complexity begins in the Polish Investment Zone

The difficulty arises only when one moves from the accounting and income tax level to the state aid level.

Because the question in the Polish Investment Zone is not:

what is the carrying amount of the intangible asset for amortization purposes?

The question is, rather:

what portion of that carrying amount may be treated as an eligible cost?

And this is precisely where the central difficulty emerges.

Given that we have a single carrying amount of 100, should the full amount of 100 automatically be included in eligible costs? Or is it necessary to disaggregate that figure and conclude that, from the Polish Investment Zone’s perspective, only 80 qualifies – with 20, representing implementation services rendered by the related party, being excluded?

In my view, it is the second question that is the appropriate one in cases of this nature.

What exactly do the regulations say?

And here we come to the crux of the matter.

The regulation on state aid for new investments permits the inclusion in eligible costs of, among other things, the acquisition cost of intangible assets connected with a technology transfer.

This is significant, because the focus is placed squarely on the intangible asset itself.

The regulation then imposes an additional condition: such intangible assets must be acquired on market terms from a third party unrelated to the acquirer.

And it is this formulation that, in my view, must be taken very seriously.

Because if read literally, the subject of this condition is the intangible asset itself — for example, the licence, the software, the know-how, or the right to use a specific technology.

This does not, however, automatically mean that every cost which, for accounting purposes, increases the carrying amount of that intangible asset must be assessed in exactly the same way.

Where the distinction lies

Precision is important here.

I am not suggesting that implementation services are “irrelevant” or can be disregarded. On the contrary – for accounting purposes and in relation to the carrying amount, they are entirely material.

But in this fact pattern, they are not treated as a distinct acquisition in the form of a standalone intangible asset. They arise, rather, as a cost element that increases the carrying amount of an intangible asset already acquired.

This is an important distinction.

Because when the regulation refers to the acquisition of an intangible asset from an unrelated party, the most critical element of that construct concerns precisely this layer: the licence, the software, or the right to use the technology itself.

It is from this that the following argument derives:

• the intangible asset itself, acquired from an unrelated party, should not automatically fall outside eligible costs merely because part of the implementation costs were subsequently incurred in favour of a related party; and
• any residual concern should attach to precisely that portion of the costs attributable to services rendered by the related group company.

What remains, and what may fall away?

If this line of reasoning is accepted, a somewhat unusual  (but logically coherent) outcome becomes possible.

In our example:

• 50 for the intangible asset itself from an unrelated party – this position is the most defensible,
• 30 for implementation services from unrelated parties – an argument can also be made for including this, since it forms part of the acquisition cost of the intangible asset,
• 20 for implementation services from the related group company – this is the portion that carries the greatest risk.

The resulting structure may therefore look as follows:

carrying amount of the intangible asset = 100

but

eligible costs under the Polish Investment Zone = 80

Not because the missing 20 “disappears” from the accounting records or from the amortization calculation – it remains there, and continues to form part of the carrying amount. But it does not necessarily need to form part of the basis for calculating the state aid.

Do the regulations say this explicitly?

No. And that is precisely what makes this area so interesting – and so demanding.

There is no provision that sets out, step by step: “if 20 of the carrying amount derives from services rendered by a related party, that portion must be excluded, and the remainder retained.”

But equally, there are no grounds for automatically concluding that the presence of a single related-party element “contaminates” the entire intangible asset and eliminates the whole amount from eligible costs.

And that is precisely why, in my view, the most intellectually honest approach is an intermediate one:

• neither defending everything uncritically, nor
• writing off the entire value simply because a related party appears in one component of the transaction.

Why this construct makes sense

Because it reflects the logic of both regulatory regimes simultaneously.

On one hand, it respects the rules of accounting and income tax law, which require a single carrying amount to be established correctly for the intangible asset.

On the other hand, it respects the logic of state aid law, which requires particular caution in relation to expenditures connected with related parties.

This approach does not disrupt the system. It brings order to it.

It demonstrates that:

• for amortization purposes, a single carrying amount may exist, while
• for the Polish Investment Zone, the amount of eligible costs may be lower.

And in my view, that is the most persuasive position in fact patterns of this nature.

What does this mean in practice?

Above all, it means that in projects of this kind, it is not sufficient to stop at one categorical conclusion: “a related party is involved, so the issue is off the table” – or, conversely, “since the main licence is from an external supplier, the entire amount will hold up.”

One needs to go one level deeper and disaggregate:

• what constitutes the intangible asset itself,
• which costs merely increase its carrying amount,
• which of those costs are incurred in favor of unrelated parties, and
• which are incurred in favor of a related party.

Only at this level does the real analysis begin.

This is also a good moment to revisit older projects in which, out of an abundance of caution, the entire intangible asset – or the entire package of implementation expenditures – was excluded. It is possible that the issue did not in fact affect the full amount, but only part of it.

Conclusion

In my view, where the intangible asset itself is acquired from an unrelated party, but part of the implementation costs are incurred in favor of a related group company, one should not automatically assume that the entire intangible asset falls outside eligible costs.

A more nuanced analysis seems to me to be the more appropriate course:

• the regulation refers to the acquisition of an intangible asset from an unrelated party;
• in this fact pattern, the intangible asset remains the licence or software; and
• part of the implementation costs merely increases its carrying amount.

This does not yield an answer of absolute certainty. This remains a somewhat unsettled area of practice.

But in my view, it provides a strong argument for not writing off the entire value automatically — and for very carefully considering whether the actual issue is confined exclusively to that portion of the costs incurred in favor of the related party.