PSI – Tax exemption for entrepreneurs on the basis of support decisions – calculation rules
Calculation of exempt income
The exemption for the Polish Investment Zone includes income earned by the taxpayer on the basis of the decision to support the ongoing investment that meets certain quantitative and qualitative criteria. Income for the purpose of calculating exempted income is exclusive of those earned from the economic activity in which the new investment is made. In the case of several decisions on support, revenues of this kind are aggregated, thus there is no need to separate them for individual new investments.
For the above purposes, deductible expenses are expenses incurred in connection with the business activity in which the new investment is made, except for expenses that are not deductible under tax regulations. If it is not possible to directly allocate the costs to the exempted activity, they should be allocated in proportion to the revenues generated, i.e. in the proportion in which revenues from the new investment remain in total revenues.
If the implementation of the new investment is carried out with the involvement of assets already in place and the new investment is a functional element, closely related to already existing assets, income for the purposes of the exemption also takes into account the costs of using existing assets before the decision to support. In view of the above, income for the purposes of the exemption is the difference between the income and the costs of obtaining this income indicated above. It is worth noting that exempt income does not refer only to the sale of goods or services, taking into account income from activities not inherent in them, such as exchange rate differences, among others.
The income calculated in this way is the basis for exemption from taxation within the limit of public aid or the expiration of the support decision. What is particularly important, however, is that the loss arising from the implementation of a new investment does not constitute a tax loss and cannot be accounted for under the general rules, as a loss arising from a source of income from which income is exempt.
Calculation of tax relief
The exemption limit is calculated as a percentage of the eligible costs of the new investment, which are:
the capital expenditures incurred or
2-year cost of hiring new employees
The maximum intensity of state aid for large entities is up to 50% and depends on the province where the investment is made, as does the period of application of the exemption, which is 10, 12 or 15 years. In addition, for medium-sized companies the maximum aid intensity is increased by 10%, and for companies with micro and small status by 20%.
The tax credit is therefore calculated as follows:
Tax credit = Eligible costs of the new investment * intensity of public assistance in the selected location.
The amount of tax-exempt income should be calculated according to the formula:
Amount of exempt income = Tax credit / tax rate
The amount of exempt income is the value of income subject to CIT or PIT exemption.