Technology Clusters and Parks

The best example of a Technology Park is in California, with Silicon Valley. Poland has its own Technology Parks, albeit a little less popular than Silicon Valley. These zones are starting to pop-up all over Poland, and many proponents of economic development understand the prospects of such implementations. As Vice Mayor of Wroclaw, Andrej Jaroch states:

"A park is an area of modern development. It involves land set aside for investment purposes plus a particular concept of its designation and development. The idea of such parks proved very successful in modern economic conditions in many countries, especially in the area of advanced technologies that create high added value…In Poland technology parks are in their infancy but a few of them have started to operate, for example the Cracow Technology Park. One of the companies operating here is Motorola; a driving force of the Cracow Park…Wroclaw is very attractive in the area of innovation. The city is a large academic center with impressive scientific potential." (1)

Since the beginning of 1995, Polish law has allowed for creation of Special Economic Zones (SSE) (2). The main purposes of the zones are: creating new employment, protection of the environment, application of new technology, management of natural resources and taking advantage of unused assets and infrastructure.

At present there are 17 SSEs in Poland: Cracow Technology Park, Czestochowa, Kamienna Gora, Katowice, Kostrzyn-Slubice, Legnica, Lodz, Mielec, Modlin Techno-Park, Slupsk, Starachowice, Suwalki, Tarnobrzeg Wislosan Euro-Park, Tczew, Walbrzych, Warmia-Mazury and Zarnowiec.

(For detailed description of each SSE, click on the technology park listed above)

In order to qualify for tax breaks in any of the zones, the investor must obtain a permit for conducting business there. The minister of the economy issues permits, but the minister may transfer this right to the administrator of a particular zone.

Benefits resulting from operating within the zone (3)

Benefits, which an investor may enjoy, differ from zone to zone. Generally, the benefits are:
· Tax exemptions on profits
· Property tax exemption
· Reduced stamp duty
· Other preferences

Tax exemptions on profits

Usually during a period of 10 years from the moment when the activity in the SSE commenced, the profit earned by the taxpayer from the activity set out in the permit is free from corporate (or personal where applicable) tax, to the amount of:
· The equivalent of investment expenditure incurred
· 10 percent (in certain cases even 25 percent) of profits earned separately in each month for every 10 employees hired by the taxpayer in a given month (This tax exemption cannot amount to more than 100 percent of the monthly profits)
· Totally when the investment expenditure exceeds the equivalent of ECU 350,000Ð2 million (depending on the zone).

Property tax exemption

Land, buildings and structures used for business activity set out in the permit may be fully exempt from property tax.

Reduced stamp duty

Stamp duty on transactions relating to the purchase of real estate within the zone concluded with the administrator is reduced by 50 percent.

Other preferences

A taxpayer who conducts business activity as outlined in the permit, but does not have the right to tax exemption on profits, can increase depreciation rates using an index up to four times the statutory rates (the rates specified in the decree of the Ministry of Finance on depreciation of fixed assets). The increase (accelerated depreciation) applies to most fixed assets except buildings and passenger cars.

The costs which arise from the acquisition of intangible assets borne by a taxpayer who conducts business activity as set out in the permit, but does not have the right to a tax exemption, can be treated directly as tax-deductible costs in the year in which the said costs were actually incurred.

An additional advantage for foreign investors is a simplified procedure for the purchase of real estate. The permit from the minister of internal affairs, which a foreign person must acquire in order to purchase real estate (situated within the zone) , must be issued within one month.

Conducting business activity in Special Economic Zones in Poland can provide substantial advantages for investors. On the other hand, as different conditions apply for different zones, detailed knowledge of the regulations regarding the particular zone in which a taxpayer operates and careful tax management are essential in order to obtain and benefit from tax breaks.

SOURCES

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