Business services centres set to benefit from new government grants
The government's grant programme attracts more business services investors to Poland
A strategic location, mature labour market, a diverse office proposition are major reasons for why Poland is a leading location in the CEE region for the business services sector. What is more, the Polish Council of Ministers amended the programme supporting investments that are deemed extremely important for the Polish economy. These changes aim to increase the competitiveness of Poland as an investment location, according to the latest report by JLL and Hays Onshore, Nearshore, Offshore: Unsure?.
"We can say that the initial shock and pausing of investors’ plans in the business services sector is already behind us. For some time now, we have been seeing an increasing number of companies from this industry locate their most advanced business processes from various countries, including Asian as well as some Easter European countries, to Poland. A number of companies from Western Europe, including the UK and Switzerland, which are looking to access qualified employment pools at competitive cost levels, are also looking at Poland. The country’s attractiveness to foreign companies is even greater because business services centres in Poland can apply for state aid, which is unavailable in other European locations. Recently, the state aid support programme was amended to better address the needs and expectations of investors”, commented Iwona Chojnowska-Haponik, Business Location Consulting Director, EMEA, JLL.
Investors from the business services sector can benefit from various instruments including corporate income tax exemption under the Polish Investment Zone (PIZ) national scheme and non-repayable grants for the hiring and training of employees. The latest changes in the state aid support programme have made the Polish incentive system one of the most attractive in the CEE region.
So what can business services investors expect from the amended programme?
Lower entry thresholds
Requirements for state assistance were loosened and are dependent on the type of investment, the size of the entrepreneur and the location of the project.
"Previously, the requirements to receive financial support by a business services centre was to create 250 jobs and invest PLN 1.5 million. Now, a large investor making their first investment or expansion on the Polish market is required to employ 100 people and incur a capital expenditure of PLN one million within a five-year period. A quality assessment of the project will determine the exact scope of state aid", explained Rafał Szajewski, Business Location Consulting Director, EMEA, JLL.
In the case of R&D activities, the requirements are significantly lower - 10 new jobs and PLN 1 million.
These changes are in line with trends that are shaping the modern business services sector.
"We have seen for some time that the scale of new investment projects is smaller. The growing maturity of the industry is illustrated by business services centres focusing on the quality of processes rather than quantity. Less advanced services are increasingly being automated. On top of this, if a centre’s operations expand, then the company has the opportunity to apply for incentives once again. One cloud on the horizon involves the European commission and its changes to state assistance which will come into effect at the beginning of 2022. This may see state assistance for new investments become very much limited in a number of countries. However, this concerns Poland to a lesser extent because in some of the country’s regions the state aid level will in fact increase”, added Rafał Szajewski.
Simplified assessment process
The business services sector has repeatedly called for a simplification and shortening of procedures which evaluate investment projects. Because of the changes in Poland, projects will now be evaluated according to criteria similar to those introduced for CIT exemption within the Polish Investment Zone. The evaluation will take into account issues such as how advanced the business process is, the pro-export character of the centre, job security, the willingness to invest in smaller locations with higher levels of unemployment, as well as the welfare, and competence development of employees.
Level of support
Investor who enters one of Poland’s major metropolitan areas may receive maximum support per new job created that ranges from PLN 3,700 to PLN 15,000 for BSS projects and PLN 5,000 to PLN 20,000 for R&D investments. Additionally, companies can use a training grant which covers up to 25% or 50% of costs, depending on the investment location. Higher levels of support are targeted at underdeveloped locations and regions impacted by high unemployment, for example, Eastern Poland.
"Such a policy of awarding grants is an important step towards levelling the playing field between different regions of the country. The winners may be smaller cities, such as Rzeszów or Białystok, which have less in the way of sector investments, but do have substantial labour markets," adds Rafał Szajewski.
The interest in incentives for investors from the business services sector is high and increasing all the time due to the amendments that are introduced to the scheme as well.
"It is important for companies to be able to fully assess opportunities and risks so that they can fully utilize tax exemptions and grants. With this in mind, the maturity of the business environment, which can offer comprehensive advisory services based on know-how and previous experience, is extremely important. Advisory firms, such as JLL, as well as investor assistance offices and thriving industry and business organizations, work hand in hand to increase foreign direct investment in Poland. As a result, despite the disruption caused by the pandemic, the business services industry in Poland looks set for an even brighter future," says Iwona Chojnowska-Haponik.