Expenditure on ancillary infrastructure may be an eligible cost
It is possible to include expenditure on auxiliary infrastructure in the eligible costs of the PSI, according to the ruling of the Voivodship Administrative Court in Lublin of 22 November 2023, case ref. no. I SA/Lu 472/23.
In the factual situation dealt with by the court, the company planned an investment to increase the production capacity of the plant and additionally intended to incur expenditure on the office, administrative and social parts of the building and necessary equipment, i.e. on ancillary infrastructure within the meaning of the provisions on the Polish Investment Zone. It applied for an interpretation asking whether such expenses would constitute eligible costs covered by the decision on support (hereinafter: DoW).
– The authority found the taxpayer’s position to be incorrect because, in its view, expenditures on ancillary infrastructure are incurred by the company independently of obtaining the DoW and serve purposes other than the actual production process. The authority referred to the Tax Notes and indicated that expenses incurred for the construction of office and administrative facilities cannot be considered as an eligible cost of a new investment, because such an investment does not contribute to an increase in production capacity, explains Adam Rzepa, a consultant at Thedy & Partners.
The company challenged the interpretation and the WSA agreed with it. Pursuant to Article 17(1)(34a) of the CIT Act, a taxpayer may benefit from a tax exemption if the income is derived from business activities specified in the DoW and is obtained from activities carried out in the area specified therein. The court ruled that since the company meets the requirements under these provisions, it may include the expenses for the construction of office and administrative facilities as eligible costs.
– The Provincial Administrative Court in Lublin confirmed the earlier position of the courts in Gorzów Wielkopolski (case files: I SA/Go 150/22 and I SA/Go 209/22) or Szczecin (case file: I SA/Sz 392/23), according to which, based on a literal interpretation of the provisions, there is no relation between the possibility of counting a given expense as eligible costs and its direct impact on increasing the production capacity of an existing enterprise. Therefore, expenditures incurred on auxiliary infrastructure may constitute eligible costs of the investment, adds Adam Rzepa.