How to determine enterprise size in the Polish Investment Zone?

The size of your enterprise is one of the key factors determining how much you can actually gain from a support decision under the Polish Investment Zone. Micro and small companies receive a bonus of +20 percentage points to the state aid intensity, medium-sized enterprises +10 percentage points, while large enterprises benefit only from the basic intensity for a given region. The difference can amount to millions of zlotys, so correctly determining your size status is not a formality but the foundation of the entire investment profitability calculation.

The rules for classifying enterprise size are set out in Annex I to Commission Regulation (EU) No 651/2014 (the so-called GBER). This document is the point of reference when applying for state aid under the PSI. Below you will find a practical discussion of each of its key elements.

1. What is an enterprise within the meaning of EU law?

Before we move on to the size categories, it is worth knowing what is considered an enterprise at all. According to Article 1 of Annex I to the GBER:

An enterprise is considered to be any entity engaged in an economic activity, irrespective of its legal form. This includes, in particular, self-employed persons, family businesses engaged in craft or other activities, and partnerships or associations regularly engaged in an economic activity.

If you run a business, whether it is a sole proprietorship, a limited liability company, a joint-stock company, or even an association conducting business activity, you are subject to the same classification rules.

2. Enterprise categories — headcount and financial thresholds

Article 2 of Annex I to the GBER distinguishes three categories within SMEs: micro-enterprise, small enterprise and medium-sized enterprise. If your company exceeds the upper SME thresholds, it is classified as a large enterprise.

The classification is based on two types of criteria:

• Headcount criterion - is mandatory. You must meet it in order to fall within a given category.
• Financial criterion - is alternative. You check annual turnover OR the annual balance sheet total, and it is enough that your company does not exceed one of these two thresholds.

This means that to qualify, for example, as a small enterprise, you must employ fewer than 50 people and at the same time not exceed the EUR 10 million threshold for annual turnover or annual balance sheet total. If your turnover exceeds EUR 10 million but your balance sheet total is below that threshold, you are still a small enterprise (provided headcount is below 50 persons).

Enterprise size classification thresholds under Annex I to the GBER

Category	Headcount (AWU)	Annual turnover	Annual balance sheet total	Aid intensity bonus under the PSI
Micro-enterprise	< 10	≤ EUR 2 million	≤ EUR 2 million	+20 p.p.
Small enterprise	< 50	≤ EUR 10 million	≤ EUR 10 million	+20 p.p.
Medium-sized enterprise	< 250	≤ EUR 50 million	≤ EUR 43 million	+10 p.p.
Large enterprise	≥ 250	> EUR 50 million	> EUR 43 million	no bonus

Note: the headcount criterion must be met together with at least one financial criterion. The financial criteria (turnover and balance sheet total) are alternatives to each other; it is enough to fall within one of them.

3. Three types of enterprises - autonomous, partner, linked

Checking your company's headcount and financial data is not everything. Article 3 of Annex I to the GBER requires you to first determine what type of enterprise yours is, because this determines whose data you take into account when calculating the thresholds.

Autonomous enterprise

This is an enterprise that is neither a partner enterprise nor a linked enterprise with respect to other entities. If you have no significant shareholders and do not hold significant shareholdings in other companies yourself, you are an autonomous enterprise and take into account only your own data.

Partner enterprise

Your enterprise is a partner enterprise when:

• You hold (alone or jointly with linked entities) at least 25% of the capital or voting rights in another enterprise, or
• another entity holds at least 25% of the capital or voting rights in your enterprise,

but the conditions for being linked, described below, are not met.

Exceptions to the 25% threshold

The Regulation provides for significant exceptions. Even if the investors listed below have reached or exceeded the 25% threshold, you may still regard your enterprise as autonomous, provided that these investors are not linked to it (individually or jointly):

• Public investment corporations, venture capital companies and so-called business angels (natural persons or groups of natural persons carrying out a regular venture capital investment activity, who invest in unlisted companies) - provided that the total investment of those business angels in a single enterprise is less than EUR 1,250,000;
• Universities or non-profit research centres;
• Institutional investors, including regional development funds;
• Autonomous local authorities (local governments) with an annual budget of less than EUR 10 million and fewer than 5,000 inhabitants.

This is an important loophole, because if, for example, a VC fund has acquired a 30% stake in your company but does not get involved in management, you may still qualify as an autonomous enterprise.

Linked enterprise

This is the furthest-reaching relationship. Enterprises are considered linked when one of them:

• holds a majority of the voting rights in the other enterprise (as a shareholder, stockholder or member);
• has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of the other enterprise;
• has the right to exercise a dominant influence over the other enterprise pursuant to a contract or provisions of its articles of association/partnership agreement;
• controls alone, pursuant to an agreement with other shareholders/stockholders, a majority of the voting rights in the other enterprise.

Importantly, a link may also exist indirectly,  through another enterprise or one of the investors listed in the exceptions. Chains of links are cumulative.

Links through natural persons

Enterprises are also considered linked when a relationship between them exists through a natural person or a group of natural persons acting jointly, but only on condition that these enterprises operate, or part of their operations, in the same relevant market or adjacent markets.

An adjacent market is the market for a product or service situated directly upstream or downstream of the relevant market (e.g. a manufacturer of components and a manufacturer of end products made from those components).

The 25% rule for public bodies

Regardless of the above exceptions, an enterprise cannot be considered an SME if 25% or more of its capital or voting rights are controlled, directly or indirectly, jointly or individually, by at least one public body (Article 3(4) of Annex I). The only exception is the small local authorities listed above (budget below EUR 10 million, fewer than 5,000 inhabitants).

4. How data is calculated depending on the type of enterprise

Article 6 of Annex I to the GBER specifies how to determine data on headcount, turnover and balance sheet total. The rules differ for each type of enterprise:

Autonomous enterprise

You take into account only your own data from your accounting records. You do not need to include any other entities.

Partner enterprise

To your own data you add the data of partner enterprises in proportion to your share of the capital or voting rights (the higher value is taken into account). If a partner enterprise in turn has linked enterprises, you add the data of those linked entities at 100%.

Example: Your company employs 30 people. You hold a 40% stake in company B, which employs 20 people and is a partner enterprise (not linked). To your 30 employees you add 40% of 20, i.e. 8. In total you count 38 employees. You proceed analogously with turnover and balance sheet total.

Linked enterprise

To your own data you add the full (100%) data of all linked enterprises, both directly and indirectly. If a linked enterprise additionally has partner enterprises, you include their data proportionally.

Example: Your company employs 80 people. The parent company (a linked enterprise) employs 200 people. In total you count 280 employees — which means your company exceeds the SME threshold and is classified as a large enterprise, even though on its own it employs only 80 people.

This mechanism most often causes „surprises”: a company that looks small or medium-sized on its own turns out to be a large enterprise once capital links are taken into account.

5. How to count headcount - annual work units (AWU)

Article 5 of Annex I specifies that headcount does not simply mean the number of contracts. What counts are annual work units (AWU), i.e. the equivalent of full-time positions over the entire reference year:

• An employee working full-time for the whole year = 1 AWU.
• An employee working half-time for the whole year = 0.5 AWU.
• An employee working full-time for 6 months = 0.5 AWU.
• Seasonal workers and part-time staff are calculated as the appropriate fraction of an AWU.

Staff includes: employees, persons regarded as employees under national law, owner-managers, and partners engaged in a regular activity in the enterprise and benefiting financially from it.

The following are not counted:

• apprentices and students engaged in vocational training under an apprenticeship or vocational training contract,
• periods of maternity or parental leave.

6. Reference periods and the two-year rule

According to Article 4 of Annex I to the GBER, the data used for classification relate to the last approved accounting period and are calculated on an annual basis. Turnover is calculated excluding VAT and other indirect taxes.

The rule of two consecutive years

If at the end of the accounting year your company has exceeded the thresholds of a given category (or fallen below them), the change of status occurs only when this situation is repeated over two consecutive accounting periods. A one-off breach of a threshold therefore does not automatically change your classification; this is a safeguard against fluctuations in results.

Newly established enterprises

If your company has only just been established and does not yet have approved accounts, the data for classification come from good-faith estimates made during the financial year.

Why this is so important in the context of the PSI

Correctly determining enterprise size is not an academic exercise but a matter that directly affects the amount of the tax exemption you can obtain under the Polish Investment Zone. Incorrect classification may have serious consequences:

• If you overstate your category (e.g. you consider yourself an SME when in fact you are a large enterprise due to capital links) - you will benefit from a higher aid intensity than you are entitled to. In the event of an audit, this may mean having to repay part or all of the state aid together with interest.
• If you understate your category (e.g. you consider yourself a large enterprise although you meet the SME criteria) you will lose the aid intensity bonus to which you are entitled.

Before you submit an application for a support decision, carefully analyse:

1. Whether your enterprise is autonomous, partner or linked.
2. Which data (whose and in what proportion) you must include.
3. Whether your headcount (in AWU) and financial data fall within the thresholds of a given category.
4. Whether your status has been maintained for at least two consecutive accounting periods.

If you have doubts about the classification of your enterprise - especially where capital relationships with other entities are involved - it is worth consulting a specialist. A correctly determined size status is the foundation of safely using state aid in the Polish Investment Zone.