Progress on the Polish National Recovery Plan and amendments to state aid law | In Principle

On 3 May 2024, Poland marked the third anniversary of submission of the first version of its National Recovery Plan to the European Commission. On the eve of that date, information was released on disbursement of the first funds under the plan, in the amount of c. EUR 6.3 billion. But this is not the only good news for those interested in financial support from European funds. Legislative work is also underway to help absorb funds the National Recovery Plan and other European funds.

Before examining the positive news on distribution of EU funds, we will let data from the Ministry of Funds and Regional Policy summarise the status of implementation of programmes for 2014–2020 and 2021–2027.

As of 20 May 2024, more than 200,000 applications had been submitted in the previous financial perspective (2014–2020). Funding agreements were signed with half of the applicants, and the total value of EU funding was PLN 352.5 billion. After settling the expenditures incurred by beneficiaries at the national level, the absorption of EU funding ultimately amounted to PLN 339.1 billion, representing 96.8% of the 2014–2020 EU funds allocated to Poland. This is not the final result, as this financial perspective has yet not been closed.

And in the new financial perspective (2021–2027), under which calls for submissions began effectively at the start of 2023, more than 3,700 agreements have been signed with the EU for funding worth PLN 75.3 billion, accounting for 18.5% of EU funds allocated to Poland. The number of project applications has already exceeded 31,000.

These figures illustrate the scale of distribution of European funds in Poland and indicate the growing interest of undertakings in obtaining support. Disbursements from the Polish National Recovery Plan and the absorption of EU funds are also reflected in the country’s economic growth. Experts point to the significant impact of European funding on Polish GDP, which is projected to grow at 4–5% in 2025.

Polish National Recovery funds

The utilisation of Polish National Recovery funds is less optimistic, at below 20%. Concerns about disbursement of the National Recovery funds allocated to Poland are particularly pressing considering that June 2024 will mark two years since approval of the Polish plan (first version) by the Council of the European Union, and implementation of all investments must be completed by 31 August 2026 (the Commission can make payments until the end of 2026).

However, while cautioning against hasty opinions on the feasibility of implementation of the Polish National Recovery Plan, it is necessary to go back to the assumptions of the plan and its scope, which has been greatly revised in recent times.

Like other EU member states, Poland prepared its National Recovery Plan implementing the general objectives of the Reconstruction and Resilience Facility, established by Regulation 2021/241.

Under the terms of the RRF, the member states were to simultaneously, in a coordinated manner, carry out reforms and make investments that would collectively contribute to economic growth throughout the Union following the Covid-19 pandemic, with a particular emphasis on job creation.

The Polish National Recovery Plan is a policy document setting out objectives for building and rebuilding Poland’s socio-economic resilience after the crisis caused by the Covid-19 pandemic. The plan is grounded on six pillars: green transformation; digital transformation; health; competitiveness and innovation; sustainable transportation; and quality of institutions. Also, reforms and investments which began on 1 February 2020 may be supported under the plan.

The original Polish National Recovery Plan has been greatly revised since submission to the Commission in May 2021. In 2023, among other things, a chapter was added for REPowerEU (unveiled by the Commission in May 2022, and centred around the RRF for funding), the purpose of which, according to Art. 21c of Regulation 2021/241, is:

• Effective enhancement of energy security
• EU energy supply diversification
• Increasing the share of renewable energy
• Increasing energy efficiency and energy storage capacity
• Necessary reduction in dependence on fossil fuels before 2030.

The revised version of the Polish National Recovery Plan indicates that its original assumptions are no longer feasible in part due to objective circumstances, resulting in a need to amend 59 measures. In doing so, the Polish side explained that the reduction in the maximum financial contribution will also cause some activities to be changed or removed to reflect the reduction in allocations.

However, this was not the end of the amendments to the Polish National Recovery Plan. In the 1^st quarter of 2024, the Ministry of Funds and Regional Policy held public consultations resulting in changes to 14 of 55 reforms and 27 of 56 projects. The purpose of the modifications is to improve implementation of the plan by, among other things, changing the scope of projects, moving the project completion deadlines, changing the deadlines for carrying out reforms, and shifting funds from the grant part to the loan part.

At the end of April 2024, the Council of Ministers adopted a resolution to amend the Polish National Recovery Plan, which has already allowed Poland to apply to the European Commission for approval of the revised version of the plan. Once the Council adopts the revised implementing decision (which is foreseen for July 2024) and signs the annexes to the financial and loan agreements, Poland will be able to submit further payment requests.

Status of absorption of Polish National Recovery Plan funds

So far, the Polish National Recovery Plan funds have been disbursed only twice. Payments were withheld due to Poland’s failure to meet the milestones regarding organisation of the judicial system and ensuring an effective audit and control system. Achievement of these milestones was to take place before the first payment request was submitted.

As a result, the Commission did not disburse the first funds of just over EUR 5 billion until December 2023 (more than EUR 4.5 billion from the loan part and more than EUR 550 million from the grant part). In the form of advances, these funds related to implementation of tasks from the REPowerEU programme constituting a part of the Polish National Recovery Plan. On 15 April 2024, the Commission transferred further funds of about EUR 6.3 billion to Poland, as part of its consideration of the first payment request.

As a result, two years after the plan was approved, Poland has drawn less than 20% of the allocated recovery plan funds:

• Grants of EUR 3.25 billion (out of EUR 25.3 billion)
• Loans of EUR 8.14 billion (out of EUR 34.5 billion).

Due to this two-year delay, some experts hope that the next revision of the plan will allow for an increase in the scale and pace of absorption of the plan funds, so that the private and public sectors can benefit from support to the fullest extent possible.

We should note that the European Commission website allows the scale of each member state’s drawdown of funds under their national reconstruction plans to be monitored in real time. On the site, users can check the progress of implementation of the Polish plan (broken down into the six policy pillars) or the level of utilisation of funds from the loan and grant parts.

Also, changes in the regulations

The activities undertaken by the Ministry of Funds and Regional Policy aren’t just a revision of the Polish National Recovery Plan. They also include legislative work intended to help leverage financial support for the plan’s reforms and investments.

The ministry has drafted a bill to improve the drawdown of loans under the Polish National Recovery Plan. The proposal was favourably reviewed by a joint commission of central and local government. The amended provisions will allow:

• Signing of agreements to provide financial support for undertakings in line with the objectives of the Polish National Recovery Plan, so that investments can benefit from funds from the loan part of the plan
• Settlement with contractors in euro, which is expected to increase the interest in funds from the loan part of the plan, especially for projects such as construction of offshore wind power plants, where the available budget is EUR 4.7 billion
• Incurring obligations up to the limit of funds indicated in the Budget Act for a given year, which is expected to streamline implementation of projects, eliminating the risk that institutions will not conclude investment agreements until they have actually raised funds for the purpose.

Changes in de minimis aid

When discussing the state of distribution of European funds, it is also important to note the recent amendments that have been introduced to the legal basis for granting state aid in the form of de minimis aid.

As of 19 April 2024, a new regulation of the Minister of Funds and Regional Policy is in effect with regard to de minimis aid under the 2021–2027 regional programmes:

• Setting forth the detailed conditions and procedure for providing such assistance to undertakings through 31 December 2029
• Constituting the legal basis for providing support in the form of de minimis aid for projects implemented by undertakings under the regional programmes for 2021–2027, excluding de minimis aid provided by the European Social Fund Plus
• Containing provisions allowing for disbursement of both repayable and non-repayable aid.

This regulation was drafted by the Ministry of Funds and Regional Policy pursuant to entry into force on 1 January 2024 of the European Commission’s new De Minimis Regulation (2023/2831), which made a number of major changes regarding delivery of support in the form of de minimis aid:

• Increasing the de minimis aid ceiling for a single undertaking to EUR 300,000 (from the prior EUR 200,000)
• Changing how the three-year period is calculated (it must now be assessed on a rolling basis, i.e. taking into account the total amount of de minimis aid granted in the past three years)
• Removing the separate limit on de minimis aid for for-profit road freight transport ventures
• Removing the ban on use of de minimis aid for acquisition of vehicles for transporting goods by road
• Allowing granting of aid to undertakings in the sector of processing and marketing of fishery and aquaculture products (so long as the amount of aid is not determined on the basis of the price or quantity of products purchased or marketed)
• Introducing an obligation for member states to maintain a central register of de minimis aid at the national or EU level.

The new De Minimis Regulation, which will remain in force through 31 December 2030, replaced the previous Council Regulation 1407/2013, the provisions of which were incorporated into the national legal order by the Regulation of the Ministry of Funds and Regional Policy of 29 September 2022. Regulation 1407/2013 could apply through 31 December 2023, but under Art. 7(4) of the regulation, after that date any de minimis aid programmes meeting the conditions set forth there will remain covered by that regulation for another six months. This means that de minimis aid can be granted under the Polish regulation of 29 September 2022 only through 30 June 2024.

In the context of amendments to the state aid law, new executive regulations in Poland are also worth mentioning:

• Regulation on granting de minimis aid under regional programmes for 2021–2027
• Regulation on providing de minimis aid for diversification of the activity of micro, small or medium-sized enterprises under the Polish National Recovery Plan
• Amended regulation on granting state aid and de minimis aid with the participation of Bank Gospodarstwa Krajowego under the European Funds for a Modern Economy 2021–2027 programme
• Regulation on granting de minimis aid by Bank Gospodarstwa Krajowego in the form of loan guarantees under the European Funds for a Modern Economy 2021–2027 programme
• Amended regulation on granting de minimis aid by Bank Gospodarstwa Krajowego in the form of loan guarantees under the Smart Growth Operational Programme 2014–2020
• Regulation on granting de minimis aid by Bank Gospodarstwa Krajowego in the form of a loan guarantee or other obligation
• Regulation on granting de minimis aid by Bank Gospodarstwa Krajowego in the form of loan guarantees under the Rural Development Programme 2014–2020

• Regulation on granting regional investment aid, investment aid for sports infrastructure and multifunctional recreational infrastructure, investment aid for local infrastructure and de minimis aid for green transition of cities under the Polish National Recovery Plan.

Dr Anna Kulińska, Tax practice, Wardyński & Partners