Tax boost for green transition – European Commission recommends tax incentives for clean industry

New European Commission initiative

At the beginning of July 2025, the European Commission published recommendations on the design of tax incentives to support investment in clean technologies and industrial decarbonisation. This document is part of the Clean Industrial Deal, an EU strategy to build a competitive, low-carbon industrial base in line with the EU’s climate goals.

Although the recommendations are not binding, they are intended to provide political and economic impetus for Member States to translate their transformation goals into concrete tax instruments. The document identifies two mechanisms: accelerated depreciation and tax relief for investments in green technologies.

Depreciation as a pro-investment tool

The first of the Commission’s proposals is to enable taxpayers to deduct investment expenditure on clean technologies (e.g. renewable energy equipment, heat pumps, hydrogen technologies, CCS equipment) more quickly, with the possibility of full depreciation in the year in which the cost is incurred. This solution would improve the liquidity of some companies and lower the barrier to entry for costly transformation investments.

The Commission also recommends introducing so-called discretionary depreciation, giving taxpayers the freedom to choose between the standard and accelerated methods. This is important in situations where taxpayers are unable to fully utilise immediate settlement of costs in a given tax year – this flexibility will allow the depreciation schedule to be adjusted to actual financial needs.

These solutions have already been in place for several years in many countries, not only in the European Union.

Tax relief for strategic projects

The second proposed instrument is tax relief for investments that contribute to the development of green technologies, the reduction of greenhouse gas emissions and the improvement of energy efficiency.

A particularly interesting element is the proposal to allow relief to be offset not only against income tax but also against other tax liabilities. This is a departure from the classic model of offsetting relief only against income tax, which is the case in Polish tax law and, in principle, in other jurisdictions as well. The Commission also recommends that allowances be refundable if they are not used within a specified period.

Principles for designing allowances

The European Commission identifies three main principles that should guide the design of effective and climate-friendly tax incentives.

Incentives should be targeted exclusively at clean technologies and decarbonisation measures, with fossil fuel investments completely excluded. They should be simple to administer for both taxpayers and tax authorities, with clear eligibility criteria. It is also important that they come into effect at the right moment in the investment process – incentives should be available when investment decisions are made, not only after they have been implemented.

Prospects for Polish regulations

From the perspective of the Polish tax system, the Commission’s recommendations open up space for discussion on extending existing solutions with tools directly aimed at supporting industrial transformation.

Although there are currently no regulations in Poland that explicitly promote investment in industrial decarbonisation, it is possible to use existing instruments in a ‘green’ way – in particular, research and development tax relief or robotisation tax relief – to support projects related to low-carbon technologies and industrial transformation.

The introduction of new incentives will require not only legislative changes but, above all, alignment with the minimum tax framework (Pillar Two).

What next?

Member States should inform the European Commission by the end of 2025 of the measures introduced or planned in response to the recommendation, as well as of existing tax measures of a similar nature. The Commission will monitor the effectiveness of the incentives implemented, support the exchange of good practices and coordinate actions within the framework of the common objectives of the Clean Industrial Deal.

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We will keep you informed about the implementation of the EU recommendations and any legislative measures. We also encourage you to contact us to analyse the possibilities of using currently available instruments, in particular R&D relief, in the context of green innovation and investment.

#MORE >> https://www.mddp.pl/rd-tax-relief-for-green-innovations/.