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Investment incentives in the Czech Republic

 
photo:  (fotolia)
 

Investment incentives may be granted to a newly established or exisiting company belonging to either Czech or foreign investors. Manufacturing companies may be granted a partial or complete income tax allowances for aperiod of up to 10 years, together with support for the creation of new jobs and employee re-training.

 

Active support for foreign and domestic investments dates to 1998, when the Czech government adopted a resolution on investment incentives for foreign investors. 

Investment Incentives Act

The system of investment incentives is regulated by Act No. 19/2004 Coll. that amends Act No. 72/2000 Coll. on Investment Incentives and changes some acts (Investment Incentives Act), as amended, and by some other acts. 

The most significant changes introduced within the framework of the latest amendment to the Investment Incentives Act (19/2004 Coll.) are for example lower limits for the minimum investment from CZK 350 million to CZK 200 million, the unification of the period of tax rebates to 10 years, the possibility to lodge a remedy and also the court review of a decision by the Ministry of Industry and Trade on offering investment incentives. 

  • Under the Investment Incentives Act there were 205 companies using investment incentives as of November 15, 2005. The realized investments of the supported companies are expected to reach almost USD 6.79 billion and create 48,110 jobs.

Investment incentives mean:

  • Legal entity income tax allowance for the period of 10 years for newly established companies or exiting legal entities
  • The transfer of a technically equipped area at a preferential price
  • Financial support for the creation of new jobs (up to CZK 200,000 per employee)
  • Financial support for the re-training and training of personnel (up to 35% of training costs)
  • The transfer of land under a special legal regulation that is registered with the Land Register as agricultural land and the transfer of other types of land at prices estimated according to a special legal regulation in effect on the date of signing the transfer contract. Special acts limiting the transfer of land in the ownership of the Czech Republic are not hereby affected.  

Conditions for granting investment incentives:

1.   The investment must be made into the branch of the processing industry, either into one of high-tech branches mentioned by the act or into another branch of the processing industry, provided that at least 50% of the price of the production line will be the acquisition cost of machinery from the government-approved list of advanced (high-tech) machinery.

2.   It must be the launch of new production, the extension of existing production or its modernization for the purposes of a significant change to the product or the production process.

3.   The investor must invest no less than CZK 200 million (CZK 350 million before the amendment); in regions where the unemployment rate is higher than the national average by at least 25% this requirement is reduced to CZK 150 million and the limit of investment in regions where the unemployment rate is higher than the national average by at least 50% is reduced to CZK 100 million.

4.   An investment of at least CZK 100 million (CZK 145 million before the amendment) - or CZK 50 million if made in a region with high unemployment - must be funded from own capital.

5.   The investor must acquire machinery classified into the chapters 84, 85 and 90 of the customs tariff worth at least 40% of the total value of acquired long-term tangible and intangible assets.

6.   The proposed production must comply with all Czech legislative requirements for environmental protection.

The system of investment incentives 

The system of investment incentives in the Czech Republic is set differently for the various types of investment projects:

Processing industry
Strategic services and technology centres
Legal entity income tax allowanceSubsidies for business activities
Support for the creation of jobsSubsidies for training and re-training
Support for training and re-training

Under the Investment Incentives Act, those investors who launch new production or extend the old in the area of processingwith an investment over CZK 100 million may receive investment incentives.

Investment incentives in the area of technology centers and strategic servicesare regulated by the Framework program of the Ministry of Industry and Trade of the Czech Republic of support for technology centers and strategic services.  

When projects are realized in the area of the provision of specific services in a region with an unemployment rate over 14% for the two previous six-month periods, the investors may also apply for financial support under the  program for the support of the creation of new jobs.

The government agency CzechInvest is trying to stimulate foreign investment in the CzechRepublic. Since 1992 CzechInvest has promoted the CzechRepublic as a ideal place for foreign investments and supported a tide of direct investments.

CzechInvest is also a contact center where domestic and foreign investors can obtain up-to-date, specialized information about the diverse support offered to business people in the CzechRepublic.

With the goal of making it easier for small and medium sized businesses to gain support, CzechInvest is also expanding its offices into the regions. Currently the organization offers 13 regional offices, where business people can find information about EU funding and systems of state support. Representatives can also help with the application process, accept applications and oversee funding for individual projects.
CzechInvest also has seven offices abroad, to simplify commiucation with foreign investors. These offices are located in countries from which a large volume of investments is directed towards the CZ. Contact information for individual offices is available on the agency's website.

For more information on investment incentives, contact CzechInvest on incentives@czechinvest.org

Information about investment incentives can be found on the website of the Ministerstvo průmyslu a obchodu (The Ministry of Industry and Trade) and on the portal www.czechinvest.org


 
 
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Added: 08.12.2009
 
 
 

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