The following document provides detailed information about the Czech Republic, such as its investment climate, investment opportunities, description of the labour market, educational system, system of taxation or procedures of setting up a business. Potential investors also find information on how to relocate their business to the Czech Republic, the situation in the property market, transport infrastructure or description of the customs system.
The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it one of the most successful transition countries in terms of FDI per capita. The introduction of investment incentives in 1998 stimulated a massive inflow of foreign direct investment in greenfield and brownfield projects. The Czech Republic''s accession to the European Union in 2004 further boosted investment.
The Czech Republic is one of the most successful transition economies in terms of attracting foreign direct investment. The introduction of investment incentives in 1998 has stimulated a massive inflow of FDI into both greenfield and brownfield projects and since 1993 more than EUR 74 billion in FDI has been recorded.
The Czech Republic is a fully-fledged parliamentary democracy, and is one of the faster growing economies as well as one of the ten countries that entered the European Union on 1 May 2004. The country''s economic policy is consistent and predictable. A strong and independent central bank (the Czech National Bank) has maintained an extraordinary degree of currency stability since 1991. The Czech Republic was the first CEE country to be admitted into the OECD. The country is a member of NATO and is fully integrated into other international organisations such as the WTO, IMF and EBRD.
The Czech Republic offers both new and existing investors investment incentives and business support through several schemes. This document describes the system of national investment incentives offered by the government to investors in manufacturing facilities. As of the end of December 2010, 615 firms had been awarded incentives.
For companies/investment projects that for any reason do not fulfil the criteria for the national Investment Incentives Scheme described in the previous fact sheet, there are other forms of support available. However, none of the schemes includes tax breaks.
The Czech Republic covers the area of 78,864 km2. In 2011, its population reached 10.5 million and the labour force 5.7 million people. The official language is Czech, the capital of the CR is Prague, and the official currency is the Czech koruna (crown, CZK).
According to the Czech Statistical Office, preliminary data for the third quarter 2010 confirmed a substantial slowdown in the year-on-year decline in employment and even an overall increase over the recent past. Compared with the third quarter of 2009, total employment was down by 10,100 in the same quarter this year. Also, in the third quarter of 2010, the seasonally adjusted average number of unemployed people decreased by 10,600 in comparison with the previous quarter. The stagnation in the number of unemployed persons points to a gradual improvement in labour market conditions.
In comparison to other CEE countries, the Czech Republic has higher level of labour costs but very well educated, skilled and multi-lingual labour force. The annual wage has grown around 6-7 % on average over the past five years but it is coming from much lower base compared to Western Europe. Moreover, the weaker CZK to EUR/USD exchange rate has recently made salaries more favourable and is expected to remain relatively stable at these levels.
Employment contracts must be concluded in writing with the following minimum mandatory content: place of work, starting date of employment and nature of the work. Employees have to be informed in writing about their duties and rights, such as holiday allowance, wage and payment dates, working hours, job description, termination period, information about collective agreements, etc., within one month after concluding an employment contract if such information is not stated in the contract.
The Czech Republic combines an outstanding level of general education with strong science and engineering disciplines. For generations the Czech education system has generated high-level, technical problem-solving skills in environments where standard solutions are inadequate.
For many years, the former Czechoslovakia produced the highest percentage of science and technical graduates in the world. This tradition continues in the Czech Republic: in 2008, the proportion of university degrees awarded in science-related fields (engineering, manufacturing, construction) was among the highest in Europe. The government is committed to sustaining this by maintaining or increasing funding in these areas.
The Czech Republic is home to a motivated workforce with a high degree of responsiveness to training and interest in continual professional and personal growth. The quality of this highly skilled workforce is evidenced by existing investors'' expansion plans. The Czech Republic is already recognized as a prime location for European services-sector expansion and hosts an increasing number of business-support, research and customer-oriented services including expert solution centres, data processing and call centres as well as regional headquarters, value-added distribution centres and technology parks.
The system of taxation in the CR is derived from the Czech tax legislation and may be modified by a particular Double Taxation Treaty. The current tax system was introduced in January 1993. The legislation is subject to frequent amendments and changes due to rapid developments in the economy.
Corporate income tax is levied on income from the worldwide operations of Czech tax residents and on Czech-source income of Czech tax non-residents. Czech tax residents are considered to be entities with their registered office or place of effective management in the Czech Republic. The tax base is calculated from the accounting profit/loss shown on the relevant financial statements prepared according to the Czech Accounting Act and Czech accounting standards and is further adjusted by non-deductible costs and nontaxable revenues and other non-accounting adjustments.
On the first day of the Czech Republic''s membership in the EU on May 1, 2004, the country''s customs authorities abolished routine customs checks of goods transferred across the internal borders, i.e. the common border between the Czech Republic and other EU member states.
The Czech Republic possesses one of the most advanced transport networks in Central and Eastern Europe. Its geographical position at the very centre of Europe makes it a natural crossroads for major transit corridors. An extensive network of transport routes serves not only the Czech Republic but also links the country to neighbouring and other European states, and the density of the transport network ranks the Czech Republic among the world`s most advanced countries. The significance of the Czech Republic as a transit hub has grown since the Czech Republic became a member of the EU Single Market covering the area of 27 countries in Europe with 502 millions customers in total.
The new Act on Electronic Communications implementing the regulatory framework of the European Union came into force on May 1, 2005. The electronic-communications sector in the Czech Republic has been fully liberalized. Every natural person or legal entity that fulfills the conditions stipulated by law can enter the market and provide electronic-communications services or operate a public communications network.
The Czech property market is increasingly attractive for foreign investors due to the fact that the availability of space for production facilities has been boosted by a major government programme designed to support the construction and development of industrial zones, brownfield regeneration and development of speculative buildings, premises for R&D and shared-services centres. Major international and Czech developers are still seeking opportunities for development of industrial, logistics and business parks.
Building a new plant in the Czech Republic is similar as in other European countries. The Czech Republic offers an effective planning process and rapid construction capabilities. In most cases, it takes about one year to go from a completely vacant greenfield site to completion of a new facility. This time span can be shortened to less than one year in municipal industrial zones, where land plots and infrastructure are already prepared and local officials have been trained by CzechInvest to effectively support investors.
On 1 January 2006, the Czech electricity market was fully liberalised; households as the last customer segment became eligible customers and won the right to select their supplier. It is typical of the Czech open electricity market that there is no longer any regulation of activities in which competition is feasible. Only activities of a monopoly nature continue to be regulated. That same day saw the completion of the restructuring of major players on the electricity market, which had been commenced in 2003 - the merging of distribution companies, outsourcing of certain services and splitting-off of assets related to these services into separate companies.
The Czech Republic is divided into 14 regions (Higher Territorial Self-governing Units), which came into effect on January 1, 2000. The Basic Territorial Self-governing Unit is the municipality. There are three categories of municipalities in the Czech Republic. These categories differ in the range of selected
competencies that have been transferred from the central government.
Foreign legal entities are allowed to conduct trade activities, including acquisition of real estate, under the same conditions and to the same extent as Czech entrepreneurs. They may become founders or cofounders of a company, or may join an existing Czech company. Foreign companies may operate in the Czech Republic either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. There are four different legal forms of companies; the most common are limited liability companies (s.r.o.) and joint-stock companies (a.s.).
Conditions applying to entry of foreign citizens to the Czech Republic and their residence in the country are set by the Act No. 326/1999 Coll., on residence of foreign citizens in the Czech Republic, as amended. The Czech Republic is a part of the Schengen area. Checks were abolished at land borders in 2007. By joining the Schengen area, the Czech Republic has applied joint rules concerning the movement of persons in the entire Schengen area, including conditions for crossing external borders.
Although the life in the Czech Republic has been rapidly approaching Western standards of living in most respects, the costs of living remain substantially lower than in Western Europe. According to the Union Bank of Switzerland, average prices of goods and services in Prague are 57.5 % of those in New York. Domestic purchase power in Prague is 43.2 % of the New York''s level.
Information about the Czech banking sector, the insurance and capital markets, auditing and accounting firms, legal services, venture capital and business angels, leasing services, or testing centres.