Investment Incentives

24. 7. 2012 | Source: Business and Investment Development Agency (CzechInvest)

The Czech Republic offers both new and existing investors investment incentives and business support through several schemes. Investment incentives are available not only to investors launching or expanding production, but also to technological centres and strategic service centres. This has been anabled by the amended Act No. 72/2000 on Investment Incentives which came into force on July 12, 2012. The concept of strategic investment project is an absolute novelty as well. This document describes the system of national investment incentives incorporated in Czech legal system.

Supported Areas

Industry

  • Introduction or expansion of production in sectors of the manufacturing industry

Technology centres

  • Construction or expansion of research and development centres

Business support services centres

  • Launch or expansion of activities of shared service centres,software-development centres, and high-tech repair centres

National Incentives Scheme

Tax incentives
  • Corporate income tax relief for up to 10 years for new companies
  • Partial corporate income tax relief for up to 10 years for existing companies
Job creation grants Financial support for creation of new jobs
Training and retraining grants Financial support for training and retraining new employees
Cash Grant on capital investment Financial support in the case of strategic investments in
manufacturing or in technology centres
Site support Transfer of public land at a favourable price

Tax incentives

The tax incentive has two forms. If a new company (legal entity) is established for the investment project, the new company is eligible for corporate income tax relief for up to 10 years. If the investment takes the form of an expansion project within an existing Czech company (legal entity), the company is eligible for partial corporate income tax relief for up to 10 years. The tax relief is terminated when the company has reached the maximum permissable state aid intensity (see the map).

Job-creation and training and retraining grants

Job creation grants amounting to CZK 50,000 per employee and training and retraining grants amounting to 25 %, 35 % and 45 % depending on the size of the company (L/M/S), of total training and retraining costs are provided only in districts with an unemployment that is at least 50 % higher than the national average.

Cash grant on capital investment

Cash grant on capital investment is available only to strategic investment projects. For capital investments in projects in this category, the level of financial support may be up to 5% of the costs, in addition to the standard investment incentives. This support is available for projects in the manufacturing industry and technological centres. Decisions concerning support to eligible projects will be made by the Government of the Czech Republic.

Site support

TThe preferential transfer of land or land with infrastructure owned by the state or municipalities is possible depending on the landowner's agreement with such preferential transfer.

Eligibility Criteria

For all types of activities it applies that the recipient of incentives shall not start work on the project (i.e. shall not acquire any assets including orders of machines and equipment and shall not commence construction works) prior to issuance of the confirmation of project registration by CzechInvest, and that the recipient shall retain the required assets and created jobs throughout the entire period of utilising state aid (at least for a period of five years).

Eligibility criteria for Manufacturing industry

  • The investor must invest at least CZK 100 million (approx. $5 million) within three years. This limit is reduced in regions with a high unemployment to CZK 50 million.
  • Half of the investment minimum must be financed through the investor's own equity.
  • At least CZK 50 million (CZK 25 million) must be made in new machinery.

Strategic investment

  • The investor must invest at least CZK 500 million (approx. $25 million) within three years.
  • At least CZK 250 million must be made in new machinery.
  • The investor must create of at least 500 new jobs.

Eligibility criteria for Technology centres

  • The investor must invest at least CZK 10 million (approx. $0,5 million) within three years. Half of the investment minimum must be financed through the investor's own equity.
  • At least CZK 5 million must be made in new machinery.
  • The investor must create of at least 40 new jobs.

Strategic investment

  • The investor must invest at least CZK 200 million (approx. $10 million) within three years.
  • At least CZK 100 million must be made in new machinery.
  • The investor must create of at least 120 new jobs.

Eligibility criteria for Business Support Service Centres

  • Creation of at least 40 new jobs at software development centres.
  • Creation of at least 100 new jobs at other business support services centres (shared servicecentres and high-tech repair centres).

State Aid

State aid is understood to be tax incentives, job creations grants and cash grant on capital investment. In the case of transfer of land for favourable prices, state aid comprises the difference between the purchase price and market prices of the given land. Training and retraining grants are not counted within the maximum amount of state aid. Aid is provided up to the amount maximum permissible state-aid intensity (see the map). The maximum aid amount is 40% (30% in the Southwest region) of total eligible costs.

Eligible Costs

Either long-term assets, when the value of machinery comprises at least half of the value of acquired assets, or two years' gross wages for newly created jobs can serve as eligible cost from which the maximum state-aid intensity is calculated.

Investment Manual

Further details on investment incentives are laid out in several documents available at CzechInvest, the Investment and Business Development Agency.