The Czech Republic is a fully-fledged parliamentary democracy and one of the most advanced new EU members. Its economic policy is consistent and predictable. The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it the most successful transition country in terms of FDI per capita. The country`s investment grade ratings from international credit-rating agencies and its early membership in the OECD testify to its positive economic fundamentals.
Political and Economic Stability
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.
EU legislation was adopted in preparation for EU accession. Czech commercial, accounting and bankruptcy laws are compatible with Western standards.
The Czech koruna is fully convertible. All international transfers (e.g. profits and royalties) related to an investment can be carried out freely and without delay.
Competitive Advantages of the Czech Republic
According to the 2011-12 Global Competitiveness Report published by the World Economic Forum, the Czech Republic ranks 38th among 142 world economies in competitiveness (Rank/142).
- Quality of the educational system (49)
- Internet access in schools (21)
- Rigidity of employment index (27)
- Capacity for innovation (25)
- Local supplier quality (17)
- FDI and technology transfer (15)
- Trade tariffs (4)
- Quality of electricity supply (18)
- Mobile telephone subscribers (22)
- Inflation (1)
Well-educated and Skilled Workforce
The Czech Republic combines an outstanding level of general education with strong science and engineering disciplines. Technical education in the Czech Republic has a long tradition and enjoys a strong reputation around the world. The availability of technically educated graduates at a fraction of the cost of western labour creates a perfect environment for both manufacturing and R&D-oriented companies. About one-third of Czech students study economics, finance or IT. According to the last Eurobarometer survey, 80% of Czechs are able to speak a foreign language (predominantly English or German).
Under the Czech law foreign and domestic entities are treated identically in all areas, from protection of property rights to investment incentives. The government does not screen any foreign investment projects with the exception of the defence and banking sectors. As an OECD member the Czech Republic is committed not to discriminate against foreign investors in privatization sales, with the same exceptions as stated above.
The Czech Republic is a member of the Multilateral Investment Guarantee Agency (MIGA), an international organization for protection of investments, which is part of the World Bank-IMF group. The country has signed a number of bilateral international treaties which support and protect foreign investments, for example with the United States, Germany, the UK, France, Austria, Switzerland, Italy, Belgium, Luxembourg, the Netherlands, Finland, Norway, Denmark and China.
The treaties provide that each party shall permit and treat investments and associated activities of the other party’s residents on a non-discriminatory basis, and guarantee full protection and security by law. The full text of the respective treaty is available in Czech and the official language of the other country only. The Czech version can be obtained from the Collection of Laws of the Czech Republic. The other language version is available from the authorities of the other country such as the embassy. The Czech Republic has also concluded agreements for the avoidance of double taxation.
Protection of Property Rights
The Czech Republic is a signatory to the Bern, Paris, and Universal Copyright Conventions. The existing legislation guarantees protection of all forms of property including patents, copyrights, trademarks, and semiconductor chip layout design. The trademark law and copyright law are compatible with the EU directives. The only case where the property of a foreign person or entity could be expropriated in the Czech Republic would be on public interest grounds that could not be satisfied by other means, which would then have to be through an Act of Parliament and with full compensation at market value. No expropriation of the property of a foreign investor has taken place since the Velvet Revolution in 1989.
Repatriation of Profits
No limitations exist concerning the distribution and expatriation of profits by Czech subsidiaries to their foreign parent companies, other than the obligation of joint stock and limited liability companies to generate a mandatory reserve fund and pay withholding taxes. The Czech Republic has treaties to prevent double taxation with many countries, including all EU countries, Switzerland, the USA, Canada, Japan, and Australia. A full list of countries is available from the Ministry of Finance. Double taxation treaties cover taxes on dividends, interests and royalties. Actual rates of the withholding tax are determined by the treaty and range from 0 to 15 per cent. The exact method of double taxation prevention must be determined by reference to the actual treaty between the Czech Republic and the other country.
An open investment climate has been a key element of the Czech Republic`s economic transition. The country`s investment grade ratings from international credit rating agencies and its early membership in the OECD testify to its positive economic fundamentals.
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Source: Czech National Bank, May 2015
Acquisition of Real Estate
Foreign legal entities from EU and other states may acquire real estate in the Czech Republic without any restrictions and under the same conditions as Czech legal entities. Hence, the original legal requirements as to the location of the company or an establishment of a branch in the Czech Republic and entitlement to conduct business in the Czech Republic were lifted.