Czech Republic: Amendment of the Investment Incentives Act

The starting point
The current unemployment rate in the Czech Republic is 2.7%. This corresponds to the lowest value in the EU. In view of this, the Czech government is seeking to focus the system of investment incentives on promoting projects with higher added value, in addition to combating unemployment. The “Investment Incentives Act” has therefore been substantially amended.

The aims of the amendment are, in particular, to

  • promote investment in projects with higher added value,
  • increase support for economically problematic regions,
  • improve the availability of incentives for small and medium-sized enterprises
  • and improve the flexibility of the system for investment incentives.

A new government decree defines concrete parameters for the provision of incentives for investment projects. This can be easily changed by the government. What is also new is that the government must approve individual investment incentive plans.

Projects with higher value added value
Eligible projects with higher added value are projects implemented in the following sectors:

  • manufacturing industry,
  • technological centres (research, development and innovation)
  • and centres for strategic services (e.g. software development).

In certain cases, it is assumed that 80% of the employees in the investment project will receive a gross wage at least equal to the average wage in the region. It may also be necessary to include certain project shares of employees with a university degree (10%) and/or of employees in the field of research and development (2%). The purchase of machines can also be prescribed. However, the need to create new jobs has been eliminated.

Increased support for economically problematic regions
If the unemployment rate in a region exceeds 7.5% and at the same time reaches 125% of the average unemployment rate, this region automatically receives increased support.

Improvement of the availability of incentives for small and medium-sized companies
The amendment also regulates the reduction of minimum investments and the requirements for new jobs in beneficiaries of small and medium-sized enterprises.

The system will become more flexible. Critics of the amendments stress, however, that the government has great influence on the distribution of incentives. In addition, applicants must expect a longer procedure. The preparation becomes more complicated, the waiting times for a decision become longer.

Author: Filip Turčáni