New conditions for investment incentives

21.9.2019

An amendment to the Act on Investment Incentives came into effect on 6 September 2019, which changed the conditions for their acquisition. Only production projects with higher added value and overlaps into research and development have a chance to obtain public support. Technology centres and strategic services centres continue to be supported.

The biggest change is that the granting of investment incentives will no longer be decided by the Ministry of Industry and Trade, but by the Government of the Czech Republic. So far, the government has only had the competence to approve strategic investment projects, but from now on it will decide on all investment plans.

The amendment defines the conditions for investment incentives only in general. The specific conditions for their assignment are set out in a separate Government Regulation (No. 221/2019). The government can flexibly respond to the current economic development of the Czech Republic and can change the conditions for granting investment incentives.

For example, a government regulation defines what is meant by “activity with higher added value”. For manufacturing companies, this means that the average wage of 80% of its employees must reach the level of the average wage in the region, and at the same time the company must cooperate with research institutions and at least 10% of its employees must be university educated. Collaboration with research institutions and the share of university-educated employees may be replaced by a share of R&D personnel of at least 2% or by the purchase of R&D machinery of at least 10% of eligible costs. Production projects implemented in the territory of a state-supported region are advantageous; they do not have to fulfil the condition of higher added value.

The limit for the acquisition of tangible and intangible fixed assets for investment projects in production remains unchanged (investment of at least CZK 100 million, of which at least CZK 50 million in machinery). The good news for small and medium-sized enterprises may be that a half limit applies for them, as for projects that will be implemented in economically troubled regions.

Newly, applicants for investment incentives must quantify and justify in the application the expected benefit of the investment for the region and the state, which sometimes can be complicated.

According to the Ministry of Industry and Trade, the new combination of conditions for investment incentives should motivate investment in more demanding activities and thus increase the international competitiveness of the Czech Republic.

Please contact us if you require assistance processing your investment incentive application or if you have any questions.




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