Czech Republic has been offering investment incentives to foreign investors since 1998. The latest amendment, which has now been approved by the Czech Senate (on 19 March 2015) should come  into force on 1 May 2015 and extend the incentives to a broader group of potential investors. The amendment reacts chiefly to changes of the EU state aid legislation, especially to the newly effective Block Exemption Regulation, which directly applies to the Czech Investment Incentives Act, and to the newly approved regional aid map 2014 – 2020, which reduces acceptable state aid intensity in all regions of the Czech Republic (with the exception of Prague, where regional aid is not permitted at all). Besides that the amendment aims to make the investment environment in the Czech Republic more attractive for foreign investors. The amendment includes, among other, the following changes:

  1. A new investment incentive in the form of exemption from real estate tax in ‘favoured industrial zones’. These zones will include the so far unoccupied industrial zones whose construction was supported by the state within previous programmes for development of these zones or programmes supporting development of business real estate or infrastructure generally. These ‘favoured’ zones will be selected by the Czech Ministry of Industry and Trade (MIT) and finally approved by the Czech government. In these favoured zones, the investors will be offered a wider spectrum of investment incentives while requiring lower minimum investment toward production activities, i.e. 50 million CZK (approximately 1.8 million €). In addition the state will provide increased material aid, in comparison with other regions, toward newly created job positions; land and buildings will be exempted from real estate taxation for 5 years. This incentive will be subject to approval by the municipality where the zone lies. MIT currently considers to designate the following zones as the ‘favoured’ zones: Ostrava-Mošnov, FPZ Holešov and FPZ Most-Joseph as the Moravian-Silesian Region and the Usti Region suffer from the highest unemployment rates.
  2. The condition that investment must be funded by the investor’s own capital has been removed.
  3. Eligible costs are defined in more detail.
  4. The number of the required new job positions has been also reduced, among other for technological centers. This reduction is also connected to the reduced number of jobs in general terms applicable for technological centers.
  5. The number of regions, where aid may be provided toward each newly created job, has also been increased, by lowering the required unemployment rate level in the given region by more than 50 % (the ‘eligible’ unemployment rate is now anything exceeding the average unemployment rate in the Czech Republic by 25 %).
  6. Investment invectives can newly be provided, within the framework of support granted to strategic services centers, to data centers and customer service centers.
  7. The new time limits for strategic investment projects have been amended. A strategic investment project needs to achieve the declared investment and the number of newly created jobs within 3 years from the issue of the pledge to provide investment incentives and be approved by the government. Should this requirement not be fulfilled within 3 years the recipient will lose the right to material aid toward acquisition of long-term assets and real estate.
  8. The limit on financial aid provided to strategic investment projects (acquisition of long-term assets) has also increased. Under the new regime the investor may be provided with financial aid of up to 12.5 % of eligible costs. Specific amounts remain subject to government approval.
  9. Recipients will be newly required to notify state authorities when the investment project will have been completed and in what extent no later than within 5 years of investment incentives pledge issue date, or within seven years in case of strategic investment projects. These time frames are now considered the final limits for completing the investment and will apply also to  recipients who received incentives under the previous wording of the Investment Incentives Act. As the first investment incentives pledges begun to be issued under the current wording at the end of 2012, this deadline will start to apply at the end of 2017 for the first time.
  10. Applicants must now newly clearly define information on the location of investment project, date of commencement and completion of the investment and the requested amount of state aid. The applicants must also declare, under a sanction, that they have not wound up the same type of activity elsewhere in the EEC in two years before applying for investment incentives (the activities are defined in CZ-NACE – Classification of economic activities, as activities to be pursued after completion of the investment, which is subject to incentives, and that these activities will not be wound up within two years of investment completion).
  11. The amendment also reflects the rule that investment incentives for investment projects exceeding 100 million € (in eligible costs) can only be provided if an individual exemption has been approved by the European Commission.

The objective of the present amendment of the Investment Incentives Act is to simplify the existing regulation, harmonise the regulation with the relevant EU legislation and also to increase competitiveness of the Czech Republic and its attractiveness for foreign investment.