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Investment Incentives

The national incentives scheme
The Czech government in April 1998 originally approved investment incentives for manufacturing. From the outset, the incentives scheme was designed to apply equally to both foreign and domestic investors under the same conditions.

A new** Act on Investment Incentives** (Act No. 72/2000 Coll.), which came into force on 1 May 2000, and whose subsequent amendments came into force in May 2004 and July 2007, codifies, simplifies and extends the original national incentives scheme. The Act was discussed with the European Commission and is in compliance with European regulations on state aid.

INCENTIVES LISTED IN THE ACT ON INVESTMENT INCENTIVES

source: Czech Invest

The incentives are available individually or collectively and are designed to have maximum impact in the
early stages of the given project.

Tax incentive
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 tax relief for up to five years. If the investment takes the form of an expansion project within an existing Czech company (legal entity), the company is eligible for partial tax relief for up to five years. The tax relief is terminated when the company has reached the maximum level of eligible state aid – see the section below on compatibility of incentives with European Union regulations.

Job-creation and training and retraining grants
Job creation grants amounting to CZK 200,000 per employee and training and retraining grants amounting to 35% of total training and retraining costs are provided only in districts with unemployment that is at least 50% higher than the national average.

Site support
The 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 manufacturing

  • The investment must be made in a manufacturing sector.
  • The investment must be made in the launch of new production or in the expansion of existing production.
  • The investor must invest at least CZK 100 million (approx. $5.5 million) within three years. This limit is reduced in regions with high unemployment to CZK 60 million or CZK 50 million, depending on the unemployment rate.
  • Half of the investment minimum (above) must be financed through the investor’s own equity.
  • At least 60% of the total investment must be made in machinery.
  • All machinery must be new.
  • The proposed production must meet all Czech environmental standards.

Investment incentives – Company with EU regulations
The compatibility of the investment incentives regulations applied in the Czech Republic with EU state-aid legislation is evaluated by the European Commission. Each application for investment incentives must pass an evaluation by the Ministry of Industry and Trade, which also decides on the total amount of state aid available to each project. The actual aid available to each project is calculated as a percentage of the total value of the actual investment (i.e. capital expenditure on land, buildings, machinery and equipment, including limited expenditure on intangible assets). Once the limit of state aid available to the project has been reached, the tax break is terminated and the company has to start paying corporate tax. Please see the attached map for the maximum percentage of state aid available in various regions in the Czech Republic, as required by EU regulations.

BUSINESS SUPPORT SERVICES AND TECHNOLOGY CENTRES

INCENTIVES AND ELIGIBILITY CRITERIA

In order to strengthen the Czech Republic’s position as an information and technology hub in the Central European region, the Czech government also supports investment in development and innovation as well as service activities. Based on Government Decree No. 1238, of December 10, 2003, the Framework Program for Support of Technology Centers and Centers of Business Support Services, the following incentives are offered:

Subsidy for business activity
Paid yearly up to 50% of eligible business expenses (business expenses can be either wage or capital expenditures on tangible and intangible assets);
Paid during a period of maximum 10 years, up to the ceiling of the state aid (this maximum amount of the state aid is calculated using either the employees’ two-year average wages within the first 3 years or using expenditures on tangible and intangible assets within 5 years).

Subsidy for training and re-training
Paid yearly at a level of 35% (30% in Prague) of special training costs and 60% (55% in Prague) of general training costs. Special training refers to training through which employees gain knowledge and skills that can be used only within the investor’s project and cannot be easily transferred to other companies. General training refers to training by which employees gain general knowledge and skills that can be used also outside the investor’s project;
Paid during the period of maximum 3 years (or 5 years if the investor creates more than 100 new jobs)
Maximum level of training subsidy is CZK 100 000 per employee (or CZK 150 000 per employee if the investor creates more than 100 new jobs)

DEFINITION OF BUSINESS SUPPORT SERVICES

“Business support services” are selected activities of companies characterised by a high proportion of added value, a high proportion of qualified labour, a close relationship with information technologies, and a distinctive international focus. This particularly concerns customer contact centres, shared services centres, software development centres, expert solution centres for information and telecommunication technologies and high-tech repair centres.

DEFINITION OF TECHNOLOGY CENTRES

Technology centres, or design centres, are centres of innovation activities in selected sectors that are closely related to manufacturing. The results of a centre’s innovation activities are expected to be applied in regular production.

ELIGIBILITY CRITERIA

Type of project:

source : Czech Invest

CzechInvest is the sole entity that may accept applications for the incentives above. Additional details on incentives can obtained from our investment incentives specialists or from the “Manual on Investment Incentives” available at CzechInvest in printed and electronic form.

For further details visit CzechIvest web sites http://www.czechinvest.org/…ep-42-en.pdf

Application Process

  • The investor prepares an application for investment incentives by means of standardized application and registration forms and submits it to CzechInvest, the Investment and Business Development Agency.
  • CzechInvest evaluates the application within 30 days (60 days in the case of incentives for technology centers and business support services) and forwards it to the Ministry of Industry and Trade.
  • The Ministry of Industry and Trade forwards the application to other ministries for their evaluation. The Ministry of Industry and Trade, in cooperation with the Office for the Protection of Economic Competition, decides the total value of investment incentives available for each project according to EU regulations. This takes 2–3 months.
  • Upon receiving the comments from the ministries, the Ministry of Industry and Trade makes a proposal of a “Project Aid Decision” to the investor. The proposal lists all the incentives available for the project and lays out the conditions under which the incentives are granted.
  • The investor has a period of 6 months to accept the proposal. Once the investor has accepted the proposal, the Ministry of Industry and Trade issues a formal “Project Aid Decision ”.

Based on materials published by CzechInvest.