Over the past few years, the Czech Republic has significantly increased its focus on investments with higher value added and innovation projects. The current priority is to support high-tech projects, research and development and environmentally friendly initiatives.
Investment incentives are provided mainly in the following forms:
- Corporate income-tax relief for ten taxable periods
- Cash grants for creation of new jobs (only for selected regions)
- Cash grants for training and retraining of employees (only for selected regions)
- Cash grants for acquisition of fixed assets for strategic investments
There are also other types of state aid available, especially for prioritised investments in R&D, innovations, energy savings and the circular economy.
The following types of investments can obtain investment incentives:
- Manufacturing industry – launch of new production, expansion of existing production (supported only in selected regions) or expansion of the product range through introduction of new products or a fundamental change in the production process.
- Technology centres – establishment of a new technology centre, expansion of an existing one or expansion through the introduction of new products.
- Strategic service centres establishment of a new strategic services centre, increase of capacity or launch of new services covering software centres, data centres, repair centres or shared-services centres
The following conditions apply for all types of investments:
- Acquisition of assets for the project, including construction works, cannot start before the application for incentives is submitted.
- Implementation of environmentally friendly activities, buildings or facilities.
- Retention of the investment at the location of the investment project in the amount and structure corresponding to the claimed state aid.
Incentives for each type of projects are subject to further conditions (e.g. minimum investment). Moreover, projects in the manufacturing industry have to achieve higher value added, which relates to R&D activities and wage conditions in selected regions. Every project is subject to the government’s approval, although there is a proposal to shift decision power back to the Ministry of Industry and Trade at least for part of the projects.
Strategic investments (large projects)
Large projects can qualify for strategic investment status. The main benefit of this status is the possibility to obtain a larger portion of incentives in the form of cash grants instead of tax relief.
Investment projects involving the production of selected strategic products (eg. pharmaceuticals, nanotechnologies, advanced technologies etc.) should be regarded as strategic investment projects without having to meet the requirements such as the minimum investment amount and the minimum number of new jobs as stated above.
The calculation of tax relief is different for greenfield projects (tax holiday) and expanded facilities. However, tax relief may be applied for ten taxable periods for both types of projects.
Permissible level of state aid
For large companies, the maximum amount of state aid is set at the level of 20%-40% (the amount varies depending on the region in which the investment is implemented) of eligible costs (investment in land, buildings, machinery and equipment and selected intangible assets).
Cash grants can be provided to an investor that creates new jobs in a region where the unemployment rate is higher than 7.5%. The cash grant for job creation amounts to approx. EUR 7,800 – 11,700 per new job based on the type of position and the region where the investment is carried out.
Training and retraining of employees
Cash grants for training and retraining employees can cover up to 50% of the eligible costs expended on training and retraining.
R&D tax allowance
Companies performing R&D activities can apply a special tax deduction for such activities. The R&D deduction in fact allows companies to claim internal R&D costs twice, both within their profit-and-loss account and as a special tax deduction. However, companies are newly obligated to notify the tax administrator of their intent to claim an R&D allowance in advance.