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(May 18, 2012) On April 25, 2012, the Senate of the Parliament of the Czech Republic approved a bill amending the Act on Investment Incentives (Act No. 72/2000, as last amended by Law No. 357/2011). In order to become law, the amendment bill, Senate Document No. 311, must be signed by the country's President. (Czech Republic: Changes to Investment Incentives' Regime Approved by Parliament, IBFD TAX NEWS SERVICE (May 7, 2012); Bill Amending Act No. 72/2000 Coll. on Investment Incentives and Amending Certain Acts (Act on Investment Incentives), as Amended, and Other Related Laws [in Czech], Senate of the Parliament of the Czech Republic website, http://www.senat.cz/xqw/xervlet/pssenat/historie?action=detail&value=3118 (last visited May 14, 2012) [viewed in Google translate].)
Under the current Act, investment incentives are subsidized by the 2007-2013 Operation Programme for Entrepreneurship [or Enterprise] and Innovation (OPEI), supported by the European Union, which encourages Czech entrepreneurs to seek financial assistance for processing or product innovation activities. The new system of incentives, however, is not intended for direct financial support of this nature, stipulating instead, for example, that investors may apply for income tax abatement for expanding production and creating more jobs. The draft law also intends that the granting of such forms of indirect support be for any commercial activity, regardless of whether it is innovative. The draft law reportedly does not call for any additional costs to the state budget, even though it might lower the state budget revenue due to its tax abatement provisions. (Senate: Amendments to Investments Incentives Act Passed, Council on Czech Competitiveness (CCC) website (Apr. 25, 2012); Ministry of Industry and Trade of the Czech Republic, Operational Programme Enterprise and Innovation (Nov. 2007), CZECHINVEST.)
Under the draft law, investors can:
- enjoy simplified procedures in seeking the granting of investment incentives;
- claim income tax relief for a period of ten consecutive years (vs. the current five-year period);
- seek income tax relief for investments in technological centers and strategic services centers, not just in manufacturing industries as is currently the case; and
- qualify for incentives in the manufacturing industry if their investment in machinery is a minimum CZK50 million (about US$2.54 million), instead of the current 60 million.
More specifically, to be eligible for incentives for investment in technological centers, the investor must: 1) create at least 40 new jobs and (2) make a minimum investment of CZK10 million, of which at least CZK5 million "must be invested in machinery and at least CZK 5 million must be funded from the investor's equity." (Id.) Qualification for investment incentives in strategic services centers is based on the investor's creation of at least 40 jobs for software development centers or at least 100 new jobs for shared services centers. At the same time, the draft law provides a reduced penalty for the failure to create the required number of new jobs. (Id.)
Cash grants will also be available, subject to government approval, for the acquisition of tangible and intangible assets in connection with qualifying strategic investments in manufacturing industries or technological centers. (Id.)
Based on the Act on Investment Incentives, a government directive was issued on May 9, 2012, regulating public support and incentives in cohesion regions of the Czech Republic (i.e., those eligible for EU funding to implement economic and social policies therein that will contribute to their enhanced cohesion with other EU Member States). The directive provides for public support of up to 75% of the value of an investment project, expands the types of projects that can be supported, and calls for attracting "'high-tech' and high value-added projects to the regions" (with even higher support incentives for the high-tech projects). (Directive on Public Incentives in Regions Passed, CCC website (May 9, 2012); Cohesion Policy 2007-2013: Czech Republic, European Commission website (Oct. 2006).)
|Author:||Wendy Zeldin More by this author|
|Topic:||Investments More on this topic|
|Jurisdiction:||Czech Republic More about this jurisdiction|
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Last updated: 05/18/2012