Investment incentives
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 priority investments in R&D, innovations, energy savings and the circular economy.
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.
Main conditions
Incentives can be obtained for the following types of investments:
- 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 centre or expansion through the introduction of new products.
- Business support services centres – establishment of a new business support services centre, increase of capacity or launch of new services covering software centres, data centres, repair centres or shared-services centres
Incentives for each type of project 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. Starting in 2024, a simplified approval process has been re-introduced, which means that parts of projects can be evaluated only by the relevant ministries without seeking the government’s approval. The government’s approval will continue to be required for strategic projects involving cash grants.
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 (e.g. products focusing on energy savings, renewable energy, advanced electronics, pharmaceuticals, nanotechnologies, advanced technologies should be regarded as strategic investment projects without having to meet requirements such as the minimum investment amount and the minimum number of new jobs.
As of 2024, the incentives legislation allows higher state-aid amounts than previously allowed by regional aid rules if an individual project notification is allowed under EU rules (e.g. the Temporary Crisis and Transition Framework).
Income-tax relief
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 grant
- Job creation
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. In fact, the R&D deduction 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.
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Jan Linhart |
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