The new amendment to the Czech Investment Incentives Act was published on 12 June 2012 and will be effective from 12 July 2012. The amendment's key objective is to make the Czech Republic more competitive and attractive to both international and local investors. The crucial changes introduced by the amendment are as follows:

Extension of the income tax relief period

The corporate income tax relief is the main type investment incentive provided at present. The period for which the tax relief may be granted, is to be extended for new projects from five to ten years.

New investment incentives for "technology centres" and "strategic services centres"

The new investment incentives system will cover technology centres engaged in research, and development and innovation of high-tech products and technologies, if the outcome of such activities may be further utilised in production. Investors in the technology centres will be eligible to obtain incentives if they invest at least CZK 10 million (EUR 400,000) into assets, of which at least CZK 5 million (EUR 200,000) will be invested into new machinery, and create at least 40 new jobs in the Czech Republic.

Investors in strategic services centres involved in software development and innovation, repair of high-tech products and shared business support services on an international level, will be eligible to obtain incentives if they create at least 40 new jobs at software development centres and/or at least 100 new jobs at other strategic services centres.

Introduction of the "strategic investment" concept

Investments in the manufacturing industry or technology centres reaching specific limits will now be considered as strategic investments. The concept of the strategic investment is introduced so that the Czech Republic may effectively compete for key investments with other countries in the CEE region. Strategic investments will be granted on top of standard incentives, a direct financial aid to cover a portion of the investment costs of the given project. This grant will be subject to approval by the government and should operate as a financial injection at the start of an operation to help investors overcome the period for which they cannot benefit from income tax relief.

Investment in the manufacturing industry of at least CZK 500 million (EUR 20 million), from which at least CZK 250 million (EUR 10 million) is invested in machinery, and creating minimum of 500 new jobs, may be considered a strategic investment and obtain such a grant. Investment in the area of technology centres may be considered a strategic investment, if the investments in assets amounts to at least CZK 200 million (EUR 8 million), of which at least CZK 100 million (EUR 4 million) is invested in machinery, and if at least 120 new jobs are created as a result of the investment.

The amendment reflects the efforts to make the Czech Republic a technology hub of Central Europe, to support activities focused on progressive technologies, activities with high added value and with high export potential. The government expects that the new legislation will boost the interest of investors in the Czech market.

Law: Act No. 192/2012 Coll., Amendment to the Investment Incentives Act

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The original publication date for this article was 18/06/2012.