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Investment Incentives in the Czech Republic
31.10.2012
Ondřej Beránek
Company introduction
eNovation is a leading provider of consulting and advisory services for business sectors
Founded in 2007 Focus on the field of ICT, R&D, Inovations in the
manufacturing industry High guality team, experience with administration and
managing of public support programmes in the state managing bodies
Portfolio: Grant and Subsidy Advisory Public Procurement Agenda Investment Incentives Audits, Analysis and Studies
Selected references
Incentives investment Act
Incentives investment Act No 72/2000 Coll.Supported Areas: IndustryIntroduction or expansion of production in sectors of the manufacturing industry Technology centresConstruction or expansion of research and development centres Business support services centresLaunch or expansion of the activities of:
- shared-services centres- software-development centres- high-tech repair centres
Most Important Investors – Country of Origin
Swed
en
Luxe
mburgKorea
Belgium
Spain
Switz
erlan
d
Great B
ritain Ita
ly
France
Austria
USAJap
an
Netherl
and
German
y
Czech Rep
ublic0
20
40
60
80
100
120
140
160
180
Number of Projects - Regional Selection
Moravian-Silesian Region
Ústí nad Labem Region
Central Bohemian
Region
South Moravian
Region
Plzeň Region
Olomouc Region
Pardubice Region
Vysočina Region
Liberec Region
Hradec Králové Region
Zlín Region South Bohemia
Prague0
20
40
60
80
100
120
EU Structural Funds – Investment IncentivesAreas Investment incentives EU Support
Programmes (2007-2013)
Manufacturing industry
Investment incentives for manufacturing industry
Inovation programmeDevelopment programme
Research & development
Technology centres Potential programme
ICT, BSC, hi-tech repair
Strategic centres(Business support services centres)
ICT and Business Support Centres programme
General conditions for qualification
Implementation of investment projects in the Czech Republic
The recipient shall not start work on the project before issuing the Registration of the application
Maintaining of the purchased assets and supported jobpositions throughout the entire period of utilising state aid (at least for 3 or 5 years (SME vs. larg-sized enterprises)
Environment-friendly project (verification by the Minsitry of the Environment of the Czech Republic)
Fullfiling of the programme conditions in three calendar years following the year in which the Decision to support the Project was issued
Corporate tax discount can be claimed after the conditions to grant investment incentives are fullfiled.
Forms of Investment Incentives
Corporate income-tax relief Transfer of land for favourable prices Job creation grants Training and retraining grants Cash grants on capital investment (in the case of
strategic investments)
Forms of Investment Incentives – Tax Relief, Transfer of Land
Tax relief
Possibility to draw the corporate income-tax relief for a period of ten years. Tax relief is provided maximally up to the amount of the ceiling of state-aid intensity.
Current corporate tax level in Czech Republic equals 19%.
Transfer of Land for Favourable Prices
Possibility to undertake the favourable transfer of land or land equipped with infrastructure owned by the state or an organizational unit thereof or by a municipality.
The difference between the purchase price and the market price of the given land is considered to be an investment incentive in this case.
Forms of Investment Incentives – Tax Discount
-1 0 1 2 3 4 5 6 7
Fullfi
ling
of
the
Con
dit
ion
s
First application of the tax reduction
Issu
ein
g o
f th
e D
ecis
ion
to
gra
nt
inve
stm
ent
in
centi
ves
8
Ta
x p
aye
sd in
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e y
ea
rs b
efo
re
the
Pro
ject
s st
arte
d
It is possible to draw corporate income-tax relief for a period of ten years.
Forms of Investment Incentives - Job creation Grants and Training and Retraining Grants Cash grants for newly created positions are available only in
regions with an unemployment rate that is at least 50% higher than the average unemployment rate in the Czech Republic, so-called A regions.
Cash grant for one newly created job amounts to CZK 50,000.
Cash grant for training and retraining is provided in the amount of 25%/35%/45% of total expenditures on training and retraining which is:
a) materials and energy usingb) travel expenitures of the trained and employeesc) other services related to training and retrainingd) personnel costs of the training specialists (instructors, lecturers, teachers and others)e) the financial depreciation of assets used for trainingf) costs of trained staff
Regions with job-creation grants and training and retraining grants
Eligible Costs
Long-term assets, when the value of machinery comprises at least half of the value of the acquired assets,
or Two years’ gross wages for newly created jobs can serve
as eligible cost from which the maximum state-aid intensity is calculated.
In the case of an investment in the manufacturing industry, only long-term assets comprise eligible costs.
Long-Term Assets Long-term tangible assets in the form of machinery, land or
buildings, long-term intangible assets Gross Wages
Wage costs expended on new jobs in the course of 24 months immediately following the month in which the jobs were opened and occupied.
Investment Incentives - Strategic Investment projectMaterial support for the purchasing of assets
The support is provided only in the case of strategic investment projects in the field of manufacturing industry or technology centers
Provided up to 5% of the eligible costs (up to CZK 1.5 billion in case of the manufacturing industry and a maximum of CZK 0.5 billion in case of the Techchnology Centres in R&D)
The support must be approved by the Government of the CR
State Aid
State aid is understood to be tax incentives, job creations grants and cash grant on capital investment. In the case of transfer of land for favourable prices, state aid comprises the difference between the purchase price and market prices of the given land.
Training and retraining grants are not counted within the maximum amount of state aid.
Maximum amount of State Aid The Aid is provided up to the amount of the ceiling of
maximum state-aid intensity stipulated by the Regional Map of State-Aid Intensity.
The maximum aid amount is 40% (30% in the Southwest region), SMEs get bonus 10 resp. 20%.
Regional Map of State-Aid Intensity
Manufacturing Industry- the Conditions for Qualification
Launch or expansion of the production
Minimal investment in the assets within 3 years:
- 50 million CZK (Region I), of which min. CZK 25 million must be invested in new machinery equipment or
- 100 million CZK (Region II), of which min. CZK 50 million must be invested in new machinery equipment
At least half of the investment has to be financed with using of applicant´s sources (equity investment )
Maintaining period of the investment is 3/5 years from the completion of the investment phase of the project
Specification of Regions
Manufacturing Industry- Support Level
The projects in the territory of the city of Prague is excluded from the possibility to receive investment incentives.
The maximum aid amount is 40%, in case of the small-sized companies 60%, middle-sized companies 50%
Reduction of the support in case of investment in the region B and simultaneously in the low-tech sectors - 75% of the maximum level of public support.
Low-tech sectors - sectors that do not fall within section 20, 21, 26 to 30 or section 32 Class 32.50 - Classification of Economic Activities (CZ-NACE), e.g. food industry
The ceiling of the public support includes: tax incentives, job creations grants, cash grant on capital investment and transfer of land for favourable prices
Strategic Investment Project in Manufacturing Industry
The minimum investment in fixed assets is CZK 500 million, of which a minimum of CZK 250 million in new machinery
and simultaneously
creation at least 500 new jobs.
The conditions has to be fulfill in three years after issuance of the Decision to grant investment incentive.
Other Support for Manufacturing Industry
EU structural funds:
Currently closed programmes, similar programme will be opened in the year 2014.
Inovation
Development
Research and Development Centres - Technology (R&D) CentresEstablishment or expansion of a technology centre, given that there is an assumption of using the outcomes in subsequent production.
Eligibility criterias: The applicant must invest at least CZK 10 mil. in the acquisition
of long-term tangible or intangible assets (of which at least CZK 5 mil. must be invested in new machinery, the rest in construction works, reconstructions, etc.)
At the same time, the recipient must create at least 40 new jobs at the new R&D centre.
Another selected conditions: At least 50% of the investment must be an equity investment by
the investor (i.e.,financed with the investor’s own capital) and at least half of the investment has to be used for new technology in R&D.
The investor has to choose between the costs counted from the tangible and intangible assets or wage costs on the new jobpositions during 24 months.
Strategic Investment Project in Technology Centres
The minimum amount of investment in long-term tangible and intangible assets is CZK 10 million, of which at least CZK 5 million must be invested in new machinery,
and simultaneously
at least 120 new jobs has to be created during Project implementation.
Other Support in R&D For Business Entities
EU structural funds:
Currently closed programmes, similar programme will be opened in the year 2014.
Potential
Technology Agency of Czech Republic:
Alfa
Business Support Services Centres Description: Focused on taking over management, operation and
administration of internal activities such as accounting, finance, administration in the area of human resources, marketing and administration of information systems and also for high-tech repair centres and software development centres.
Eligible criterias: Creating and maintainig at least 40 new jobs for software
development centers in 3 years Creating and maintainig at least 100 new jobs in other centers
during the 3 years
Other conditions: The investor has to choose between the costs counted from the
tangible and intangible assets or wage costs on the new jobpositions during 24 months.
Other Programmes for ICT and BSC
EU structural funds:
Currently closed programmes, similar programme should be opened in the year 2014.
ICT and Business Support Centres Programme
Application Process
Cash Grant on Capital Investment – Strategic Investmet Project
This form of support is provided only in the case of strategic investments in manufacturing or in technology centres.
Cash grant on capital investment can be provided up to the amount of 5% of eligible costs (max. CZK 1.5 billion in the case of a manufacturing project and max. CZK 0.5 billion in the case of a technology-centre project).
If commencement or expansion of production and establishment or expansion of a technology centre occur simultaneously within the given investment, the amount of cash grant can be up to 7% of eligible costs.
Aid is again provided maximally up to the amount of the ceiling of state-aid intensity and must be approved by the Government of the Czech Republic prior to provision.
Investment Incentives vs. EU Structural Funds Target group of applicants (SME – Large enter.) Clarity of rules Communication with suppurt provider authority Application process for support (registration, full
application) Selection of projects vs. eligible criterias Public tenders How to proof fulfilling of the elibible parametres Audits by state authorities
http://www.enovation.cz/en/investment-incentives
