Investment Incentives - October 2013

Czech Republic

Investment IncentivesJan Fried | Director of East Coast Operations, USA

New York, October 2013

Investment Incentives

-- Act on Investment Incentives No. 72/2000 Coll., as amended

Supported activities

-- Manufacturing industry- Starting or expanding production facilities

-- Technology centres- Establishment or expansion of R&D centres

-- Business support services centres

- Establishment or expansion of shared service centres, SW development centres or high-tech

repair centres

Source: Act on Investment Incentives No. 72/2000 Coll.

General conditions

-- The project must be implemented in the Czech Republic

-- No work may be started on the Project before issuance of the

“Confirmation of Project Registration” by CzechInvest

-- Investment and new jobs must be maintained for a period

of 5 years

-- Environmentally friendly activities


Manufacturing industry - eligibility criteria

-- Starting or expanding production facilities

-- Min. investment into assets:

- Regions I: CZK 50 mil. (app. EUR 2 mil.), of which at least CZK 25 mil. into new machinery

- Regions II: CZK 100 mil. (app. EUR 4 mil.), of which at least CZK 50 mil. into new machinery

-- At least half of the above minimum investment must be

financed from own financial sources (not loans)

-- The conditions must be fulfilled within 3 years


Specification of regions

Source: Resolution of the Government of the Czech Republic No. 141 of 22 February 2010

Strategic investment in production

-- Minimum investment into assets CZK 500 mil., of which at least

CZK 250 mil. into new machinery

and at the same time

-- Creation of at least 500 new jobs

-- The conditions must be fulfilled within 3 years


State Aid Map (2007 – 2013)

Source: Government Order No. 194/2012 Coll.

Proposed regional aid guidelines 2014 – 2020

-- reduction of state aid intensity from current 40% to 25% for large enterprises

-- complication of eligible criteria for proving the motivation effect of incentives,

for documenting the compatibility of state aid with regional guidelines, etc.

Effectiveness of proposed guidelines

-- new guidelines shall be applied to all Decisions to grant investment

incentives issued from July 1, 2014

Manufacturing industry – state aid ceiling

-- Investment in Regions II and at the same time in low-tech sectors –

75 % of ceiling of state aid

-- Low-tech sectors = sectors that do not fall under codes 20, 21, 26

up to 30 or 32.50 of the branch classification of economic activities

(CZ-NACE)

Source: Government Order No. 194/2012 Coll.

Eligible costs

-- Long-term assets, of which at least half must be new

machinery

or

-- 2-years wage costs of employees on newly created positions

Investor can choose one option;

In case of investment in production – only long-term assets can be used


Types of Incentives

Following items summed up cannot exceed the ceiling of state aid

-- Tax incentive

-- Job creation grants

-- Discounted price of land

-- Cash grant on capital investment

(in case of strategic investment)

Granted above the ceiling of state aid

-- Training and retraining grants


Tax incentive

-- New companies: full corporate income tax relief for

max. 10 years

-- Existing companies: partial corporate income tax relief

for max. 10 years

-- Current corporate income tax rate = 19 %


Tax incentive – new company


Tax incentive – existing company


Job creation, training and retraining grants

-- Offered in regions with the highest rate of unemployment

only (regions A)

-- CZK 50,000 (app. EUR 2,000) per each new job created

-- 25 % of total training costs (35 % / 45 % for medium / small

enterprises)


Job creation, training and retraining grants

Source: Ministry of Labour and Social AffairsValid from: July 1 – December 31, 2013

Training and retraining grants – eligible costs

-- Services related to training and retraining

-- Material and energy consumption needed for (re)training

-- Travel expenses

-- Labour costs and on-costs of employees ensuring

the (re)training - instructors, teachersH

-- Accounting depreciation costs of the tangible and intangible

assets

-- Labour costs and on-costs of (re)trained employees


Cash grant on capital investment

-- Offered in case of Strategic investment in production

or in technology centre

-- Cash grant on capital investment up to 5 % of eligible costs

(max. CZK 1,5 bil. in case of investment in production,

max. CZK 0,5 bil. in case of investment in technology centre)

-- Cash grant on capital investment must be approved

by the Czech Government


Application process -

Applicant and Recipient are two different entities


Application process:

Applicant = Recipient


Ministry of Industry and Trade

CzechInvest AgencyForeign Offices – USA

Mr. Jan Fried

USA – East Coast – New York

Mobile phone: +1 (347) 216 9355

E-mail: [email protected]

Mr. Roman Horacek

USA – West Coast – California

Mobile phone: + 1 (415) 794 0665

E-mail: [email protected]

Thank you for your attention.www.czechinvest.org

Jan Fried | Director of East Coast Operations, USA

[email protected] @jan_fried