Government (not) approving investment incentives
Three applicants for investment incentives were denied financial support to acquire fixed assets by the government. Applications for the support of strategic investment projects were submitted by investors under the previous legislative regime. Aid in form of tax relief was granted.
In mid-January, the government decided not to grant investment incentives to several strategic investment projects promising the creation of more than 1 600 new jobs. Investors applied for funds to acquire fixed assets (financial support), and for income tax credits.
The government’s decision has been influenced by the current economic situation and recent developments in the labour market, e.g. the rate of unemployment that has been at its historical low. The government came to the opinion that the projects in question did not meet the status of strategic investments and material support to acquire fixed assets, as one of the tools to attract foreign investors and boost employment, was no longer substantiated. Applications for the support of strategic investments that are generally subject to government approval were thus dismissed on the grounds that they did not involve investments of a strategic nature. In the future, investors may only utilise aid in form of income tax credits.
Despite investors filing their applications for investment incentives before the effective date of the last amendment to the Act on Investment Incentives, the above decision indicates what the government’s position on this matter is likely to be in the future. According to the Minister of Industry and Trade, every direct investment support will be carefully evaluated.
Investors planning to file applications for investment incentives should therefore mainly focus on a project’s added value and its link with research and development while quantifying and describing all economic and socio-economic benefits for the region and the state.
A project’s chance to obtain investment incentives may significantly be affected by the above, as it is now the government that approves incentives for each individual project, assessing in particular whether a project is in line with the Czech Republic’s strategy and whether it reflects the state’s current economic situation and its needs that may change over time.