New investment incentives?

The reason for submitting an amendment to the Act on Investment Incentives is the need to respond to developments in the Czech economy and the low flexibility of the existing investment incentive system, as the system does not allow for the preferential treatment of projects that are technologically advanced, are closely connected with research and development or require a greater involvement of highly qualified personnel. In contrast, the need to use investment incentives as a tool to support employment has now been overcome.

The new investment incentives should primarily be directed at the enhancement of support to technological centres and shared services centres, focusing on two areas: increasing the limit of monetary financial support for the acquisition of fixed assets to up to 20% of total eligible costs at the expense of tax incentives and providing financial support to such centres for the creation of new jobs in all Czech regions (except for Prague, in which regional aid is not permitted). This change significantly expands the local applicability of direct subsidies for the acquisition of fixed assets within the investment incentive regime.

Another change should concern the existing condition to create and staff twenty new jobs, as the methodology applied to prove the meeting of this condition in relation to the number of employees of the entire company differs from the methodology used to prove compliance in relation to the activity that is being supported. Meeting this condition can be difficult for many investors, mainly where it relates to investment into the expansion or modernisation of existing productions. The amendment proposes to unify the approach and monitor the meeting of both conditions only with respect to a specific activity that is being supported, which would be much simpler. The further alleviation or complete omission of this condition is being discussed, as compliance with this condition is the main obstacle to the expansion of existing investment projects with high added value, implementing a high level of automation but not creating the required number of jobs.  

For support granted to manufacturing companies, the amendment expects to introduce a new condition, calling for the payment of a minimum wage to employees of a manufacturing company that would be determined as a certain percentage of the average wage in a respective region. The application of other conditions is also under discussion: this involves both the tightening and alleviation of certain rules currently in application. The Ministry of Industry and Trade expects to submit the substance of the law to the government by the end of June. The amendment will not be discussed before the elections to the chamber of deputies and will not therefore be effective earlier than on 1 January 2019.