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Draft amendment to Investment Incentives Act to be discussed by government

In March, the government will discuss the long-prepared and debated amendment to the Investment Incentives Act including the relevant decree. We consider the main reasons for the upcoming change to be the poorly set up process of approving investment incentive applications after the 2019 amendment, especially investors' dissatisfaction with the length and results of the approval process at the government level. The amendment also responds to the changing needs of the Czech Republic and the European Union for energy savings and self-sufficiency in the supply of certain key components (e.g., microchips).

The amendment should abolish the obligation to submit every application for investment incentives for consideration to the government. For most projects, the assessment of applications will thus return to the Ministry of Industry and Trade and other relevant ministries. Mandatory approval by the government will remain only for strategic investment projects aiming to obtain support for the acquisition of fixed assets. The new rules should only apply to applications submitted after the amendment comes into effect.

Hand in hand with this change, the related government decree tightens the conditions for obtaining investment incentives, which will be discussed along with the above amendment. Most important is the extension of the requirement for higher added value to all regions of the Czech Republic, with the exception of those where the share of unemployed persons is 7.5% or more (currently only the Karviná district). In this way, disadvantaged regions will lose their advantage over more developed ones. At the same time, other sub-conditions for higher value added shall also be modified.

The amendment also extends the range of products considered strategic. This category will newly include products intended for the production or storage of energy from renewable sources, for improving energy efficiency or energy performance of buildings (e.g., heat pumps, photovoltaics, battery systems, insulation materials). Investments in the production of these products may obtain an incentive in the form of support for the acquisition of fixed assets for so-called strategic investment projects, without having to reach CZK 2 billion and create 250 jobs. Support may increase to up to 20% of eligible costs. Also, selected strategic investment projects do not have to meet the higher added value thresholds.

Further modifications to submitted proposals during the approval process are possible.