An amendment to the
Czech legislation regulating granting of investment incentives by
the Czech government to investors entering into/expanding in the
territory of the Czech Republic has recently been passed and
officially published. This amendment made
changes to the Czech Act on Investment Incentives and to Income Tax
Legislation dealing with tax relief granted as part of the
incentives.
The
amendment will come into effect once the country enters the EU,
i.e. May 2004. The most important changes
introduced by the amendment are:
* the limit for the minimum value of
investment that must be made to qualify for investment incentives
has been reduced from CZK 350 million (EUR 11 million) to CZK 200
million (EUR 6.3 million); for investments in the districts with
the highest unemployment rates the limit has been set at CZK 100
million (EUR 3.2 million),
* in the incentives package, investors
can now also benefit from incentives in the form of reimbursements
for the cost of employee's training; the other forms of incentives
(i.e. income tax relief, subsidies on creation of new jobs etc.)
remain in effect
* the maximum term for benefiting from
investment incentives which have been granted for an expansion of a
business already established in the Czech Republic has been
extended from 5 to 10 years
* the power to define the permitted
level of state aid granted to particular investors has been
transferred from the Czech Anti-Monopoly Office to the Ministry of
Industry and Trade, which is also in charge of the whole incentive
grants process and issues the final decision on granting the
incentives to particular applicants
* the maximum level of the incentives
granted as a percentage of the total value of the investment, shall
be set out by a government regulation, which has
yet to be issued
* to be entitled to receive the
incentives the investors will be obliged to keep their investment
in the country for at least 5
years
The amendment and the forthcoming government regulation aim
to define the terms and conditions under which investment
incentives will be granted in accordance with the European rules
for state aid, so that the European Commission should not need to
approve each project individually.
The amendment will be effective as of 1st May 2004, and the
investment incentives pursuant to the amended act may be granted as
of the same date. Therefore it is of most
relevance to potential investors planning to invest in the Czech
Republic after this date.
Those
investors who have already entered the Czech market and been
granted incentives may benefit from the new rules relating to
reimbursement of staff training costs from incentives that have
already been granted.
Existing investors should also consider the possibility of
obtaining incentives for the expansion or the modernisation of
their current operation.
For
further information please contact Lukáš
Janíček on +420 221 098 833 or at lukas.janicek@cms-cmck.com