European commission reduces czech investment incentives

1 Jul. 2014 | CzechInvest | State aid for large enterprises to be reduced by 15%. However, the Czech government intends to offset the difference for investors.

New European Commission rules for regional aid came into force on 1 July. The maximum possible intensity of state aid in the form of investment incentives in the Czech Republic has thus been reduced from 40% to 25% of eligible costs for large enterprises, which currently comprise 95% of all investment-incentives applicants. Aid will also be reduced in relation to small and medium-sized enterprises, which rather more frequently apply for aid from EU structural funds than for investment incentives. These firms will also be affected by the change, as aid is being reduced from 50% to 35% of eligible costs in the case of medium-sized enterprises and 60% to 45% in the case of small enterprises.

CzechInvest guaranteed the original, more advantageous conditions for applications submitted until the middle of March this year. As a result of that guarantee, the agency recorded heightened interest from investors in the form of a record number of applications for investment incentives. CzechInvest has received 108 such applications since 1 January 2014. A large majority of applicants have in turn received decisions on the granting of incentives. Conversely, only 98 investors applied for state aid in the whole of 2013.

The Czech Investment Incentives Act must be adapted to the aforementioned changes. An amendment which is now being drafted by the Ministry of Industry and Trade harmonises the European and Czech regulations and, at the same time, should offer investors other advantages aimed at maintaining the Czech Republic’s competitiveness and attractiveness as an investment destination. The amendment is expected to come into force in the first quarter of 2015.