Investment incentives will apply to private corporation research

19 Oct. 2011 | CzechInvest, Ministry of Industry and Trade | The government approved new Investment Incentives Act today. The new Act will offer incentives to the service and research sector.

Investment incentives will now be offered to corporations involved in the development and research spheres or for strategic services, such as software development. The period during which these corporations will be able to enjoy discounted tax rate will extend from the today’s five to ten years. These are the main changes proposed by the Ministry of Industry and Trade in the amended Act on Investment Incentives, which the government approved today. The amendment also introduces a new institute – that of a strategic investor – who will be eligible to obtain a direct investment aid.

"The aim of the amendment is to attract firms to the Czech Republic dealing with high-end technologies and services, such as development laboratories of large corporations or, for instance, major software development centres," explains Minister Martin Kocourek the reasons for changes to the investment incentives system. "A more attractive investment incentives system is part of the changes projected in the International Competitiveness Strategy of the Czech Republic, which has been recently adopted by the government and which aims to push the country among the world’s most competitive economies." "In global economy, our competitors in attracting investment are not just the countries of the Central Europe. A large software company might not care too much whether it will set up shop in the Czech Republic, or Singapore or in Great Britain. And this is exactly the type of enterprises which we would like to attract and in order to do that we must be able to offer sufficiently attractive conditions, which the changes brought by the amendment make possible," explains Petr Očko, Director of the EU Funds, Research and Development Section at the Ministry of Industry and Trade.

"Our incentives system was no longer competitive in international comparison, which reflected itself in the decision-making of investors. Ten-year discounted tax rate periods have been offered, for instance, by Hungary, a more flexible systems than in the Czech republic are in place in Poland or Germany and the proposed capital support of investment is usual for example in Canada, Germany and also in Slovakia," compares the existing systems Miroslav Křížek, Director General of CzechInvest.

The fundamental parameters of investment incentives will remain the same even after the amendment has been approved by the Parliament — firms will be able to recoup up to 40 per cent of their costs related to expansion into the Czech Republic in the form of investment incentives. "The maximum amount of support is always exactly defined and cannot be exceeded. The proposed extension of the discounted tax rate period does not change the maximum amount of the support itself, which remains the same. The companies will however enjoy greater flexibility in planning their projects," explains Petr Očko.

In order to obtain the incentives, the manufactures will need to invest at least one hundred million Czech korunas in the Czech Republic or 50 million in case they decide to set up in regions suffering from high unemployment levels. "Besides attracting investment with high added value, the system will also motivate investors to create new job opportunities, especially in the regions which need them the most," adds Minister Kocourek; the current statistical data show that investors who were granted incentives created more than 135 thousand positions, most of them in the Usti Region.

Companies, which will decide to build or expand their technological centres in the Czech Republic will need to create at least 50 new positions in order to obtain the incentives, and to contribute at least 10 MCZK. Incentives will be also offered to firms in the strategic services sector, which will create at least 40 new job opportunities when setting up a software development centre, or at least 100 new jobs in other lines of business.

"Thanks to this innovated investment incentives system, Czech Republic will be able to support commerce in all key entrepreneurial sectors and size of companies. While the incentives reflect the needs of the larger corporations, the small and mid-size companies may seek support from European funds, especially from the Operational Programme Enterprise and Innovations. For the smallest companies, including those that has not been set up yet, we are in the process of preparing a special capital growth seed fund, which will focus on highly innovative firms," conclude Minister Kocourek.