On 22 March 2023, the Government of the Czech Republic discussed a draft government regulation on investment incentives. We informed you about the original wording of the amendment to the Government Regulation in September 2022 already.

Expansion of strategic investment projects

The Government Regulation extends the scope of strategic investment projects to include an investment project in a software development centre, a data centre or a shared services centre, if the entire investment project is to be implemented as part of a major project of common European interest, for which the European Commission has approved the compatibility of its aid with the internal market by a decision of the European Commission, and the recipient of the investment incentive participates in the solution of this project as a direct or indirect participant (hereinafter referred to as a “major EU project”).

For a major EU project, the minimum value added conditions do not apply, nor do the minimum requirements for new jobs or the minimum value of tangible or intangible assets to be acquired.

Increase in added value

The government regulation tightens the conditions for higher value added as follows:

• increasing the amount of R&D expenditure by spending on collaboration with a research organisation to 2% of eligible costs (currently 1%),
• increase the share of R&D staff in the workforce to 3% (currently 2%).

The higher value added condition is generally already applicable to all regions of the Czech Republic, but is not applicable:

• to regions of the Czech Republic with a share of unemployed persons of at least 7.5% (currently only the Karviná district),
• to major EU projects,
• to certain strategic investments.

The aim is to motivate companies more strongly to invest in other corporate activities, in particular research and development activities, which will help companies increase productivity as well as value added and thus better cope with rising prices and wages.

Energy transformation in the Czech Republic

The new government also seeks to further contribute to the fulfilment of the energy goals of the Czech economy and the energy self-sufficiency of the Czech Republic through more targeted support for the production of technologies and equipment that will contribute to energy savings and energy transformation. The list of these selected products is set out in the newly added separate Annex 4 to Government Regulation No.221/2019 Coll. In general, they must be products intended for the production or storage of energy from renewable sources, for increasing energy efficiency or reducing the energy intensity in buildings.

Effect

The final draft of the amendment has already been signed by the Prime Minister and will probably be published in the Collection of Laws within days. The new regulation will enter into force on the 15th day after its publication in the Collection of Laws.

The new Regulation will apply to applications for investment incentives submitted after the date of entry into force of the Regulation. Intentions submitted earlier are governed by the original wording of the regulation.

If you have any questions regarding investment incentives, please do not hesitate to contact us at any time. We will be happy to discuss your options with you and suggest the optimal procedure (both for obtaining an investment incentive and for drawing it and meeting the required conditions).

Author: Petr Němec, Martin Hahn