The following incentives are applicable from 1 May 2004:
- full tax relief for 10 years (newly-established companies)
- partial tax relief for 10 years (expanding companies)
- job-creation grants
- training and re-training grants
- transfer of land with infrastructure at a discount
- transfer of land owned by the Czech state at a discount
The current corporate tax rate in the Czech Republic is 24%. The tax incentive is the maximum % of the long-term tangible and intangible assets minus job-creation grants and the difference between the market price and the purchase price of land.
The tax incentive has two forms. If a new company (legal entity) is established for the investment project, the new company is eligible for corporate tax relief for up to ten years. If the investment is made as an expansion or modernisation project within an existing Czech company (legal entity), the company is eligible for partial tax relief for up to 10 years. The tax relief is terminated when the company exceeds the maximum level of eligible state aid.
Tax relief may only be applied after fulfilling the criteria for receiving investment incentives (and in any case at the latest within 3 years from the date that the incentives are granted). Once these 3 years have elapsed, the tax relief period starts automatically, regardless of whether the company has a profit or loss.
Job creation grants and training and retraining grants
The Czech government’s incentives package contains two employment-related benefits:
- Job-creation grants ranging from CZK 100,000 to CZK 200,000 per employee, depending on the district where the investment is made.
- Training and retraining grants covering up to 35 % of training costs per employee, depending on the district where the investment is made.
Grants (usually for the creation of new jobs and training costs expended in the first three years) can be paid in advance, after the final decision to grant the incentives is issued to the investor. The specific conditions for grants are laid out in a contract with the Ministry of Labour and Social Affairs.
Districts of the Czech Republic are divided into four groups, A - D. The highest amount of support available is CZK 200,000 per employee, which is available in Group A districts, where the unemployment rate is 50% or more above the national average. Areas with below-average unemployment (Group D) do not qualify for job-creation grants. The average unemployment rate in the Czech Republic at the end of November 2006 was 7.3%.
The specific written conditions for grants are laid out in a contract with the Ministry of Labour and Social Affairs.
This incentive is available on a national basis subject to availability of suitable sites, and the site should be selected prior to submitting the application for investment incentives. The incentive is granted by the government to the municipality and/or the private developer in the form of subsidies for the development of site infrastructure and the transfer of land from state ownership to the municipality at an advantageous price.
As investment incentives are a form of state aid, they are granted in accordance with the respective state aid rules valid in the EU. On the basis of these rules, a regional state aid map was developed, which sets the maximum intensity of state aid in individual NUTS II regions of the Czech Republic.
An investor in a given region can receive incentives up to the maximum percentage shown on the regional map for the investment into long-term tangible and intangible assets. The total amount of state aid is not only limited in terms of percentage but there is also an absolute maximum calculated from the estimated investment. The total amount of state aid actually granted cannot exceed this fixed and absolute amount for a given project. State aid is provided as tax incentives, financial support for creating jobs and, if applicable, the transfer of land at a favourable price.