The amendment of the Act on Investment Incentives, effective from 1 May 2015, introduces a new type of support (exemption from real estate tax), expands the range of supported activities (data centres and customer support centres) and relaxes the conditions for granting investment incentives. It allows investment incentives to be obtained by both domestic and foreign investors for whom incentives were not formerly intended, or who did not meet the original strict conditions.

1)        Aim of the amendment

Act No. 84/2015 came into force on 1 May 2015, amending Act No. 72/2000 Coll., on investment incentives and amendments to certain acts (Act on Investment Incentives), as amended, and other related acts (hereinafter the “Amendment”).

According to the explanatory memorandum, the Amendment aims to ensure a continuingly attractive investment environment in the Czech Republic, to maintain the international competitiveness of the Czech Republic within the influx of foreign investments, enhance its success in competition for quality foreign investments with high added value and to ensure provided support complies with relevant European Union regulations.

Specific objectives are then to increase the number of projects involving technology centres and strategic services centres, to increase the total number of jobs created within the framework of supported projects, to increase the number of new jobs in preferential regions and a general increase in the number of projects in state-assisted areas.

The Amendment aims to achieve these objectives through a number of significant changes, the most prominent of which are outlined below.

2)   A new kind of investment incentive – exemption from real estate tax

Alongside existing types of investment incentives (in particular, a discount on income taxes, financial support for creating new jobs and for retraining and educating employees), the Amendment introduces an exemption from real estate tax in concessional industrial zones. The purpose is to motivate entrepreneurs to acquire or build real estate in these industrial zones, thereby ensuring their full utilisation.

3)   New types of assisted areas

One of the supported types of investment projects is the establishment or expansion of strategic services centres. Before the Amendment, a strategic services centre was considered a centre for software development, a repair centre or shared services centre, if the services provided by the centre spanned the territory of at least two states.

The Amendment expands the range of supported activities, and under the concept of strategic services centre also includes:

• data centres, i.e. an enterprise whose role is to store, sort and manage data through its computer systems, and
• customer support centres, i.e. an enterprise whose role is customer relationship management and customer communication through electronic communication networks 

Investment incentives are thus newly available to the operators of data centres and customer support centres.

4)   Revocation of the requirement for a minimum amount of own equity

Before the Amendment, the Act required the investor to spend at least CZK 50,000,000 of its own equity on investment projects in production and at least CZK 5,000,000 on investments in technology centres.

This requirement is newly revoked, and investors are no longer required to invest their own funds at a fixed minimum amount. Investors may therefore secure their investment projects through foreign funds, especially mortgages, loans and the like.

5)   Reduction in requirements for the number of newly created jobs

Before the Amendment, a strategic investment project included, inter alia, a project in the field of technology centres, which created at least 120 new jobs. The Amendment reduces this limit to 100 jobs.

The Amendment also reduces general conditions for investment projects in the field of software development centres from creating and filling 40 new jobs to 20, and in the case of repair centres and shared services centres from 100 to 70.

For newly supported data centres, the requirement is to create and fill 20 new jobs and for customer support centres 500.

Reducing these requirements for creating, respectively, creating and filling new jobs significantly reduces the demands on the investor and facilitates the receipt of investment incentives for projects that do not require extensive staffing.

6)   Conclusion

The Amendment has expanded the range of supported activities and types of activities provided, while reducing the demands on investment projects and thereby making investment incentives more accessible for investors, who did not meet existing stringent criteria. It can therefore be expected that the Amendment will have a positive impact on the investment environment and provide support for more new investments.

For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.