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InvestmentIncentives in the Czech Republic31.10.2012 Ondřej Beránek
Companyintroduction • eNovationis a leading provider of consulting and advisory services for business sectors • Founded in 2007 • Focus on thefieldof ICT, R&D, Inovations in themanufacturingindustry • Highguality team, experiencewithadministration and managingof public support programmes in thestatemanagingbodies Portfolio: • Grant and Subsidy Advisory • Public Procurement Agenda • Investment Incentives • Audits, Analysis and Studies
IncentivesinvestmentAct IncentivesinvestmentAct No 72/2000 Coll. SupportedAreas: • Industry Introduction or expansion of production in sectors of the manufacturing industry • Technology centres Construction or expansion of research and development centres • Business support servicescentres Launch or expansion of the activities of: - shared-servicescentres - software-developmentcentres - high-techrepaircentres
General conditionsforqualification • Implementation of investment projects in the Czech Republic • The recipient shall not start work on the project before issuing the Registration of the application • Maintaining ofthepurchasedassetsand supported jobpositionsthroughout the entire period of utilising state aid (at leastfor 3 or 5 years (SME vs. larg-sizedenterprises) • Environment-friendlyproject(verificationby theMinsitryoftheEnvironmentofthe Czech Republic) • Fullfilingoftheprogrammeconditionsin three calendar years following the year in which the Decision to support the Project was issued • Corporate tax discount can be claimed after the conditions to grant investment incentives are fullfiled.
FormsofInvestmentIncentives • Corporateincome-tax relief • Transfer of land for favourable prices • Job creationgrants • Trainingand retraininggrants • Cash grants on capital investment(in the case of strategic investments)
FormsofInvestmentIncentives – Tax Relief, Transfer of Land Tax relief • Possibility to draw thecorporate income-tax relief for a period of ten years. Tax relief is provided maximally up to the amount of the ceiling of state-aid intensity. • Currentcorporate tax levelin Czech Republic equals 19%. Transfer of Land for Favourable Prices • Possibility to undertake the favourable transfer of land or land equipped with infrastructureowned by the state or an organizationalunit thereof or by a municipality. • The difference between the purchase price and the market price of the given landis considered to be an investment incentive in this case.
FormsofInvestmentIncentives – Tax Discount • It is possible to draw corporate income-tax relief for a period of ten years.
FormsofInvestmentIncentives - Job creation Grants and Training and RetrainingGrants • Cash grants fornewlycreatedpositionsare available only in regions with an unemployment rate that is at least 50%higher than the average unemployment rate in the Czech Republic, so-called A regions. • Cash grant for one newly created job amounts to CZK 50,000. • Cash grant for trainingand retraining is provided in the amount of 25%/35%/45%of total expenditures on training and retrainingwhichis: a) materials and energyusingb) travel expenituresofthetrained and employeesc) other services related to training and retrainingd) personnel costs of thetraining specialists (instructors, lecturers, teachers and others)e) the financial depreciation of assets used for trainingf) costs of trained staff
EligibleCosts • Long-term assets, when the value of machinery comprises at least half of the valueof theacquired assets, or • Twoyears’ gross wages for newly created jobs can serve as eligiblecost from which the maximum state-aid intensity is calculated. • In the case of an investment in the manufacturingindustry, only long-term assets comprise eligible costs. Long-Term Assets • Long-term tangible assets in the form of machinery, landor buildings,long-term intangible assets Gross Wages Wage costs expended on new jobs in the courseof 24 months immediately following the month in which the jobs were opened and occupied.
InvestmentIncentives- Strategic Investmentproject Material support for the purchasingof assets • The support isprovidedonly in the case of strategic investment projects in thefieldofmanufacturingindustry ortechnology centers • Provided up to 5% of theeligible costs (up to CZK 1.5 billion in case ofthemanufacturingindustryand a maximum of CZK 0.5 billion in case oftheTechchnology Centres in R&D) • Thesupportmust be approved by the Governmentofthe CR
State Aid • State aid is understood to be tax incentives, job creations grants and cash grant on capitalinvestment. In the case of transfer of land for favourable prices, state aid comprisesthe difference between the purchase price and market prices of the given land. • Training and retraining grants are not counted within the maximum amount of state aid. Maximum amount of State Aid • TheAid is provided up to the amount of the ceiling of maximum state-aid intensity stipulatedby the Regional Map of State-Aid Intensity. • The maximum aid amount is 40% (30% in the Southwest region), SMEsget bonus 10 resp. 20%.
Manufacturing Industry- the Conditionsfor Qualification • Launchorexpansionoftheproduction • Minimalinvestment in the assetswithin 3 years: - 50 million CZK (Region I), of which min. CZK 25 millionmustbeinvestedin new machinery equipmentor - 100 million CZK (Region II), of which min. CZK 50 million mustbeinvested in new machinery equipment • At least half of theinvestment has to befinanced withusingofapplicant´ssources (equityinvestment ) • Maintainingperiod of theinvestment is 3/5 years from the completion of the investment phaseoftheproject
ManufacturingIndustry- Support Level • The projects in theterritory of the city of Prague is excluded from the possibility to receiveinvestmentincentives. • The maximum aid amount is 40%, in case ofthesmall-sizedcompanies60%, middle-sizedcompanies 50% • Reductionofthe support in case ofinvestment in the region B and simultaneously in the low-tech sectors -75% of the maximum level of public support. • Low-tech sectors - sectors that do not fall within section 20, 21, 26 to 30 or section 32 Class 32.50 - Classification of Economic Activities (CZ-NACE), e.g. food industry • Theceilingofthe public support includes: tax incentives, job creations grants, cash grant on capitalinvestmentand transfer of land for favourable prices
StrategicInvestmentProject in ManufacturingIndustry • The minimum investment in fixed assets is CZK 500 million, of which a minimum of CZK 250 million in new machineryand simultaneously creation at least 500 new jobs. • Theconditionshas to befulfill in three yearsafterissuanceoftheDecision to grant investmentincentive.
Other Support forManufacturingIndustry EU structuralfunds: Currentlyclosedprogrammes, similarprogrammewillbeopened in theyear 2014. • Inovation • Development
Research and DevelopmentCentres- Technology (R&D) Centres Establishmentor expansion of a technology centre, given that there is an assumption of using the outcomes in subsequent production. Eligibility criterias: • The applicant must invest at least CZK 10 mil. in the acquisition of long-term tangible or intangible assets (of which at least CZK 5 mil. must be invested in new machinery, the rest in construction works, reconstructions, etc.) • At the same time, the recipient must create at least 40new jobs at the new R&D centre. Anotherselectedconditions: • At least 50% of the investment must be an equity investment by the investor (i.e.,financed with the investor’s own capital) and at least halfoftheinvestment has to beusedfornew technology in R&D. • The investor has tochoose between the costs countedfromthetangible and intangible assets orwagecosts on thenewjobpositionsduring 24 months.
StrategicInvestment Project in Technology Centres The minimum amount of investment in long-term tangible and intangible assetsis CZK 10 million, of which at least CZK 5 million must be invested in new machinery, and simultaneously at least 120 new jobs has to becreatedduring Project implementation.
Other Support in R&D For Business Entities EU structuralfunds: Currentlyclosedprogrammes, similarprogrammewillbeopened in theyear 2014. • Potential Technology Agencyof Czech Republic: • Alfa
Business Support ServicesCentres Description: • Focusedon takingovermanagement, operationand administrationof internalactivitiessuch as accounting, finance, administrationin the areaof humanresources, marketingand administrationof informationsystemsand also for high-techrepair centresand software developmentcentres. Eligiblecriterias: • Creating and maintainig at least 40 new jobs for software development centers in 3 years • Creating and maintainig at least 100 new jobs in other centers during the 3 years Other conditions: • The investor has tochoose between the costs countedfromthetangible and intangible assets orwage costs on thenewjobpositionsduring 24 months.
OtherProgrammesfor ICT and BSC EU structuralfunds: Currentlyclosedprogrammes, similarprogrammeshouldbeopened in theyear 2014. • ICT and Business Support CentresProgramme
Cash Grant on Capital Investment– StrategicInvestmet Project • This form of support is provided only in the case of strategic investments in manufacturingorin technology centres. • Cash grant on capital investment can be provided up to the amount of 5% of eligiblecosts (max. CZK 1.5 billion in the case of a manufacturing project and max. CZK 0.5 billionin the case of a technology-centre project). • If commencement or expansion of production and establishment or expansion of a technologycentreoccur simultaneously within the given investment, the amount of cash grantcan be up to 7% of eligible costs. • Aid is again provided maximally up to the amount of the ceiling of state-aid intensityand must be approved by the Government of the Czech Republic prior to provision.
InvestmentIncentives vs. EU StructuralFunds • Target group of applicants (SME – Large enter.) • Clarity of rules • Communicationwithsuppurt provider authority • Applicationprocessfor support (registration, full application) • Selection of projects vs. eligible criterias • Public tenders • How to prooffulfillingoftheelibibleparametres • Audits by stateauthorities