Important changes to investment incentives
The outgoing government approved two important changes in the area of investment incentives during November. The first one is a new map of regional aid, which adjusts the percentage of aid granted in each region in the Czech Republic. The second change will affect the support for projects with active research and development activities. Read the article below to find out more.
New map of regional aid
The first change concerns the expected approval of a government regulation setting the permitted level of public aid in the individual cohesion regions of the Czech Republic. After seven years, the percentage of aid granted is changing in connection with the new map of regional aid approved by the European Commission, which will be valid until 31 December 2027.
From the current 25%, the public aid rate will be increased to 30% and 40% in some regions under the new regulation. The highest increase applies to the North-West cohesion region and aid will also be increased to 30% in the Moravian-Silesian, Central Moravia and North-East cohesion regions.
Conversely, for other regions of the Czech Republic, the current rate of support will be reduced to 20% and to 15% from 2025. The reduction is partially compensated by an increase in support in some districts adjacent to the North-West region. The biggest impact for regions with reduced support will concern “large enterprises”, where it will no longer be possible to support investments in the expansion of existing activities in the coming years (these investments were in high demand according to the number of supported projects). The adjusted rules will only allow support of investments in new economic activities.
Projects with active research and development activities
The second change focuses on support for projects with higher added value. In particular, the government discussed and approved an amendment to the regulation specifying and implementing the provisions of the Act on Investment Incentives. Until now, investors in the manufacturing industry actively performing research and development activities have not been able to obtain any investment incentive other than a corporate income tax allowance. Now, selected projects approved by the government will also be able to receive an investment incentive in the form of cash support for the acquisition of tangible and intangible fixed assets, which has been increased from the current 10% to 20% in the Ústí nad Labem, Karlovy Vary and Moravia-Silesia regions.
As a result, the selected projects will also become strategic investment projects, similar to the existing large strategic investment projects and the manufacturing of products of strategic importance for the protection of life and health of people. However, it will not be subject to the other limits for strategic investment projects (amount of asset acquisition and creation of new jobs).
In the manufacturing industry, the change will affect projects with high or medium-high technological intensity according to CZ-NACE and higher value-added activities where research and development is carried out using a key enabling technology. Key enabling technologies are defined as technologies using advanced materials, nanotechnologies, advanced manufacturing technologies, biotechnologies, nanoelectronics and artificial intelligence technologies.
Change in limits for strategic investment projects
The last modification is a change in the limits for “traditional” strategic investment projects for the acquisition of assets from the original CZK 500 million to CZK 2 billion and a reduction of the required number of newly created jobs from 500 to 250.
Will the number of applications and approved projects increase?
The following months will show whether the changes to the conditions under which the investment incentive can be obtained will motivate investors and trigger recovery in this area. After the last major change in 2019, the number of approved projects and applications for investment incentives has dropped significantly, so we believe that this trend will change soon.