Foreign investments in the Czech Republic

The Czech Republic has taken active measures to control foreign investments through Act No. 34/2021 on the Verification of Foreign Investments, which entered into force on 1 May 2021. This law establishes mechanisms for analysing and evaluating foreign investments, especially those originating from non-EU countries, in sectors of strategic importance for the national security and public order of the Czech Republic. Here are the main aspects and procedures concerning foreign investments in the Czech Republic:

Key features of the Foreign Investment Review Act:

Impact on foreign investors:

• Foreign investment remains welcome in the Czech Republic, but stricter scrutiny is now required to protect the national interest.
• Foreign investors may face additional verification procedures and potential delays in their investment projects.

International Co-operation:

• The Czech law complies with pan-European and international standards for controlling foreign direct investment and includes the possibility of co-operation with other countries and the European Commission to exchange information on potential threats.

This law is part of a broad trend of increased foreign investment controls seen in many countries around the world, aimed at protecting key national assets and ensuring security.

Restrictions for foreign shareholders

Foreign shareholders may legally hold a controlling interest in Czech companies.

Under the Foreign Direct Investment Law, a foreign shareholder (or investor) is any person who

• Is not a national of an EU Member State.
• Does not have a registered seat in an EU Member State.
• Supervised by a person who fulfils the above conditions.

The Czech Republic offers attractive conditions for foreign investors, including a wide range of investment incentives and benefits. The main focus is on attracting investments that contribute to the creation of highly skilled jobs and the development of high value-added sectors. Here are the main investment incentives available in the Czech Republic:

• Corporate Income Tax Relief: New and expanding companies can receive corporate income tax exemption for up to ten years.
• Job Creation Grants: Support for new jobs through grants that help cover a portion of wage costs.
• Training and Retraining: Grants for employee training and development, which supports the development of workforce skills.
• Capital Investment Cash Grants: Provided for strategically important projects that require significant investment in fixed assets.
• Property tax exemption: Can be granted for up to five years, which reduces operating costs for businesses.
• Transfer of state-owned land: Foreign investors can acquire land at reduced prices, making it easier to start projects.

These measures are aimed at strengthening the Czech Republic’s competitiveness as an international investment destination. Combined with the highly educated population and the country’s strategic location in Europe, these incentives make the Czech Republic attractive to foreign investors from various sectors, including high technology, financial services and manufacturing.

Foreign investors in the Czech Republic

Foreign investors in the Czech Republic can benefit from state support provided under the Regional Development Strategy of the Czech Republic 2021+. This strategy determines the levels of state aid depending on the size of the enterprise:

• Large businesses can receive up to 25 per cent of the total eligible costs.
• Medium-sized companies can receive up to 35% of total eligible expenses.
• Small businesses can receive up to 45% of total eligible expenses.

Public assistance includes:

• Tax benefits
• Grants for job creation
• Transfer of land at favourable prices
• Property tax exemption
• Cash grants for capital investments

It is separately noted that grants for training and retraining are not included in the calculation of the maximum intensity of state aid, which allows enterprises to receive additional funds for the development of their employees.

In addition, projects may receive funding through special programmes of ministries and regional councils, partly funded by the EU or the Czech Republic, for example:

• Infrastructure Development Programme of the Ministry of Industry and Trade, which supports business and innovation, energy management and ICT development.
• A programme of the Ministry of Labour to support the employment and retraining of employees.

These programmes aim to stimulate economic growth, improve competitiveness and create new jobs, making the Czech Republic attractive to international investors.