4. Industrial Policies
The Czech Republic offers incentives to foreign and domestic firms alike that invest in the manufacturing sector, technology and R&D centers, and business support centers. The amended Act No. 72/2000 Coll. came into force September 6, 2019 and shifted availability of incentive programs from all types of investments to only those requiring R&D and that create jobs for university graduates, as well as in specialized sectors such as aerospace, information and communication technology, life sciences, nanotechnology and advanced segments of the automotive industry. Incentives are funded from the Czech Republic’s national budget as well as from EU Structural Funds. The government provides investment incentives in the form of corporate income tax relief for 10 years, cash grants for job creation up to USD 8,000 per job, cash grants for training up to 50 percent of training costs, and cash grants for the purchase of fixed assets up to 20 percent of eligible costs. In response to COVID-19, the government approved November 30, 2020, an amendment to this law, which enables producers of personal protective equipment and medical products to more easily obtain investment incentives, because the state considers these products strategic for the protection of citizens’ lives and health during the pandemic. In addition, to prevent businesses from delaying investments due to high uncertainty caused by COVID-19, the latest amendment also lowers thresholds for obtaining investment incentives, primarily for small and medium-sized investors. The latest amendment also makes it possible for companies affected by COVID-19 to apply for an extension of the period for fulfilment of the general terms and conditions of investment incentives. In addition, in 2019, the Czech Republic significantly expanded film industry incentives provided through the state organization Czech Film Fund. The new incentives cover up to 20% of eligible costs of foreign filmmakers.
The government does not have a common practice of issuing guarantees or jointly financing FDI projects.
Foreign Trade Zones/Free Ports/Trade Facilitation
Both Czech and EU laws permit foreign investors involved in joint ventures to take advantage of commercial or industrial customs-free zones into which goods may be imported and later exported without depositing customs duties. Free trade zone treatment means duties need to be paid only in the event that the goods brought into the free trade zone are introduced into the local economy. Since the Czech Republic became part of the single customs territory of the European Community and now offers various exemptions on customs tariffs, the original tariff-driven use of these free trade zones has declined.
Performance and Data Localization Requirements
The host government does not mandate local employment. There are no government-imposed conditions on permission to invest. The host government does not follow “forced localization.”
The visa process for non-EU foreign investors and their employees is time consuming and slow, but the requirements are the same for domestic, EU, and non-EU companies.
The Czech Republic abides by EU law governing data localization and performance. The Czech Republic strongly supported creating the EU Regulation on free flow of non-personal data which came into effect in May 2019, stating that it would boost the competitive data economy and accelerate the development of artificial intelligence.
The July 16, 2020 ruling of the EU’s highest court in the Schrems II case, which invalidated the legal basis for the EU-U.S. Privacy Shield framework, has put a significant burden on companies transferring personal data from the Czech Republic to the United States.
The Lower house of the Czech Parliament passed the “Bill on Digitalization of Public Authorities (“Cloud Bill”) March 5, 2021, marking the latest step in the country’s efforts to move government data to the cloud. The bill is now subject to approval by the Senate and signature by the President. The Czech government proposed the legislation to enable government ministries to partner with global cloud service providers to migrate government data to the cloud. The legislation seeks to operationalize a “Cloud Catalogue” of cloud service providers that are certified as secure and trustworthy partners for government data. The draft legislation mandates that sensitive government data be stored in the EU but allows global cloud services providers (including U.S. companies) to transfer data overseas for routine maintenance purposes. The legislation also allows cloud service providers managing Czech government data to comply with the U.S. CLOUD Act, which gives U.S. law enforcement agencies the right to access personal data stored outside the United States.