Foreign Investment in the Czech Republic

These are the highlights if you want to know more about Foreign Investment in the Czech Republic. This entry was drafted by Bányaiová Vožehová. Link to E-Iure Network. This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case Bányaiová Vožehová is an excellent option in Czech Republic.

Conditions for Foreign Investment in the Czech Republic

In general, there are fairly good conditions for Foreign Investment in the Czech Republic. Stable, consistent and predictable political and economic environment along with investments incentives are fine motivation for foreign entities to invest their funds in the Czech Republic.

Important aspect for investors to realize their investments in the Czech Republic is especially qualified and reliable workforce, together with advantageous geographical location in the Central Europe, availability of various suppliers and wide options of financing.

The Czech Republic is also a member of various international organizations such as the World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), International Monetary Fund (IMF) and North Atlantic Treaty Organization (NATO). Furthermore, as an EU member, the Czech Republic adopts its legislation and standards.

Key industry sectors are automotive industry and mechanical engineering, but also aerospace engineering, nano-technologies and IT industry play its role.

The Czech currency – the “koruna”.

The Czech National Bank as the central bank maintains very high currency stability. The current exchange rate (as of July 2017) is EUR 1 = CZK 25,91. As the Czech National Bank ceased to pursue interventions on the monetary market in April 2017, the Czech currency has the tendency to strengthen, with estimated exchange rate EUR 1 / CZK 25.5 in long-term framework. The Czech currency koruna is fully convertible and there are wide options of exchange rate risk hedging.

Non-discrimination, repatriation of profits and transparency

Under the Czech law and also international regulations by which the Czech Republic is bound, discrimination of foreign entities is strictly prohibited and such entities must be treated the same way as domestic entities in all areas. Generally, foreign investors may perform business activities under the same conditions and to the same extent as Czech investors and do not need any special permission or registration for making investment operations in the Czech Republic. Since 2004, acquire of real estates by foreign entities is not limited by Czech laws.

There are in general no limitations regarding distribution and expatriation of profits related to foreign investments. Foreign investors are allowed to transfer profits to their state of origin providing they act in compliance with Czech corporate and tax law.

In order to prevent double taxation of profits, the Czech Republic has concluded treaties with many countries, including the United States, Canada, Australia and all EU members.

Pursuant to the Act No. 253/2008 Coll., on selected measures against legitimization of proceeds of crime and financing of terrorism, as amended, banks and other entities are obliged to identify and check up on investors with regard to the sources of their funds used for investments. Furthermore, since 2018, any legal entity or property trust registered in the Czech Commercial Register or other public register shall provide the administrator of the respective register with identification of the beneficial owner of the registered entity. Generally, this information shall not be disclosed to public, however it would be kept by the by regional courts maintaining the Commercial Register.

Investment Protection

The Czech Republic is a party to many bilateral treaties whose aim is to protect and support foreign investments. No discrimination based on the origin of the capital is allowed in the Czech Republic and foreign entities are protected against unlawful expropriation of their property by the Czech state.

The Czech Republic is also a member of the Multilateral Investment Guarantee Agency (MIGA), which is a member of the World Bank Group and its mission is among other things to promote foreign direct investment (FDI).

Investment Incentives

The Czech Republic provides both new and existing investors with various investment incentives through its agency Czech Invest. The main objective of the Czech Invest is to advise and support the existing and new entrepreneurs and foreign investors in the Czech Republic. The Czech Invest provides services as full information assistance, handling of investments incentives, access to EU structural funds, business properties identification, case for existing investors, etc.[1] For more detailed information, you can visit www.czechinvest.org.

Specific supported areas are:

• Industry – Introduction or expansion of production in sectors of the manufacturing industry, mainly in designated special industrial zones
• Technology centres – Construction or expansion of research and development centres
• Business support services centres – launch or expansion of the activities of shared-services centres, software-development centres, high-tech repair centres, data centres, customer support centres

Types of investment incentives are:

• Tax incentive – Corporate income-tax relief for up to ten years for new companies
• Discounted price on land and related infrastructure
• Job creation grants – Financial support for creation of new jobs in less developed regions
• Training and re-training grants – financial support for training and retraining of new employees in less developed regions
• Cash grant for capital investment – Financial support in the case of strategic investments in manufacturing or in technology centres
• Property tax incentive – Property tax exemption up to five years for real estates in special industrial zones.