Investment incentives without politicians?

12. September 2022

At the beginning of August 2022, the Government of the Czech Republic prepared an amendment to the Investment Incentives Act. This amendment is now subject to the comment procedure.

The amendment focuses on the following two changes:

a)    Cancellation of the obligation of the Ministry of Industry and Trade to submit every application for an investment incentive to the Government for consideration. However, applications from strategic investment projects to obtain a financial contribution for the acquisition of tangible and intangible fixed assets will continue to be submitted to the Government. In the case of other investment projects, the decision on the investment incentive will be issued on the basis of an assessment of the conditions and obligations set out in the Investment Incentives Act and other related legislation, in particular Government Regulation No.221/2019 Coll., on the implementation of certain provisions of the Investment Incentives Act, as amended, and on the basis of binding opinions of the authorities concerned (Ministry of Finance, Ministry of the Environment, Ministry of Labour and Social Affairs, Ministry of Agriculture). The assessment of applications for an investment incentive will thus return to the level of being considered in ministries with full respect for the principles of administrative procedure, thereby increasing the legitimate predictability of the approval procedure.

b)    Introduction of a  one-stage decision-making procedure, as is the case for subsidy decisions under the budgetary rules (i.e. limiting the use of appeals against decisions). The subject of the proposed amendment to the Act is therefore primarily to shorten, simplify and, above all, streamline the process of approving standard applications for investment incentives. The government (as a political body) would thus lose the criticized power to de facto reject a particular investment incentive arbitrarily. Thus, the government could continue to regulate investment incentives only in a transparent manner by amending the general support criteria set out in Government Regulation No. 221/2019 Coll. and thus bindingly set stricter rules for the provision of investment incentives.

Due to the fact that the amendment is still in the comment procedure, it can be expected to come into force in 2023 at the earliest.

Author: Petr Němec, Martin Hahn

Author: Petr Němec, Martin Hahn