The applicability of the new rules is governed by the incentives’ approval date rather than the application’s filing date (as is the case under Czech law). Given the length of the approval process on the part of Czech state authorities, it is thus now high time to apply for investment incentives if applicants wish to obtain them under the existing rules.

The new rules will form part of the amended Regional Aid Guidelines (RAGs), which lay down a general framework and the rules of providing state aid within the European Union on which other European and local public aid rules are based. This means that based on these guidelines, the General Block Exemption Regulation (GBER) and subsequently the Czech Investment Incentives Act will be amended. The RAGs set out, inter alia, the criteria for defining the areas in which regional aid can be granted, and the aid intensity in individual areas. This will result in a change to the regional aid map for each member state. The new maps should apply from 1 January 2022 to 31 December 2027.

Under the currently valid RAGs, all regions of the Czech Republic (except for Prague) have been assigned an aid intensity of 25%. From 1 January 2022, the aid intensity in individual regions will change as follows:

• 40% – Karlovy Vary and Ústí nad Labem
• 30% – Liberec, Hradec Králové, Pardubice, Zlín, Moravia-Silesia and Olomouc
• 15% – Central Bohemia, Pilsen, South Bohemia, Vysočina and South Moravia
• 0% – Prague.

Another important change is the limit in support for investments to expand existing production. In the Central Bohemian, Pilsen, South Bohemia, South Moravia and Vysočina regions, it will no longer be possible to support investments aimed at expanding existing productions or diversifying product portfolios, except in cases where it would involve a completely new activity for the company in question. These forms of investment will still be supported in the remaining regions (except for Prague).

The rules under the new RAGs will apply to all investment projects where the decision to grant an investment incentive is issued after the end of 2021, i.e. also to projects where the application for an investment incentive is submitted during 2021, but the approval process is not completed by the end of 2021. As the approval process now takes much longer due to the projects’ need for mandatory governmental approval (seven months are not uncommon), it is now high time to apply for an investment incentive if you wish to obtain it under the existing rules.

If, on the other hand, you feel that the new rules will be more advantageous for you, we recommend rescheduling and postponing the project (if commercially possible) and only filing the investment incentive application at the end of 2021. For the sake of completeness, please also note that the new rules should not affect already granted investment incentives.

We will be happy to help you assess the impact of the new rules on your project.

Ivana Stibůrková istiburkova@kpmg.cz +420 222 123 549

Renata Kadeřábková rkaderabkova@kpmg.cz +420 222 124 336