WORLD TRADE  
ORGANIZATION  G/SCM/Q2/CZE/17 
G/SCM/Q2/EEC/44 18 October 2004 
 
(04-4378) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions Posed by the UNITED STATES1 Regarding  
the New and Full Notification of the CZECH REPUBLIC2 
 
  The following communication, dated 15 October 2004, is being circulated at the request of the Delegation of the European Commission.  
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I. INVESTMENT AID 
 Aid for Foreign and Domestic Investments 
 
 What types of industries benefit under this programme?  
 
II. REGIONAL AID 
 Aid for Endangered Regions and Regional Aid 
 
1. Please explain further the conditions a co mpany must meet to receive aid under this 
programme.  2. What types of industries benefit under this programme?  
 
Replies
 
 
 Investment Aid   (Aid for Foreign and Domestic Investments) and Regional Aid  (Aid for 
Endangered Regions and Regional Ai d) are both covered by Investment Incentives scheme.  Since 
April 1998 incentives were provided under a contr act (Memorandum of Unde rstanding) between the 
state and the investor.  The Investment Incentives Act  came into force in May 2000.  This law 
codified and to some extent simplified the previ ous scheme.  The Act was discussed with European 
Commission and follows European rules on state aid.  Under EU rules, the maximum amount of state 
support for investment is limited.  These provisi ons, setting out the so-called “maximum admissible 
level of public and regional support”, were incorporated into Czech le gislation in the State Aid Act, 
which took effect in May 2000.  There were tw o amendments to the Investment Incentives Act, 
becoming effective in January 2002 and May 2004, respectively.  This I nvestment Incentives scheme 
is for investment in the manufacturing sector . 
 
                                                      
1 G/SCM/Q2/CZE/16 
2 G/SCM/N/95/CZE G/SCM/Q2/CZE/17 
G/SCM/Q2/EEC/44 Page 2 
 
 
  
 The general conditions  for granting the incentives are: 
 1. The investor must establish a new manufacturing plant, or expand or modernize an existing 
plant. 
 2. The activities must be in the sectors of manufacturing industry, provided that part of the 
production line consists of machinery specified in  a Government Decree, and the cost of this 
part constitutes at least 50 per cent of the tota l cost of the production line. In practice this 
means that most manufacturing activity is capab le of qualifying.  However, the following are 
explicitly excluded from the qualifying activities: 
  -  extraction of minerals  -  electric power generation and distribution 
 -  gas and water treatment and distribution 
 -  construction  -  repairs of motor vehicles  -  trading in goods and services.  3. Production machinery must represent at least 40% of the total value of tangible and intangible 
assets. 
 4. The project must meet Czech environmental standards.  5. The investment in tangible and intangible as sets must normally be at least CZK 200,000,000 
of which at least CZK 100,000,000 must be met from equity.  The minimum of 
CZK 200,000,000 is reduced to CZK 150,000,000 if the investment is in a district with an unemployment rate that at the time of the app lication for incentives is at least 25 per cent 
above the national average. In this case, CZK 75,000,000 must be met from equity.  Similarly, 
the minimum of CZK 200,000,000 is reduced to CZK 100,000,000 if the investment is in a district with an unemployment rate that at the time of the application for incentives is at 
least 50 per cent above the national average.  In this case, CZK 50,000,000 must be met from 
equity.  The assets, which meet these minimum investment figures, must be purchased–assets 
subject to finance leases, for example, cannot be included. 
 6. The first three conditions above must be met with in three years of the date of the formal grant 
of incentives.  This is subject to a two-year extension in some cases (e.g. where there have 
been unexpected delays beyond the control of the investor). 
 7. Acquisition of assets for the project cannot begi n before the initial application for incentives 
is submitted. 
 
 The main benefits  are: 
 1. Corporate tax relief for a period of up to te n years for both new companies and for expansion 
of existing companies. 
2. Financial support for creation of new jobs. 
3. Financial support for training employees. 
4. Transfer of a construction site at an advantageous price.   The maximum level of public support is set fo r individual investment projects based on so-
called regional map .  This map allows providing higher incentives for the investment projects located  G/SCM/Q2/CZE/17 
 G/SCM/Q2/EEC/44 
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 in more endangered regions.  The total of the incen tives provided for a single investment project must 
not exceed the “maximum admissible level of pub lic support” under EU rules.  Generally, the 
maximum level of state aid (and thus total amount of investment incentives) will not exceed 50 per 
cent of the total investment into  tangible and intangible assets. 
 
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