Amendment of the Investment Incentives Act: From support of assembly plants to innovations

29. 8. 2018

To date, the primary aim of investment incentives has been the creation of new jobs and reduction of unemployment. Considering the present high employment rate, the State wants to show clearly, by amending the Act, that it is not going to support projects of this kind any more. From now on, incentives should be directed primarily at industries with a high added value, technological centres and centres of strategic services. Nevertheless, the provision of State aid in economically problematic regions is expected to continue. The amendment also reacts to the unavailability of investment incentives for small and medium-sized businesses, which is frequently subject to criticism, and it significantly decreases the amount of investment required from such entities to receive State aid.

The most significant change, directed at technological centres and centres of strategic services, is an increase of the limit for the provision of State aid for the acquisition of assets to 20% of the eligible costs.

It was quite difficult for the legislature to find the criteria for the evaluation of the higher added value in the processing industry. Finally, the condition was selected where 80% of the employees of a company that wants to use an investment incentive will need to receive a salary at least in the amount of the average salary in the respective region. In addition to this basic condition, the company will have to either employ research and development specialists (whose share will have to be at least 2%) or will have to co-operate with a university or a research organisation in the area of research and development. An alternative to the research activities is the employment of at least 10% employees with a university degree, which, in fact, is almost impossible in a majority of today’s manufacturers.

The amendment under preparation also removes the obligation to create new jobs for investment projects in manufacturing. For the processing industry to remain competitive, it must adapt to technological progress and react to the developments in technological innovations. Increased labour productivity in manufacturing is in fact not connected with the creation of new jobs; just on the contrary, production automation and digitisation contribute to their decrease.

The last change is a more detailed specification of the conditions for investment support in the structurally disadvantaged regions, for which an exemption from the criteria defining the higher added value is planned. In the case of an increase in the unemployment rate to 125% of the national average or in the case of reaching the absolute unemployment rate of 7.5%, these regions could be also eligible for financial aid intended for manufacturing jobs.

The amendment of the Act is now in the stage of the commentary procedure; however, many of the comments are of a fundamental nature. Therefore, significant changes to the prepared bill can be expected in the future.

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