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Foreign Investments in Czech Republic

Foreign Investments in Czech Republic

Updated on Sunday 26th January 2020

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The Czech Republic is positioned among the important Central and Eastern European countries in terms of foreign direct investment (FDI) – investments in businesses made by entrepreneurs from foreign countries for which they have control – as well as FDI capital inflow – increase in the amount of capital available from foreign sources for the acquisition of capital assets – according to the Investment and Business Development Centre of the local government, CzechInvest. The reason for this lay behind the foreign investment incentives introduced by the government in the Czech Republic, efficient infrastructure and richness in natural resources. Our Czech lawyers can offer legal advice for foreigners willing to invest in the Czech Republic.
 

Strategy for foreign investments in Czech Republic

 
Since 1990, the Czech Republic took an important role in the Central and Eastern European region in matters of foreign direct investments. In 2014, the FDI inflow data registered a yearly increase of 60%, recovering completely after the economic crisis, the increase being due mainly to the automotive industry. CzechInvest issued a new strategy which intended to make the Czech Republic one of the most attractive markets for foreign entrepreneurs. This strategy is based on five principles:
 
  • increased activity outside the country;
  • improved service for entrepreneurs;
  • enhanced support coordination for small and medium-sized businesses;
  • highlighting the use of research and development;
  • general enhancement of the communication among agencies connected to FDI and state authorities.

 

As for 2015, 2016 and 2017 the FDI inward flow registered in the Czech Republic was of USD 465 million, USD 9,815 million and USD 7,412 million respectively. Manufacturing, wholesale and retail, financial and insurance activities, real estate, and communication represent top sectors attractive to foreign investors in the Czech Republic. There are many companies from abroad that decide for branches and subsidiaries in the above-mentioned sectors. Also, foreign investors can easily open companies in Czech Republic as long as they respect the applicable legislation.

 
Our lawyers in Czech Republic can provide more details on this matter.
 

Main investment industries and countries in the Czech Republic

 
According to the Czech National Bank statistics issued in 2016, the main industries which registered foreign direct investments in the Czech Republic were:
 
  • the manufacturing industry – 33% of the total foreign investments;
  • financial intermediation – 21.8% of the entire foreign investments in the Czech Republic;
  • property, renting – 14.7%;
  • trade and maintenance – 6.7%;
  • transport, storage, and communications – 6.5%.
 
As about the main countries investing in the Czech Republic, these are:
 
  • The Netherlands, with 43.9% of the FDI inflow;
  • Germany, with 15.7%;
  • Austria, with 13.2%;
  • Belgium, with 7.8%;
  • USA, with 5%.
 

The benefits of investing in Czech Republic

 
Foreign investors have many advantages when deciding for investments in the Czech Republic. They can benefit from a stable economy which grew by 3.2% in 2017, for example. The banking sector is extremely powerful, and it aligns with the international financial centers, allowing trading partners to develop their activities in the Czech Republic. Having the lowest unemployment rate among the European countries is definitely a great advantage considered by investors from abroad who think of Czech Republic for future businesses and operations. A healthy business environment is definitely the case of the Czech Republic and the investors from overseas who bear in mind all the advantages of developing their activities in this country.
 

Governmental efforts to attract foreign investments in the country

 
The Czech government is aware of the investment potential of the country and continues to develop varied economic and financial strategies to improve the business climate and competitiveness. The export sector is of high importance and it is sustained by a series of reforms to develop even more the business opportunities in this area, mostly related to the taxes and business terms and conditions. Targeting the fast-growing markets is a purpose that prolongs until 2020. The Czech government introduced in 2013 the “Welcome Package” which addresses to foreigners interested in obtaining work and residence permits to legally invest in the country. With this initiative, the immigration procedure was far easier than before, allowing entrepreneurs to access the market in a fast and reliable manner. As for 2018, the Czech government focused on streamlining the public administration and promoting better the idea of entrepreneurship in the Czech Republic. This way, it is a lot easier to access funds for research, development, and innovation.
 

Procedures involving FDIs in Czech Republic

 
In matters of legal conditions, starting a business in Czech Republic is relatively easy, with fewer formalities for both local and foreign investors. As for the obligations of an investor in this country, he/she needs to declare the intentions of the investments and to obtain the necessary business approvals in order to benefit from varied incentives. Foreigners can easily establish branches and subsidiaries in respect to the applicable legislation in the Czech Republic. Even though there is no need for specific authorizations for opening a company, the Ministry of Industry and Trade in the Czech Republic oversees the businesses and investments in sectors like national security, energy, oil, and gas. It is good to know that foreigners have the possibility of investing in the real estate sector and purchase industrial lands and buildings, being allowed to make investments in the public interest. As for the income tax relief, this is established for 10 years if foreign investors decide to modernize a factory, a workshop or expand an existing establishment with the creation of new jobs. We invite you to talk to our specialists and find out more about the ways in which you can place your investments in the Czech Republic. You can also receive help for VAT registration in Czech Republic.
 

Investment by citizenship

 
The Czech Immigration Law was revised in 2017 by adding a new amendment related to the ways in which a foreigner can obtain citizenship through investments. This means an investment visa and naturalization can be obtained if the entrepreneur invests approximately EUR 2,850,000 million and creates more than 20 jobs. The investments made can be tangible or intangible and can be represented by real estate properties or any other important assets. Just like in most cases of countries offering citizenship by investment, Czech Republic solicits a solid business plan and complete information about the investments which will take place in the country, plus the social and economic advantages that come with such investments. The legal aspects of an investment visa can be easily obtained from our Czech lawyers.
 
Our law firm in the Czech Republic can provide detailed information on the legislation regarding foreign investments in this country. Please contact us if you need to know what this legislation consists of.