New Instrument Gives Tax Breaks for R&D in the Czech Republic
Prague - At the beginning of November the Czech Government has passed a new income tax law providing tax benefits for research and development (R&D) in the Czech Republic. The Chamber of Deputies voted 'Yes' on the modified bill which introduces a deductible item of 100% of costs allocated for R&D. The bill now has to be affirmed by the senate. The new legislation will then come into force on January 1, 2005. The essence of the support resides in the fact that R&D costs, which can be regularly declared for tax purposes and included in every company's costs, will now be eligible to be deducted once more at 100% from the calculated tax base. The deductible item is thus seen as an effective tax instrument to support R&D. “It will provide major support to companies operating in the Czech Republic and will contribute to a higher competitiveness of our country,” commented Martin Jahn, Deputy Prime Minister for Economic Affairs.
The introduction of new tax breaks for R&D aims at increasing the attractiveness of the Czech Republic as a country suitable for such R&D activities. The approval should help after the phase of foreign investors' arrival to retain the Czech Republic's attractiveness not only in terms of low operating and labour costs but also in terms of introducing activities with a higher added value.
The new legislation is also seen as one step towards satisfying the need to strengthen the EU's competitiveness, which the Czech Republic assumed as part of the so-called Lisbon strategy.