Czech Republic

Investing

FDI in figures

According to the state agency for FDI, CzechInvest, the stock of foreign investment in the Czech Republic at the end of 2005 (including reinvestment of profits) totaled USD 54 billion (49% of 2005 GDP). Czech Republic ranked first in Central and Eastern Europe in both FDI stock and inflow per capita in 2005. The upswing in investment since 1998 is generally attributed to the introduction of investment incentives, as well as the Czech Republic's natural advantages.

During the period 1993-2005, Germany and the Netherlands were officially the leading foreign investors. Their investments totaled USD13.2 billion (24.4%) and USD9.2 billion (17.0%) respectively, followed by Austria with USD4.9 billion (9.0%), France with USD3.4 billion (6.3%), the United States USD3.3 billion (6.1%) and UK with USD2 billion (3.7%). Other major investors included Belgium, Switzerland and Slovakia. In 2005, massive investment in the local telephone company by a Spanish company brought in USD4.8 billion of the total Spanish FDI of USD9.5 (17.5% of estimated 2005 GDP) in 2005.

In 2006, Luxembourg was the leading foreign direct investor because of investment to the chemical industry. But leading position of Luxembourg is influenced by “tax shelter” of Luxembourg ; many firms operating in the Czech republic are subject of Luxembourg or Cyprus tax system.

FDI in 2007 reached its maximum level and manufacturing FDI shifts towards „centres of strategic services".

Foreign Direct Investment	2004	2005	2006
FDI of inward flow (millions USD)	4,974	11,658	5,957
FDI inward stock (millions USD)	n.c.	n.c.	77,460.0
Performance Index*, world ranking	29	31	32
Potential Index**, world ranking	39	38	n.c.
Number of Greenfield investments	144	149	174
FDI inwards (in % of GFCF)	17.2	36.1	16.8
FDI stock (in % of GDP)	n.c.	n.c.	54.8

Source: UNCTAD, World Investment Report

Note: * The UNCTAD Inward FDI Performance index is based on a ratio of the country's share in global FDI inflows and its share in global GDP. ** The UNCTAD Inward FDI Potential index is based on 12 economic and structural variables such as GDP, foreign trade, FDI, infrastructures, energy use, R&D, education, country risk.

Why you should choose the Czech Republic

Strong points: Good accession to the European market, long history of industrial production, quality of labor force
Weak points: Lack on the number of labor force (often foreign workers are hired in order to make production possible).
Government measures to motivate or restrict FDI: Government oficially declares its goal to restrict investment incentives, because there are only few areas suitable for big manufacturer. On the other hand, in past three years, the competition among foreign investor rapidly grew up (especially in terms of human resources for new manufacturing).
Bilateral investment conventions signed by the Czech Republic: To date there were signed 77 bilateral conventions

Administrative procedures relative to foreign investment

Freedom of establishment

Guaranteed

Acquisition of holdings

A majority holding interest in the capital of a Czech company is legal.

Obligation to declare

submission of an initial application by the person intending to make the investment
consideration of the application by the relevant government bodies
following approval, an offer of incentives
a formal application for the incentives by the person who will actually claim them – this may be a person other than the investor, e.g. a Czech subsidiary of a foreign investor set up following the offer of incentives
final consideration and approval

This is valid for all sectors applying for state aid (investment incentives).

Competent organization for the declaration

CzechInvest

Requests for specific authorizations

Generally, there is no need to get an authorization before setting up a company, except in some sectors such as national defense, national security, nuclear energy, etc. In particular cases, companies have to contact the respective ministries. Investors shall contact CzechInvest, the agency of the Ministry of Industry and Trade of the Czech Republic, in order to get further information on investment matters.