Country profiles

Business Environment

Doing Business

Traveling and Living

BLF internationally

Change country

Market information

Best trading countries Import-Export flows Market reports search Professional reviews Consumption Data Business alert

Home > Country profiles > Investing

Czech Republic: Investing

FDI in Figures

According to CzechInvest, Investment and Business Development Center, the Czech Republic is classified in the first place among the Central and Eastern European countries not only for the level of FDI stock but also for the FDI inflows per capita. This situation can be explained by the creation of investment incentives, by the presence of a skilled and inexpensive manpower and also by the natural advantages of the Czech Republic, such as its location in the heart of Central Europe. A change in FDI direction can be observed in the Czech Republic, from the manufacturing industry to the "strategic services centers".

Due to the deterioration of the international situation, the FDI flow declined in 2008 and 2009, but have since recovered. In 2011 new investment doubled in volume compared to 2010, half of it directed to the IT and software sectors.

The European Union and the United States are the two main foreign investors in the Czech Republic.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	6,451	2,927	6,781
FDI Stock (million USD)	113,174	125,827	129,893
Performance Index*, Ranking on 141 Economies	86	98	-
Potential Index**, Ranking on 141 Economies	33	-	-
Number of Greenfield Investments***	142	99	-
FDI Inwards (in % of GFCF****)	12.5	1.3	-
FDI Stock (in % of GDP)	52.4	60.9	-

Source: UNCTAD - Last Available Data.

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. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2011, in %
Netherlands	29.4
Germany	12.9
Austria	12.4
France	6.4
Luxembourg	6.2
Switzerland	4.9
Cyprus	4.1
Spain	3.7

Main Invested Sectors	2011, in %
Electricity, water and gas	30.9
Car sales and repairs	14.9
Construction	11.6
Transport and storage	7.5
Oil, chemical, pharmaceutical, rubber and plastic products	6.0
Machinery and equipment	5.8
Finance and insurance	5.7
Information and communication	3.1

Source: Czech National Bank - Last Available Data.

Form of Company Preferred By Foreign Investors: Branch or an entity
Form of Establishment Preferred By Foreign Investors: Corporation limited (so called s.r.o.)
Main Foreign Companies: Hyundai Motor Company, Sungwoo Hitech, FTE automotive s.r.o., Sun Microsystems Czech, TietoEnator
Sources of Statistics: Czech national bank

Why You Should Choose to Invest in the Czech Republic

Strong Points: Good access to the European market, a long history of industrial production and the quality of the labor force are part of the positive factors of the Czech Republic. We can also name the following factors, which represent non-negligible advantages for the country:
- A strong and independent central bank and an extremely stable currency;
- Rapid economic growth;
- A good capacity to withstand the global economic crisis.
Weak Points: The Czech Republic is very dependent in terms of export and on the influx of foreign investments, which makes it vulnerable during crises. The country's skepticism towards Europe and the lack of interest in the adoption of the Euro could discourage certain European entrepreneurs in the long term and make the country less competitive.
The country has also experienced political tensions, particularly in 2009, which could undermine its stability in the eyes of potential entrepreneurs.
The lack of labor force also slows down the country's development (it is often necessary to hire foreign workers in order to fulfill production demands).
Government Measures to Motivate or Restrict FDI: From 1998, the government put into place an investment incentive plan and has encouraged massive FDI inflow as well as projects on unused land ("greenfield"), as well as on used land ("brownfield" or development of existing structures). We can name amongst these measures:
- The non-discrimination and equality of treatment between nationals and foreigners;
- The protection of investment and the avoidance of double taxation;
- The protection of property rights and the export of profits.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By the Czech Republic: To date there were signed 77 bilateral conventions
International Controversies Registered By UNCTAD: Some disputes took place regarding TV NOVA (commercial TV) and IPB (bank)
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
Member of the Multilateral Investment Guarantee Agency: Yes

Country Comparison For the Protection of Investors

	Czech Republic	Eastern Europe & Central Asia	United States	Germany
Index of Transaction Transparency*	2.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	5.0	4.0	9.0	5.0
Index of Shareholders’ Power***	8.0	6.2	9.0	5.0
Index of Investor Protection****	5.0	5.5	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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.

Learn more about Foreign Investment in the Czech Republic on Globaltrade.net, the Directory for International Trade Service Providers.

Office Real Estate and Land Ownership

Possible Temporary Solutions: As a temporary solutions could be used office rental usually in big cities, but also small cities offer such a place.

There are many business centres in the biggest cities (Prague, Brno, Ostrava). Most of them are owned and operated by commercial companies. For instance, CTP Invest .
The Possibility of Buying Land and Industrial and Commercial Buildings: Yes
Risk of Expropriation: Usually it is not possible, but in public interest (highway construction) it is possible. Risk can be reduced through visiting locally relevant construction office which is responsible for urban development plan (so called uzemni plan). This plan identifies possible function of every ground for next several years, so be aware of fact that you can not build where ever you want.

Investment Aid

Forms of Aid

income tax relief for up to 10 years for the establishment of a new manufacturing entity and for the expansion or modernization of an existing manufacturing plant,
employment subsidies in the form of grants for the creation of new jobs and training, the amount of which depends on the unemployment rate in the region in which the investment is made,
transfer of land at a discounted price

Privileged Domains

Manufacturing, technology centers

Privileged Geographical Zones

Not specified, but better subsidies have those regions having higher rate of Unemployment (Northern Moravia, Northern Bohemia)

Free Zones

Free zones with control type I in following cities: Ostrava, Cheb, Prague, Pardubice, Hradec Kralove.

Organizations Which Finance

CzechInvest
It is the agency of Ministry of industry and trade. Czechinvest is also intermediate body for all structural fonds interventions oriented on industry and trade.

Investment Opportunities

The Key Sectors of the National Economy: Automotive, machinery, electronics, life sciences, airplane technique, IT,
High Potential Sectors: Information technologies, Software development, Life sciences
Privatization Programs: Energetic
Tenders, Projects and Public Procurement: Ted - Tenders Electronic daily, Business opportunities in EU 27
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Energy production
Sectors in Decline: Textile industry

Finding Assistance For Further Information

Investment Aid Agency: CzechInvest
Czech Invest representation abroad in Brussels (Belgium), London (UK), Paris (France), Hong Kong (China), Yokohama (Japan), Munich and Koeln (Germany), Chicago (USA).
Doing Business Guides: Deloitte Business Guide
KPMG Investment Guide
Czech Republic Commercial Guide 2010 - Buy USA

Any Comments About This Content? Report It to Us.

Learn more about Investing in the Czech Republic on Globaltrade.net, the Directory for International Trade Service Providers.

TERMS & CONDITIONS | SITEMAP | FAQ | VIDEOS | CONTACT