Czech Business Today
Czech Parliament Approves Boost to R&D Tax Incentives
The Czech Chamber of Deputies has approved a legislative package introducing a unified wage reporting system for employers and, importantly, amending the rules governing research and development (R&D) tax deductions. This long-anticipated reform is being welcomed as a step toward revitalizing the country’s innovation environment.
“Innovation remains a strategic priority, and Czech companies have considerable untapped potential in this area,” said Martin Jahn, Vice-President of the Confederation of Industry. “Improving the attractiveness and predictability of R&D tax incentives has long been a focus of our efforts. The recent amendments send a positive signal to the market, but further clarity and stability in the application process will be key for greater uptake.”
The approved law introduces several significant changes. The rate of deductible R&D expenditures has been increased to 150 percent for costs up to CZK 50 million, while expenditures above this threshold will remain deductible at the existing 100 percent rate. The period during which companies can carry forward unused deductions has been extended from three to five years. In addition, documentation requirements have been simplified.
These adjustments aim to reverse a worrying trend. In 2015, over 1,300 companies in the Czech Republic used R&D deductions. By 2023, this number had fallen to just 731. The reform responds to calls for more user-friendly and predictable support mechanisms—especially given that tax incentives for R&D are now standard practice in most advanced economies. As of 2024, 24 out of 27 EU member states and 34 of 38 OECD countries offer tax relief. In the Czech Republic, however, the use of R&D tax deductions remains significantly lower in proportion to GDP than in countries such as Austria, where the uptake is four times higher.
The business community has consistently highlighted that uncertainty in the system deters many potential users. Small and mid-sized companies, in particular, express concern about unclear compliance requirements and the risk of unpredictable audits. Despite these concerns, the latest reforms bring the Czech R&D support system more in line with practices seen in countries like Germany, Finland, and Poland, where similar instruments have recently been expanded.
Looking ahead, the goal of the Confederation of Industry is to increase the number of companies benefiting from R&D tax deductions to 3,000 by 2029. This will require ongoing cooperation between policymakers, tax administrators, and the business sector to ensure that the system is transparent, consistent, and trusted.
For the Czech Republic, which seeks to strengthen its position as a modern and innovation-driven economy, this legislative step is a move in the right direction. The next phase will be crucial—ensuring the system works effectively in practice and builds long-term confidence among companies.
