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Czechs say yes to EU accession

( 16 / June / 2003 )

The Czech Republic will become a full member of the European Union on May 1, 2004 and will be part of the single internal EU market with the obligation to maintain its rules, including protection, antidumping and anti-subvention measures. Legislative and decision-making powers will be carried over to the EU and the ČR will enter into international treaties concluded by the European Union. In addition, a unified customs tariff will start being used.

“The positive outcome of the referendum on the Czech Republic’s accession to the European Union is a very positive signal for foreign investors – both for those who have already been doing business here and were counting on EU accession back when they were deciding on the location of their investment, and for companies considering investing. The Czech Republic will be able to offer them a quality and still cost-effective investment climate within the Union without customs and other previous barriers. We expect that our entry into the EU will thus contribute significantly to maintaining a stable influx of foreign direct investment to the Czech Republic,” commented Martin Jahn, chief executive officer at CzechInvest.

The results of the referendum also confirmed the findings of the CAPE survey organized by EUROCHAMBERS now for the third year, which monitors the level of preparedness of companies in candidate countries for entering the single market. This year’s survey, in which 3,871 companies from all ten states took part, found for example that:

• 91% of Czech businessmen support the ČR’s accession to the EU
• Czech companies are generally very optimistic in terms of their own prosperity in the single market:
  • a majority (63%) of respondents are optimistic to very optimistic (the average of all candidate counties is 60%)
  • the number of “Euro pessimists” in the ČR is among the lowest – only 8%
  • only one tenth of respondents expect serious complications in finance, trade and human resources. The majority, however, expect only minimal complications
  • 29% of Czech companies surveyed assume that they are able to adapt to the single market without changing company strategy. 48% expect to use only their own resources (compared to 41% last year), and only 10% will search for a strategic partner.
• Czech companies estimate their preparedness at 2.3 out of a possible 4 points, which represents the 2nd best place out of the ten candidate countries, 19% of companies have begun successful implementation of EU regulations and only 24% of those surveyed declared that they have not yet begun to prepare
• Most frequently there will harmonization of regulations in the area of product certification, technical measures and standards
• 21% of Czech companies are aware of how much it will cost to fully assimilate, 64% of these put this value below 0.5 million Euro and 20% are convinced that the cost will climb to 1.5 million Euro
• Czech businessmen seem to be (compared to other candidate countries) relatively well informed on EU law - 14% of those surveyed are in their opinion fully informed, 63% are partially informed

Planned changes in VAT after EU accession

VAT was already modified in the legislation by the national regulations of member countries in accordance with EU guidelines. After the CR’s accession to the EU however there will be changes, for example, in classification of certain services from the lower rate (5%) to the basic rate (22%), in lowering the threshold for mandatory VAT registration and in introducing the so-called intracommunity transactions among member states.

Visas and work permits

On the day the Czech Republic joins the EU there will be a fundamental simplification in the area of granting work permits and visas for citizens of states of the European Union (with the exception of those states against whom reciprocity provisions could be applied restricting free movement of persons resulting from the transition period). In this area, citizens of EU member states will be treated the same as Czech citizens. Work permits will be replaced by the obligation just to inform. We expect that this will certainly be praised by investors from the EU whose employees often work in company branch offices all over Europe and who will not have to repeatedly apply for work permits and visas. For citizens outside the European Union we expect conditions similar to the current ones.

Investment incentives scheme in the CR in relation to EU accession

The CR has always proceeded in compliance with European state aid rules when granting investment incentives, and so the Czech Republic can provide legal certainty towards the investment incentives already granted both before and after EU accession. In addition, the investment incentives provided in the Czech Republic based on the Investment Incentives Act (tax incentive, job-creation grants, employee retraining grants, purchase of land at a symbolic price) will be able to be provided after the Czech Republic joins the European Union as well.

A so-called Euro-amendment to the Investment Incentives Act is currently being prepared which reacts to the fact that after EU accession the authority to evaluate state aid will be transferred from the Czech Antimonopoly Office directly to the European Commission. The Euro-amendment to the Investment Incentives Act, whose effective date is proposed as the date of the ČR’s accession to the EU, once it is passed by the Czech Parliament will be submitted for approval to the European Commission, and thereafter the Investment Incentives Act will be able to be considered a national program of regional aid of an EU member state. Whereas the Czech Antimonopoly Office already at the present time proceeds in compliance with European state aid rules, the Euro-amendment to the Investment Incentives Act will not lead to material changes but only technical ones relating to the approval mechanism of granting investment incentives.

The same will hold true for investment incentives granted to projects in the area of strategic services and technology centers based on the program to support the creation and expansion of centers of strategic services and technology centers. Upon approval by the Czech government this program will also be submitted to the European Commission and after Czech accession to the EU will serve as a national program of state aid of an EU member state.

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