Government introduces start-up law. It is intended to bring Czech capital to innovation and retain talents in the Czech Republic

The goal of the law is to increase the number of established and successful innovative companies in the Czech Republic. The legislation is to create a predictable status framework: to clearly determine which company is a start-up, introduce professional certification and pave the way for targeted incentives and relief without the blanket distribution of public money.

The proposal responds to the weaker availability of capital in the early stages of entrepreneurship, the outflow of ambitious founders and key activities abroad and the difficulty of transferring the results of Czech research into commercial practice.

Over the past decade, there have been 89 start-ups with external investment per million inhabitants in the Czech Republic. In Sweden, it is 316 and in Estonia, even 681. Venture capital investments in 2024 amounted to approximately 510 Czech crowns per capita in the Czech Republic, while in Sweden it was about 5,200 crowns.

"We have great, talented young people here, it happens very often that they have an idea, but because they don't have good conditions here, they prefer to start a company elsewhere. We said that we would change that, the Czech Republic must not export ideas, talents and future companies. The Start-up Act will set clear rules, bring in private capital and help innovation grow directly in the Czech Republic" said Prime Minister Andrej Babiš.

Clear definition and professional certification

The law does not create a new type of business company. It introduces the status of a certified start-up, which will be able to be linked to specific legal benefits. The proposal combines fixed conditions with a professional assessment of innovativeness and scalability.

The proposed conditions include in particular:

• the company must be no more than eight years old, up to ten years for selected deep-tech projects;
• annual net turnover of no more than 250 million Czech crowns;
• the company must not be a purpose-built or majority-owned part of an established company;
• the company must not be traded on a regulated market;
• the start-up must not distribute profits or other own resources to partners;
• professional assessment of the product or prototype, market validation, scalability, competitive advantages, team and previous traction.

"The definition of a start-up and high-quality certification are a prerequisite for everything else. We want a fast, professional and predictable process that will distinguish truly innovative and scalable companies from ordinary businesses. Certification is to be provided by the emerging CzechBusiness, and the Ministry of Industry and Trade will have an appealing and supervisory role. The law is part of a broader package for better access to capital, talent and state services," said First Deputy Prime Minister and Minister of Industry and Trade Karel Havlíček.

Private capital instead of subsidy dependence

The main incentive is to support investments by individuals, so-called business angels, in certified start-ups at an early stage.

The current plan is that an investor will be able to deduct a monetary investment from the tax base, up to a maximum of five million Czech crowns per year, under certain conditions. The structure limits non-monetary contributions and leaves the investment decision and business risk to the private investor. The proposal also works with a longer use of tax losses for start-ups themselves. This is to better suit companies that finance product development, market verification and initial expansion for several years before achieving stable revenues. The specific parameters will be confirmed as part of the legislative process.

"We want to motivate Czech capital to invest more domestically in companies with a high growth potential. This is not a blanket relief. The investment will be monetary, will be directed to a certified start-up and will have a clear annual limit. The goal is to get more private money into the phase, in which good Czech projects most often encounter a lack of financing" specified Minister of Finance Alena Schillerová.

Part of a broader change for innovative companies

The Start-up Act follows on from the regular start-up tripartite of the government, the Czech Start-up Association, founders and investors. In addition to the act, the government is preparing other measures, in particular expanding the usability of employee shares, more flexible conditions for cooperation with experts, support for technology transfer and the development of services for start-ups at the CzechBusiness agency.

"We did not prepare the Start-up Act from scratch. It is based on the specific experiences of founders, investors and other people who build the Czech start-up ecosystem every day. The definition of a start-up itself may seem like a formality, but in reality, it is the key to everything else. It will allow the state to precisely target support, remove specific barriers and gradually create an environment, in which innovative companies can be established, survive the first challenging years and subsequently grow from the Czech Republic to foreign markets" added Martin Jiránek, the MIT´s plenipotentiary for start-ups.

"Successful states are built on successful start-ups. I am glad that we are finally promoting their systematic support with the government. Upgrading the start-up environment not only makes economic sense, start-ups are the most courageous Czech companies and their support and development directly contributes to strengthening the Czech national self-confidence. I am happy that thanks to our cooperation with the government, they are finally becoming a legitimate priority" concluded Jiří Vicherek, Chairman of the Czech Start-up Association.

The paragraphed text will go through the standard legislative process. The government plans to submit the proposal to the Chamber of Deputies so that the law can enter into force on July 1, 2027.