Linet going ‘Dutch’ due to Czech solar dispute

Hospital bed maker Linet founder Zbyněk Frolík says Czech political meddling in the solar sector is prompting the change in tax address

Companies
Eva Jarešová | 08.04.2011
Zbyněk Frolík says there are no legal guarantees in the Czech Republic, so he’s relocating his firm to a tax haven

Prominent Czech businessman Zbyněk Frolík plans to relocate the Linet hospital bed maker to the Netherlands. As the company’s founder and CEO, he has put Linet through structural changes and is taking other foreign companies under his wing. This will result in it becoming a Dutch holding early this summer, albeit with Czech and German owners.

The reasons that the local Želevčice-based company — which arose more than 20 years ago to become one of the world’s largest manufacturers of hospital beds — is changing its tax address are varied. One of them involves the current goings on in the photovoltaic business. “I just don’t feel good when the parliamentary elite sets the rules to their benefit and then goes and changes them as they want,” said Frolík, who was named Businessman of the Year in 2003.

Solar “envoys”

A couple of years before the solar boom, Linet was considering building a photovoltaic power plant on the roofs of its factories near Slaný, Central Bohemia, so that it could be self-sufficient in energy. As soon as this idea was unofficially taken up in the business and banking circles, “envoys” willing to help with the investment soon appeared. Frolík said that their argument was that a number of politicians in Parliament had themselves invested considerable sums into this sector by means of anonymous shares. Thus, it would be a safe and lucrative investment. ‘I had the feeling that there was something fishy about it, and that it will all end in tears.’

“That is why, in the end, we decided to hold back from it all. ... I had the feeling that there was something fishy about it, and that it will all end in tears,” Frolík said, adding that at the time the Germans regulated solar energy prices so that the returns on the investment were sensible. In the meanwhile, a number of investors in the Czech Republic rushed into photovoltaics.

“Whether they were virtuous or not is not important from this aspect. The situation stopped being sustainable, so the politicians began thinking about how to improve their public image,” Frolík said. “That’s when they came up with the additional solar tax. It was then that I realized that there was no legal security in the Czech Republic and it definitely convinced me to move abroad.”

In his opinion, foreign investors have a far better initial position than domestic ones. But there is one thing Frolík says he doesn’t understand: why the public is not interested in which parliamentarians actually invested into the photovoltaic business. “These people must have known how [little] sun there is in the Czech Republic and that solar energy will always be on the margins of the energy mix. And it must have been clear how the situation that they had helped create would end,” Frolík said. ‘It must have been clear how the situation that they had helped create would end.’

The government and Parliament had set up generous grants for investors into solar energy based on European legislation. After huge numbers of large and small investors entered the sector, the politicians amended the Act on Support for Renewable Resources, introducing a 26 percent tax on revenues from solar energy for owners of solar power plants of 30 kilowatts or larger that went into production in 2010 or 2009 and took advantage of government incentives.

This “solar tax” (technically a “levy”) is limited to three years and, according to the politicians, merely brings the rules back to their original proportions. Its proponents argue that thanks to the fall in the price of solar panels the return on the investment fell to less than the 15 years that had been originally assumed.

All previous articles on the solar arbitration issue are achived here 

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