THE LATEST DIRECT INVESTMENT INCETIVES REGULATION IN SERBIA - Confluence advisory
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THE LATEST DIRECT INVESTMENT INCETIVES REGULATION IN SERBIA

//THE LATEST DIRECT INVESTMENT INCETIVES REGULATION IN SERBIA

The Government of the RoS adopted amendments to the Regulation on determining the criteria for awarding incentives to attract direct investments, entered into force (“Official Gazette of the RS”, no. 39/2023 and 43/2023, hereinafter: the Regulation), which modified conditions for the allocation of incentive funds as follows:

In this version of the Regulation, as a basis for the allocation of incentive funds, new division of local self-government units by region is introduced, as follows:

  1. Belgrade region (Capital city with its surroundings);
  2. Vojvodina region (North Serbia and up north of Belgrade);
  3. Šumadija and Western Serbia region, Southern and Eastern Serbia region, and Kosovo and Metohija region (other).

Perhaps the most significant novelty is that the regulation now pays special attention to the introduction of technologies and investment projects with minimal impact on the environment, for which the largest incentive funds can be awarded.

Eligible investment projects:

  1. Greenfield and Brownfield;
  2. Manufacturing sector, investment into material and non-material assets;
  3. 3. New employees + investment (cumulative).

Minimum requirements per region:

  1. Belgrade region: min. 50 new employees + min. EUR 500,000 of investment;
  2. Vojvodina region: min. 40 new employees + min. EUR 400,000 of investment;
  3. Šumadija and Western Serbia region, Southern and Eastern Serbia region, and Kosovo and Metohija region: min. 30 new employees and min. EUR 300,000 of investment.

Type and level of incentives:

  1. Basic calculation (calculated on total gross 2 salary amount in the 2-year period after reaching committed employment)1:
    • Belgrade region: 20% of total gross 2 salary amount, max. EUR 2,000/new employee2 ;
    • Vojvodina region: 25% of total gross 2 salary amount, max. EUR 3,000/new employee;
    • Šumadija and Western Serbia region, Southern and Eastern Serbia region, and Kosovo and Metohija region: 30% of total gross 2 salary amount, max. EUR 5,000/new employee.
  1. 2. Additional/optional increase of incentives (possible increase 1, based on eligible investment costs3):
    • Belgrade region: up to 10%;
    • Vojvodina region: up to 15%;
    • Šumadija and Western Serbia region, Southern and Eastern Serbia region, and Kosovo and Metohija region: up to 30%.
  1. Additional/optional increase of incentives (possible increase 2, based on labour intensive projects4):
    • 101-200: up to 10%5;
    • 201-500: up to 15%;
    • 500+: up to 20%.

Deadline for realization:

  • 3 years, from the submission of formal Application for incentives and
  • up to 10 years from the submission of formal Application for incentives for projects exceeding EUR 5 million of investments into fixed assets.

Monitoring/direct investment and employment maintenance:

  • 5 years after project completion for large enterprises and
  • 3 years after project completion for small and medium-sized enterprises (company size according to state aid regulations);
  • Constant monitoring during the realization supported by Local Independent Auditor.

Other important points:

  1. Good financial standing of the investor and/or the Beneficiary of funds (subject of extensive analysis by Development agency of Serbia);
  2. Viable Business plan for investment project (according to required methodology, and pre-approved by Development Agency of Serbia);
  3. Apostille certificate or full legalization of supporting documents, depending in Investor/Group/Division formal residence6;
  4. Bank guarantee by local good standing bank (subject to prior approval by Ministry of economy), for reimbursed incentives.

1 Obligation of “agreed salary”, as per model = basic salary = min.wage in RoS according to employment regulation + at least 20%. Other salary elements according to regulations.

2 Corrective criteria; this amount can be increased by application of other criteria in Regulation, see below in text;

3 On top of amounts from Basic calculation and based on eligible investment costs (up to 10-15-30% of eligible investment costs);

4 Labour intensive projects are projects with more than 100 new employees.

5 On top of amounts in Basic calculation and based on eligible costs of 2-years total gross 2 salaries (up to 10-15-20% of total gross salaries for stated thresholds).

6 Unless there is a bilateral treaty on mutual acceptance of documents issued by public authorities concluded between RoS and the relevant country