New Decree on Attracting Investments

On 8 March 2018 the Government of Republic of Serbia has adopted the new Decree on Conditions and Manner of Attracting Direct Investments (the “Decree”), with the aim of stimulating development of economy, in particular investments in spa tourism.

Depending on the volume of investments, total amount of newly opened work places, as well as the location where the investment is made, investors may achieve a significant incentive from Republic of Serbia.

The right of assignment of incentives, as well as the amount of funds which may be awarded depends on several criteria:

  1. Whether the applicant company is considered as small-sized, medium-sized or large-sized company;
  2. Economic development of the area in which the investment is made (whereby the greatest incentives may be expected for the investments in the areas qualified as so-called devastated areas);
  3. Total amount of newly opened work places;

One of the most important novelties of this Decree is the possibility to award funds for investment projects, in sector of hotel accommodation services in spa areas, which minimal value is EUR 2,000,000, and which are providing at least 70 new work places on indefinite period of time related to the investment project.

Depending on the value of investment, state incentives may amount up to 50% of the justified costs for realization of investment project for large-sized companies, and up to 70% of the justified costs for realization of investment project for small-sized companies. Incentives may be realized in the following manners:

  1. Incentives for the justified costs of gross salaries for newly opened work places – in the amount up to EUR 7,000 for each new work place;
  2. Incentives for the justified costs of investment in fixed assets – in the amount up to 30% of the justified costs of investment in fixed assets for the investments in spa areas;
  3. Incentives for labour-intensive projects, which provide at least 200 new work places – in the amount up to 20% of the justified costs of gross salaries.

According to the Decree, large-sized company is defined as a company having over 250 employees and total annual balance sheet over EUR 43 million. Medium-sized company is defined as a company having 50 to 250 employees and total annual turnover which does not exceed the amount of EUR 50 million and total annual balance sheet which does not exceed the amount of EUR 43 million. Small-sized company is defined as a company which has less then 50 employees and annual turnover or total annual balance sheet which does not exceed the amount of EUR 10 million.

Justified costs prescribed by the Decree are:

  • Investments in tangible and intangible assets as of the date of applying for state grants until the deadline for implementation of the investment project in accordance with the state grant contract (justified investment costs) or
  • Gross salaries for new employees associated with the investment project during two-years period after reaching full employment at the user of grants (justified costs for gross salaries).

The Decree provides several conditions and limitations for awarding of incentives to investors, such as maintaining direct investment at the particular location – for up to 5 years. Likewise, investors are obliged not to reduce the number of newly engaged employees over a period of up to 5 years.

All potential investors who want to use state grants are required to provide a minimum of 25% of justified costs from their own resources or from other sources which do not contain state grants.

Awarding of incentives related to realization of investments projects in service sector of hotel accommodation in spa areas shall be conducted in accordance with the public call, published on the web site of the Ministry of Economy.

Deadline for implementation of investment projects and the creation of new work places is up to three years from the date of applying for state grants. Exceptionally, after the state grant contract has been concluded, this deadline may be extended for up to 5 years, following a written explanation from the beneficiaries.

Beneficiary is obliged to provide a bank guarantee, as security for eventual return of received funds, for the total amount on the awarded funds with period of validity up to 5 years and 6 months for large-sized companies.

In case of non-fulfilment of the conditions provided for in the state grant contract, the Ministry of Economy is entitled to terminate respective contract in every stage of its realization, if the Council for Economic Development has issued a decision on termination of contract. Nonetheless, if there are justified reasons, the Ministry of Economy is authorised to terminate the state grant contract even before the session of the Council for Economic Development.

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