The Government of the Republic of Serbia adopted a new Regulation on the Terms and Conditions of Attracting Direct Investments, in place of the previous Regulation which was in force since March 2016. The new Regulation is expected to secure continuity of economic growth, to obtain new capacities and technology, and to induce job creation. Furthermore, it introduces stricter controls regarding fulfillment of contractual obligations, and especially promotes investments in “devastated areas”.
The Regulation defines direct investments as investments in material and non-material assets of a company, which are directed at initiating a new business activity or expanding existing capacities and scope of production to include new products, which leads to job creation. Domestic and foreign investors alike are eligible to apply for subsidies based on this Regulation in order to support their investment projects.
However, under this scheme, investment projects in certain sectors are not eligible to receive funding. These relate to projects in the traffic sector, hospitality, software, games of chance, trade, synthetic fiber production, production of coal and steel, tobacco and tobacco products, weapon and munition, shipbuilding, airports, utility sector, energy sector, and broadband networks. Subsidies also cannot be directed at funding undertakings in difficulties.
The minimum conditions for a company to qualify for funding have been lowered when compared to the previous Regulation. Under this scheme, it is required that an investor invests at least EUR 100.000 and hires at least ten new employees in order to benefit from subsidies based on this Regulation. For every newly opened workplace, the state will finance the investor with an amount ranging from EUR 3.000 to EUR 7.000, depending on how developed is the region in which the funds are invested. The right to participate in the process of obtaining subsidies is reserved for investors who obtain at least 25% of funds from their own resources and other resources which do not constitute state aid.
Other conditions that investors must fulfill in order to obtain subsidies under this regulation are that they have a registered business entity with the Serbian Business Register Agency, and that they have submitted a business plan for the investment project. It is also required that their company is not subject to bankruptcy or liquidation proceedings, that the legal representative of the company has not been charged with a criminal offence related to their professional duties, and that the company has no outstanding tax obligations. Furthermore, it is necessary that in the past year the company has not reduced the number of its employees for more than 10 percent, and that the company has not previously benefited from subsidies granted from the state budget of the Republic of Serbia for the same purpose.
The amount of the subsidies will vary depending on the level of development of the municipality (according to the criteria laid out in the Regulation) in which the investment is made. The maximum amount of funding, EUR 7.000 per one newly created work place, will be awarded to investors who invest in the so called “devastated areas”.