Novelty in the Regulation on Attracting Direct Investments

In May and June 2023, amendments to the Regulation on Determining the Criteria for Granting the Incentives for Attracting Direct Investments entered into force (“Official Gazette of RS”, no. 39/2023 and 43/2023). Below are the more significant changes to the aforementioned Regulation.

One of the most significant novelties is reflected in the increase of the threshold for minimum investment in tangible and intangible assets (fixed assets). That threshold is now EUR 300,000 compared to EUR 100,000 under the old Regulation. It should be noted that this threshold refers to investment projects in the Region of Šumadija and Western Serbia, the Region of Southern and Eastern Serbia and the Region of Kosovo and Metohija, and that this threshold is higher for other regions. The amount of minimum investments will be discussed in more detail later.

The new Regulation abolished the division of local self-government units, which were classified into groups according to the level of development. Instead, a division into 3 regions is introduced:

• Belgrade region;
• Region of Vojvodina;
• Region of Šumadija and Western Serbia, Region of Southern and Eastern Serbia and Region of Kosovo and Metohija.

Also, the institute “Investment of special importance for the Republic of Serbia” is abolished. For investments of special importance, the old Regulation stipulated a period of ten years for the realization of the investment project. However, with the new Regulation, the ten-year term now refers to investments that are greater than EUR 5,000,000.

In addition to the already existing nine Criteria for expert analysis of investment projects, the new Regulation introduced additional three:

• the effect of investment on production capacities in the processing industry and the impact on the export structure of the processing industry and added value;
• the impact of the use of production equipment and technologies with minimal impact on the environment on sustainability and performance in the activity in question;
• the impact of investment in the activity in question or the introduction of technologies with a minimal impact on the environment on the attraction, training or retraining of the workforce.

The amount of approved funds is determined either on the basis of justified costs of investment in tangible or intangible assets (fixed assets), or on the basis of justified costs of gross wages for new jobs.

Also, the new Regulation defines the minimum amount of investment of funds in relation to the region where the investment project is implemented, as well as the amount of incentives:

• Belgrade region – an investment of at least EUR 500,000 and employment of at least 50 new employees for an indefinite period is required, on the basis of which funds can be allocated in the amount of up to 10% of justified investment costs in tangible and intangible assets (fixed assets), or allocate funds in the amount of 20% of the justified costs of the gross salary of new employees in the two-year period after reaching full employment for beneficiaries of incentive funds, and a maximum of EUR 2,000 per workplace;

• Region of Vojvodina – an investment of at least EUR 400,000 and employment of at least 40 new employees for an indefinite period is required, on the basis of which funds can be allocated in the amount of up to 15% of justified investment costs in tangible and intangible assets (fixed assets), or allocate funds in the amount of 25% of the justified costs of the gross salary of new employees in the two-year period after reaching full employment for beneficiaries of incentive funds, and a maximum of EUR 3,000 per workplace;

• Region of Šumadija and Western Serbia, Region of Southern and Eastern Serbia and Region of Kosovo and Metohija – an investment of at least EUR 300,000 and employment of at least 30 new employees for an indefinite period is required, on the basis of which funds of up to 30% of justified costs can be allocated. investments in tangible and intangible assets (fixed assets), or funds can be allocated in the amount of 30% of the justified costs of the gross salary of new employees in the two-year period after reaching full employment for beneficiaries of incentive funds, with a maximum of EUR 5,000 per workplace.

As an exception to the above rules, the user of the funds implementing the investment project may be granted higher amounts of grants than those mentioned above, for justified investment costs in tangible and intangible assets (fixed assets), up to the maximum amount of state aid, in accordance with the regulations which regulate the rules for granting state aid, if it meets the following conditions:

• improves the competitiveness of the Republic of Serbia by raising and technologically modernizing production capacities in the processing industry, which has a significant impact on the export structure of the processing industry and high added value;

• the investment project envisages the use of production equipment and technologies with minimal impact on the environment, or the investment project significantly improves sustainability and performance in the activity in question;

• contributes to the introduction of measures to attract, improve or retrain the workforce for the relevant activities or to use technology with minimal impact on the environment.

All listed conditions must be fulfilled cumulatively.

The right to increase the amount of grants does not apply to beneficiaries of funds who implement investment projects in the field of food and beverage production.

Another important novelty relates to incentives for so-called “Labor-intensive investment projects”. A labor-intensive investment project is an investment project that employs at least 100 new employees, within the time limit set for the implementation of that investment project. Depending on the number of new employees, the beneficiary of the funds is granted an increase in the amount of grants, namely:

• over 100 new employees – an increase of 10% of the amount of justified gross salary costs is approved for each increase in the number of new employees;

• over 200 new employees – an increase of 15% of the amount of justified gross salary costs is approved for each increase in the number of new employees;

• over 500 new employees – an increase of 20% of the amount of justified gross salary costs is approved for each increase in the number of new employees.

You can see more details about the original version of the Regulation, which was commented on by our colleague Nikolina Dubroja, at the following link – https://vp.rs/en/2022/03/16/guide-through-the-procedure-of-starting-business-in-in-the-republic-of-serbia/