Financial incentives provided by republic of Serbia
LAW OFFICE CVJETICANIN&PARTNERS
In addition to existing benefits such as its strategic geographic location, duty-free exports to the countries of Southeast Europe and Russia, one of the lowest corporate tax rate in Europe of 15% and an educated and experienced workforce available at a competitive cost, Serbia offers financial support to investors.
The funds may be granted for financing investment projects in the manufacturing sector and the services sector which may be subject to international trade. Investment projects in the sector of primary agricultural production, fishing and aquaculture, transportation, hospitality, lotteries, trade, the production of synthetic fibers, coal and steel, tobacco and tobacco products, weapons and ammunition, shipbuilding (construction of naval vessels on its own drive – at least 100 gross registered tons), airport, sector of energetics, broadband networks and companies in difficulties are not eligible to receive funding.
The following investors, i.e. Beneficiaries, are excluded from the right to be awarded funds:
- Companies in difficulties;
- Those with outstanding obligations towards the Republic of Serbia;
- Those that significantly reduced the number of employees in the last 12 months preceding the application submittal;
- Those that are partly owned by the Republic of Serbia, autonomous province or local government.
The level of funds which may be awarded are determined in accordance with the criteria set forth by this Decree in relation to the eligible investment costs.
Conditions for awarding funds
Funding may be awarded only on the following conditions:
- The investment is maintained on the same territory for at least five years after the project’s implementation, or at least three years for small- and medium-sized companies;
- The accrued number of employees of the Beneficiary does not decrease after the investment project’s realization for a period of three years in the case of small- and medium-sized companies, and five years in the case of large companies.
After achieving full employment in accordance with the provisions of the Agreement on awarding of funds, the Beneficiary is required to regularly pay salaries to each employee in accordance with the regulations governing labor relations, which is at least 20% (twenty percent) higher than the minimum wage in the Republic of Serbia as regulated for the month in which the salary is paid.
Method and procedure for awarding funds
Funds are awarded through a procedure which is carried out in accordance with a public announcement and this Regulation.
The public announcement shall be prepared and published on its web site by the Ministry of Economy. The public announcement will also be published on the SIEPA web site.
Application for participation in the procedure of awarding funds shall be submitted to SIEPA by the deadline stated in the public announcement. The application has to be submitted in the Serbian language.
Investment projects are evaluated based on the following criteria:
- Investor references (market recognition, customer references, previous experiences and success in implementation of investment projects and the like),
- The percentage of unemployed persons whose qualifications match investors’ activities, ie. beneficiaries of funds in the total number of persons registered with the National Employment Service in the territory of the local governments where investment project is implemented;
- The number i.e. percentage of highly qualified workers which are employed due to realization of the investment project;
- The amount and type of investment (Greenfield or Brownfield, purchase of new or used equipment, etc.)
- Technological level of activity which is the subject of investment and which is in accordance with Eurostat classification;
- Previous collaboration with suppliers and projected contribution of domestic suppliers;
- Effects of the investment on employees (training of employees and average salary levels);
- Previous and planned volume of international and overall turnover;
- Impact of the investment project on the increase in competitiveness and entrance onto new markets;
- Financial-market evaluation of the investment project (funding sources, liquidity, profitability, etc.);
- Sustainability of investment projects in all business parameters, including credible analysis of market placements and procurement.
Disbursement of awarded funds is carried out by satisfying the conditions for disbursement defined by the Agreement on granted of funds and based on the request for disbursement submitted to the Ministry of Economy by the Beneficiary in accordance with the Agreement on granted funds. Dynamics of disbursement is carried out in three installments, relatively, in accordance with available resources, according to one of the following models:
- in relation to the amount of investment in each year of the investment project implementation, in an amount that is proportional to the percentage of the investment in fixed assets as defined by the investment project, or
- in relation to the number of employees in each year of the investment project implementation, in an amount that is proportional to the percentage of newly employed workers defined in the investment project.
The mutual rights and obligations pertaining to the awarding of funds are governed by the Agreement concluded between the Ministry and the Beneficiary. The Ministry may terminate the Agreement at any phase of execution if it determines that the Beneficiary does not satisfy the conditions stipulated in the Agreement regarding the dynamics of the investment’s implementation. In the case where the contractual obligations are not fulfilled, the Ministry is entitled to collect the same amount of the disbursed funds as well as the legally prescribed default interest on the basis of a bank guarantee and blank promissory notes.