Ivana Ružičić

Managing Partner

Danica Nikitović

Junior Associate

During May 2023, the Government of the Republic of Serbia adopted two regulations on amendments to the Regulation on Determining the Criteria for Awarding Incentives to Draw Direct Investments (Off. Gazette of RS no. 39/2023 and 43/2023) (“the Regulation”), which entered into force on May 20, i.e., June 3, 2023.

The most significant novelties refer to:

• raising the thresholds for necessary minimum investments;
• reduction of the maximum amount of incentives per workplace; as well as
• abolishing the division of local self-government units according to the level of their development, and introducing a division into five regions (Belgrade Region, Vojvodina Region, Šumadija and Western Serbia Region, Southern and Eastern Serbia Region and Kosovo and Metohija Region).

Necessary minimum investments and maximum incentive amounts by region

According to the Regulation, funds can be allocated for:

• investment projects in Belgrade Region, in which at least 500,000 euros are invested and in which at least 50 employees are employed, in the amount of 20% of gross salaries, and in the maximum amount of 2,000 euros per new workplace;
• investment projects in local self-government units that belong to Vojvodina Region, where at least 400,000 euros are invested and at least 40 employees are employed, in the amount of 25% of gross salaries, and in the maximum amount of 3,000 euros per new workplace; and for
• investment projects in local self-government units in the Region of Šumadija and Western Serbia, Southern and Eastern Serbia Region and Kosovo and Metohija Region, where at least 300,000 euros are invested and at least 30 employees are employed, in the amount of 30% of gross salaries, and in the maximum amount of 5,000 euros per new workplace.

Relation with state aid

The amount and intensity of incentive funds calculated and approved in accordance with the Regulation cannot deviate from the maximum amount and intensity calculated under the conditions established by the regulations governing the conditions and criteria for compliance with regional state aid.

Additionally, when determining the amount of funds that can be allocated, cumulation with previously approved state aid is taken into account, in accordance with the regulations governing the control of state aid.

Other novelties

The Regulation now also stipulates that the justified investment costs of a large business entity in the market for the purpose of a significant change in the production process must be higher than the depreciation costs in the previous three fiscal years for assets that are connected to the activity being modernized, as well as that the justified investment costs in order to diversify the production program must be at least 200% higher than the book value of the assets that are reused, which are registered in the fiscal year before the commencement of works.

When it comes to the sources and purpose of funds for drawing direct investments, the Regulation stipulates that funds cannot be allocated for the implementation of investment projects in the sectors of transport, hospitality, games of chance, trade, production of synthetic fibers, coal and steel, mining, tobacco and tobacco products, weapons and ammunition, shipbuilding of self-propelled maritime commercial vessels over 100 gross registered tons, airports, utilities, the energy sector, broadband networks, fisheries and aquaculture and for the development of software, unless they are in the function of product improvement, production process or provision of service center services.

The regulation also includes an amended list of documents to be submitted with the application for awarding funds and stipulates that for investments over 5 million euros the deadline for the implementation of the investment project is up to 10 years from the date of submission of the application for allocation of funds.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

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