Furthermore, it should be noted that the Letter of Intent and the information of the Development Agency of Serbia on a possible level of incentive is now an optional step (unlike earlier), and the application for the allocation of funds can be submitted immediately without previously sending the Letter of Intent. (Article 18). However, it is recommendable to undertake the steps entailed in the submission of the Letter of Intent, unless reasons for urgency justify submission of the application without delay (given that the investments are counted as eligible after the filing of the application).
The collection of required documentation for the application has been made easier, as the certificate of non-conviction (for legal entities and responsible persons at the investor and beneficiary of funds) has been replaced with a statement to that effect. This is a significant relief since obtaining adequate certificates abroad was associated with serious difficulties.
There have been no changes to the rule that the funds are paid to the investor in installments in percentages: (i) in proportion to the amount of investment in fixed assets in each year of the investment project implementation, or (ii) in the amount that is proportional to the number of newly employed in each year of the investment project implementation (Art.23) IV. Which investments cannot be stimulated?
The Regulation does not apply to the investments in the following fields: transport, software development (unless in the function of product improvement, production process or centers for the provision of service), hospitality industry, gambling, trade, production of synthetic fibers coal and steel, tobacco and tobacco products, weapons and ammunition, shipbuilding of self-propelled marine merchant vessels over 100 gross registered tons, airports, utilities sector, energy sector, broadband networks, as well as fisheries and aquaculture. (Art.4) V. Collaterals to be provided
The Regulation stipulates the collaterals to be provided with each Request for Payment of each installment. In addition to a certified auditor’s report on fulfillment of conditions for payment of an installment, the funds beneficiary also encloses a bank guarantee for repayment of the paid installment, along with two registered and signed blank solo promissory notes with a signed letter of authorization for collecting the statutory default interest. The promissory notes may be replaced by a bank guarantee covering the amount of total awarded incentive funds. VI. Control of existing contracts under provisions of new Regulation?
It is worth noting that the new Regulation for year 2019 governs the control of performance of contractual obligations under the concluded contracts on awarding incentive funds, as well as the decision-making based on the performed control. VII. Abolished rules from previous Regulation
The investment projects and criteria for the analysis of investment projects are no longer divided according to the number of new jobs to be created, whether there will be up to, or more than, 100 new employees.
Furthermore, funds can no longer be awarded for hotel accommodation services projects in the territory of a local self-government with a spa or climatic area, nor for investment projects in the agricultural sector.
The earlier prohibition on awarding funds to the sector of logistic centers no longer applies, thus relevant projects are now eligible for the funds granting procedure.
The notion of “investment of special importance for the Republic of Serbia” has been retained as previously defined.
The term "period of guaranteed investment and employment" has been deleted from the Regulation, which we assume to be a technical omission, (or the term will have to be defined in the future draft contract on granting incentive funds), because the Regulation refers to the term in the articles governing the reporting on implementation of the investment project as well as the control and monitoring of the contractual obligations (Article 25, 26 of the Regulation) VIII. Coming into force of the new Regulation
Regulation on Determining the Criteria for Giving Incentives for Attracting Direct Investments ("Official Gazette of the Republic of Serbia", No. 1/2019) came into force on 19 January 2019, following in the footsteps of regulations previously designated as "Regulation on Terms and Conditions for Attracting Direct Investments".
Please contact our team if you have any questions regarding incentives for specific investment projects. Author: Marko Janicijevic, Attorney-at-Law, TSG Tomic Sindjelic Groza Law Office