Investment legislation of Serbia

If you are looking for a good place to do business, Serbia is a very promising country for this purpose. With low operating costs and a strategic location in the Balkans, it is an ideal location for both entrepreneurs and investors.

Good Internet coverage, low operating costs, skilled labor and many other advantages are encouraging foreign companies and an increasing number of foreign citizens to start their business in Serbia.

The Investment Law of 2015 defines Serbia's investment incentive program. Incentives are available to both domestic and foreign investors. The Law established the Economic Development Council and the Serbian Development Agency (RAS).

The level of available subsidies for investment projects is determined by the Resolution on determining the conditions for approving incentives for attracting direct investment, approved in January 2019. Investors are required to provide 25% of eligible costs from their own funds. For investment projects worth 50-100 million euros, subsidies are limited to 25% of the total investment, and for projects worth more than 100 million euros they are reduced to 17%. Under certain conditions, large companies can receive support up to 50% of eligible costs for investment projects, medium-sized companies — up to 60%, and small companies — up to 70%.

The Decree provides funds for the implementation of investment projects in the field of production and customer service centers. For investment in production, government subsidies are available to any company that invests an amount equivalent to €100,000. For investment in service centres, subsidies are available for companies investing an amount equivalent to €150,000 and creating at least 15 new jobs anywhere in the country. The required minimum investment and employment level to receive subsidies increase on a sliding scale depending on the level of development of the investment location. For each project in a devastated area, the state will pay the investor 40% of the relevant gross wage costs of newly employed people over a two-year period after the employment obligations have been fulfilled, up to an amount equivalent to €7,000 per new job; the subsidy is reduced to 20% of eligible costs up to €3,000 per job in the most developed regions. For labour-intensive projects that create more than 200 new jobs, the government may approve additional incentives. The government will also provide subsidies for the purchase of fixed assets, again on a sliding scale depending on the level of development of the investment location. The subsidy reaches 30% of the eligible value of assets in the destroyed zone and decreases to 10% in the most developed areas of Serbia. The total amount of subsidies provided cannot exceed the amount allowed by Serbia's EU-compliant state aid rules. The government can sell land for construction at a price below market value in support of an investment project of national importance.

There is a separate Decree “On determining the conditions for approving incentives for attracting direct investment in food production,” also approved in January 2019 with almost identical conditions to those indicated above. The only difference is that government subsidies are available to any company that invests an amount equivalent to a minimum of 2 million euros and hires at least 30 new employees, regardless of the level of development of the municipality. For projects investing more than 20 million euros in fixed assets, the government will approve additional incentives.

The government also approved the Decree “On the conditions and methods of attracting direct investment in the hotel accommodation services sector”, according to which similar government subsidies are available to any company that invests a minimum of 2 million euros in equivalent and hires at least 30 new employees in this sector. For investment projects worth up to 30 million euros, subsidies are limited to 20% of eligible fixed investment costs, and for projects worth more than 30 million euros they are reduced to 10%.

In May 2021, the government approved the resolution “On determining the conditions for approving incentives for attracting direct investment in the automation of existing food industry capacities.” The decree aims to improve the productivity of beneficiaries, increase the number of domestic subcontractors and increase the use of domestically sourced raw materials. This measure imposes almost the same conditions as the decree for the hotel sector, with the difference that government subsidies are available for investment projects in the field of automation of the food industry equivalent to a minimum of 1 million euros.

Expanding the focus on automation, in February 2022 the government adopted a Resolution “On determining the conditions for approving incentives for attracting direct investment in the automation of existing facilities and innovations focused on industries with high added value.” As part of this measure, funds of at least 5 million euros can be allocated for the implementation of investment projects for automation and/or innovation. The Decree lists industries with high added value:

• chemicals and chemical products;
• main pharmaceutical products and drugs;
• electrical equipment;
• computers, electronics and optical products;
• cars, trailers and semi-trailers;
• production of other vehicles; and
• rubber and plastic products.

In addition to the 25% of eligible investment costs for automation investments, the beneficiary is entitled to an additional 5% of eligible investment costs for automation investments if the project forms a supply chain, and an additional 5% of eligible costs for automation investments. investments in tangible and intangible assets.

Ordinances on attracting direct investment also establish criteria for providing local incentives for investments important for local development.

At the provincial level, the government of the Vojvodina region offers investment incentives similar to those described above. The main difference is that the program is implemented by the Vojvodina Development Agency, which was created in February 2017 as the successor to the Vojvodina Investment Promotion Agency (VIP). Local municipalities may sell development land at below market prices for investments that promote local economic development. Other important incentives at the local level include exemptions or deductions for land taxes and other local fees.

Serbian tax legislation offers a number of incentives for new investors. The corporate income tax rate is 15% and is one of the lowest in the region. Non-resident investors are taxed only on income received in Serbia. A ten-year tax holiday on corporate profits is available to investors who employ more than 100 workers and invest more than 1 billion dinars (US$10 million). Tax holidays begin as soon as the company begins to make a profit.

According to the January 2023 Cinema Incentives Decree, both domestic and foreign filmmakers are eligible to apply for reimbursement of 25% of qualifying expenses. For film projects costing more than €5 million, the government offers reimbursement of up to 30% of eligible costs. The film incentive budget for 2023 is $17.5 million.

Employment incentives allow persons registered with the National Employment Service to receive tax deductions from their salaries for at least six months continuously. Current benefits are valid from the date of employment until December 31, 2023:

• 1-9 new jobs: 65% deduction
• 10-99 new jobs: 70% deduction
• 100+ new jobs: 75% deduction

The Serbian Innovation Fund provides a variety of grant opportunities for young entrepreneurs and start-ups, including mini-grants for the development of technological innovations, matching grants for the commercialization of research and development, and a co-grant scheme for joint R&D projects to create new products and services . These grants are mainly available to companies established in Serbia and majority owned by Serbs.

Some subsidized loans for start-ups, entrepreneurs and small and medium-sized businesses are available through the state Development Fund and various ministries, and some are issued through the Serbian Development Agency. These loans are available to companies with foreign participation registered in Serbia, provided that the company registered in the country has not suffered losses in the previous two years.

The government guarantees or co-finances foreign direct commercial investment projects, and also participates as a minority partner in financed infrastructure projects.