Over the past few years, various media outlets have highlighted investments and foreign projects aimed at advancing the economy of the Republic of Serbia. Central to these efforts is the Law on Investments (“Official Gazette of RS”, no. 89/2015 and 95/2018), which replaced the previous Law on Foreign Investments, broadening its scope to encompass both domestic and foreign investors.
The primary objectives of this legislative framework are to enhance Serbia’s investment environment, stimulate direct investments, and foster economic development alongside employment growth.
Recent updates in May and June 2023 introduced amendments to the Regulation governing the criteria for awarding incentives to attract direct investments (“Official Gazette of RS”, no. 39/2023 and 43/2023).
Under these laws and regulations, state aid is pivotal for investors, providing financial incentives and support during the investment process. Such aid is typically granted for justified expenses, including:
- Incentive allocations
- Tax incentives and exemptions
- Customs benefits
- Mandatory social security contributions
- Leasing and use of publicly-owned real estate and land
- Other forms specified under relevant laws controlling state aid allocation
Investors can access these incentives by undertaking direct investments, which involve activities such as launching new ventures, expanding existing operations, acquiring assets linked to defunct businesses, and creating new jobs.
In contrast, indirect investments involve acquiring shares or stakes in companies.
A public register tracks direct investments in Serbia and the corresponding state aid granted.
Eligibility for incentive awards extends to projects in manufacturing and service center sectors, excluding areas like transportation, hospitality, gambling, trade, synthetic fibers production, coal and steel, mining, tobacco, firearms, shipbuilding (vessels over 100 gross tons), airports, utilities, energy, broadband networks, fisheries, aquaculture, and software development unless enhancing product, process, or service center functions.
Entities ineligible for funding include companies facing financial distress, those with unpaid tax liabilities, state-owned enterprises, those required to repay illegal state aid, or those terminated from incentive agreements.
The process for securing incentives begins with submitting a letter of intent to Serbia’s Development Agency (RAS), detailing investment specifics, past ventures, projected asset investments, job creation estimates, and expected salary expenses.
Applicants must then submit a formal request outlining their investment plan to the Development Agency for assessment against criteria such as:
- Investor credentials and market recognition
- Employment of qualified local job seekers
- Utilization of local suppliers
- Technological advancements aligned with Eurostat standards
- Financial viability and sustainability metrics
- Environmental impact mitigation
- Production capacity enhancement and export potential
Minimum investment thresholds and job creation criteria vary by sector and locality. For instance, service centers require a minimum €150,000 investment and 15 new hires, while production sector thresholds align with local development levels.
Successful applications proceed to the Council for Economic Development for final approval, followed by contract negotiations with the Ministry of Economy.
Ultimately, these measures aim to stimulate Serbia’s economic growth by attracting strategic investments and fostering sustainable development across key sectors.
