The Serbian Government passed the new Regulation on the conditions and manner of attracting direct investments (the “Regulation”), that has entered into force on 31 December 2016.

As per general rules of the Law on Investments, the Regulation sets out a revised framework concerning eligibility of direct investments for award of incentive funds, being more favorable for potential investors.

The target investment projects are the ones in:

  • Manufacturing and production; and
  • Services provision that can be subject of international trade (the ones provided via ICT primarily to users outside the territory of Serbia).

In order to benefit from the Regulation, a direct investment must qualify either (i) as an “Investment of special importance” or (ii) another investment for funds that are awarded based on a public invitation announced by the Ministry of Economy and Serbian Development Agency.

Generally, the investor is obliged to provide a minimum 25% of justified costs from own funds or other sources excluding state aid.

The criteria for Investments of special importance have been significantly lowered, and among other conditions, include:

  • an investment of EUR 5 million in fixed assets or employment of more than 500 employees, if realized in municipalities of 1st or 2nd development level; or
  • an investment of EUR 2 million in fixed assets or employment of more than 100 employees, if realized in municipalities of 3rd or 4th development level or in devastated areas; or
  • an investment that is realized in the territory of one or more municipalities and that enhances realization of their developing priorities, in terms of improving their competiveness; or
  • an investment based on one of bilateral treaties or agreements on cross border cooperation.

The Regulation also sets out minimum criteria for other direct investments that are competing for incentives based on a public invitation, which have also been reduced for the most part. These are the projects in manufacturing sector, divided into five different categories, with eligibility criteria being lowest for investments into devastated areas and the least developed municipalities, while being gradually increased for the ones with higher level of development (the criteria range from EUR 100.000 to EUR 500,000 of justified investment costs, and 10 to 50 of new jobs created). Specific eligibility criteria are envisaged for services provision and investments in agriculture and fisheries. The exact conditions for these investments and related incentives will be known after release of a public invitation for award of the funds, which can be expected by the end of this year.

Finally, the Regulation elaborates on the exemption from customs and other duties (save for import VAT) on imports of equipment of investors. This exemption is normally applicable to equipment which is not older than 3 years and which the investor enters into the company as in kind contribution (at incorporation, or later by increase of share capital).