Serbia: Law on Investments
Publisher: Bojović & Partners
(Official Gazette of the Republic of Serbia, no. 89/2015)
The Law on Investments (hereinafter “the Law”) came into force on 4 November 2015. On the day of coming into force of the Law, the Law on Foreign Investments (Official Gazette of SRJ, no. 3/2002 and 5/2003, Official Gazette of SCG, no. 1/2003 – Constitutional act and Official Gazette of RS, no. 107/2014 - other law), chapter VIII- promotion of exports and foreign investments of the Law on Foreign Trade (Official Gazette RS, no. 36/2009, 36/2011 – other law and 88/2011) and Chapter V, Paragraph 6, Articles 27-30 of the Law on Regional Development (Official Gazette RS, no. 51/2009 and 30/2010 ) ceased to be in force.
From the very name of the newly adopted Law, it can be seen straight away that contrary to its predecessor (the Law on Foreign Investments) it is averted towards both foreign and domestic investments. The goals of the adoption of the Law are enumerated in the Law itself and are directed at the amelioration of the investment surroundings in the Republic of Serbia, stimulation of direct investments with the goal of improving economic and commercial development, increase in employment, improving general welfare, and so on.
The Law also strictly prescribes the rights of investors which represents an affirmation of principles prescribed by the Constitution, which are most of all an illustration of the intent of the legislator to secure guarantees for both the investors and investments in general. Namely, the Law prescribes the following rights of the investors: freedom to invest, protection of acquired rights, guarantees against expropriation, national treatment of foreign investors, freedom to effectuate payments towards foreign entities (especially the right of the investor to buy foreign currencies on the foreign currency market in the Republic of Serbia for effectuation of payments towards foreign countries), the right to transfer of profits Page | 3 and property of the foreign investor (especially the right of foreign investors to free transfer of financial and other assets in relation to the investment, after the payment of all taxes and other relevant obligations) and consensual dispute resolution. It should be mentioned that, in regards to expropriation, it has been prescribed by the Law that an investment will not be the subject of expropriation, except in case a special law prescribes the possibility for property rights and other rights of the investor on real-estate to be confiscated or limited, if it is in the public interest.
Another important novelty of the Law is the prescription of the distinction of investments based on the importance of an investment of a special interest for the Republic of Serbia and an investment of local importance, alongside the statement of general criteria used to determine the importance of the investment, which are more closely regulated by a decree of the Government. The distinction is also of importance since the suggestion for acquiring state aid related to investments of special interest is to be given without previous public announcement.
The Law also prescribes stimulation for investments of which the beneficiaries can be both natural persons and legal entities subject to tax and social contributions and other public income in the Republic of Serbia. However, the law does not introduce new stimulating means, but refers to stimulation prescribed by regulations that regulate state aid, tax stimulation and mitigation and exemption from payment of fees, customs benefits and obligatory social insurance. An exception is a provision of the Law that addresses customs benefits, which prescribes that the import of equipment that represents a stake of the foreign investor, excluding passenger motor vehicles and equipment for recreation and games of chance, is exempt from payment of customs and other import fees.
The criteria, conditions and means of attracting direct investments and regulation of approved stimulation are more closely regulated by the Government, placing special importance on the harmonization with provisions regulating control and delegation of state aid. The decision on granting of investment stimulation is made by the Council for economic development, as the collegial body, while the contracts for the granting of stimulating measures from the budget of the Republic of Serbia are concluded with the investor by the ministry competent for commercial matters, with prior consent from the Government. The stated means of awarding of stimulating measures on one hand disable biased decision making, since decisions are made by the collegial body, while on the other they are directly linked to the Government and the competent ministry, which largely contributes to the transparency principle during the process of awarding of stimulating measures for investments.
For the first time, the Law determines the subjects for investment support, among which are bodies that will be implemented after the coming into force of the Law (Council for Economic Development and the Development Agency of Serbia). Besides that, the Law strictly prescribes the obligation of Government institutions, in regards to the effectuation and maintenance of investments and obligations of investors, to act urgently, and within their limitations enable unhindered investments and follow and control the realization of rights of the investor and the effectuation of obligations by the investor, i.e. undertaken obligations of the Republic of Serbia in regards to the investment.
After the presentation of the most important novelties of the Law, we can conclude that the main goal of the implementation of the Law is the reduction of financial and time expenditures for investors, throughout better coordination of work of bearers of public authority in the process of planning and implementation of the investments, all for the benefit of stimulating market entries by new commercial subjects and increasing of competition, therefore providing positive effects on the legal framework for investments and commercial development in general.