Alert: New Regulation Concerning Incentives in the Hotel Industry

Alert: New Regulation Concerning Incentives in the Hotel Industry

The Government of Serbia passed a new Regulation concerning Government incentives and subsidies for investors planning on investing in building new hotel accommodations, as well as for investors planning on investing in expanding existing ones in the region of Belgrade for purposes of the specialized exhibition ,,EXPO 2027”, which will take place in Belgrade during the year 2027.

The Regulation concerns direct investments in the hotel industry. Article 2, section 1a of the new Regulation defines the term ,,direct investments for the realization of the international specialized exhibition EXPO BELGRADE 2027:

The terms used in this Regulation have the following meanings: 

1а) direct investments for the realization of the international specialized exhibition EXPO BELGRADE 2027, are investments in building, reconstructing or expansion of hospitality facilities for accomodation – hotels which will be categorized with three stars or more in the Belgrade region, excluding investments in hospitality facilities of hotel types garni hotel and apart hotel, which isn’t considered a direct investment according to this Regulation.

The regulation also defines the term “justified expenses”. Justified expenses, according to article 3 of the Regulation, are: 

1.    Investments in tangible and intangible assets, starting from the submission of application for receiving government incentives and subsidies until deadline day for the realization of the investment project, according to the agreement on the allocation of incentive funds;

2.    Gross earnings for new employees in the 2 year period after achieving full employment at the incentive beneficiary

Investors who want to exercise the right to get government incentives and subsidies in order to realize projects for the specialized exhibition EXPO BELGRADE 2027 have to submit an application for allocation of funds no later than 31st December 2024. The term “justified expenses” is important because the incentive beneficiary (the investor), in order to get the government incentives and subsidies, needs to invest at least 25% of justified expenses from his own funds or other sources which aren’t government incentives and subsidies. 

Conditions for Allocation of Funds

In order for the allocation of funds to be granted to investors investing in the Belgrade region in the hotel industry, some conditions need to be met, according to the Regulation. 

The first group of conditions concerns the investment projects. Funds may be allocated to investors investing in the Belgrade region for building hotels which will be categorized with three stars or more and which will have an accommodation capacity of at least 50. The minimum value of investment must be 5.000.000,00 EUR. Also, funds may be allocated to investors investing in the Belgrade region for expanding hotels which will be categorized with three stars or more and which will have an accommodation capacity of at least 50. The minimum value of investment must be 2.000.000,00 EUR.

The second group of conditions concerns the location of the investment. Funds will be allocated if the direct investment stays in the same location for at least 5 years after the realization of the investment project and if the category of the hotel stays the same. 

The third group of conditions concerns a deadline for the realization of the investment project. The deadline for the realization of the project is 2 years from the date of submission of the application for allocation of funds, which deadline can be extended until 31st of December 2026 at the latest. The deadline can be extended only by a reasoned request submitted by the investor (incentive beneficiary) and can be extended only if the Council for economic development finds that there are justifying circumstances for the extension.       
 

Contact:

Miloš Vučković, Managing Parnter at IVVK in cooperation with LexQuire

E-mail: milos.vuckovic@lexquire-ivvk.rs

Matija Ignjatović, Junior Associate at IVVK in cooperation with LexQuire

E-mail: matija.iganjtovic@ivvk.rs

 

28/11/2023

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