Investment incentives in the Slovak Republic
The primary role of the investment incentives should be the motivation of investors to place their new projects in so-called disadvantaged localities, i.e. regions with higher unemployment, lower infrastructure quality, etc. The positive impact of a new investment shall be proved by jobs creation, by improved chances for the graduates to get a job, as well as by creation of new entrepreneurial opportunities for local companies.
State Aid
The State aid may be provided for various purposes. It may be, for example, the education aid, aid provided to disadvantaged applicants for a job, research and development aid, environment protection aid as well as the regional aid. It means that the State aid is a general term which includes a number of aid types.
Regional Aid
The Slovak Republic is characterized by considerable regional differences which are given by its geography, history in part, previous economic development, urbanization and industrialization level, etc.The differences may be seen also in the economic performance, social level and education structure.The primary role of the investment incentives should be the motivation of investors to place their new projects in the so-called disadvantaged localities, i.e. the regions with higher unemployment, lower infrastructure quality, etc. The positive impact of a new investment shall be proved by jobs creation, by chances for the graduates being of use as well as by creation of new entrepreneurial opportunities for local companies.In general the regional aid aims at the support of the disadvantaged regions economic development and balance of their mutual differences. The connection with a certain region is one of the regional aid’s characteristics and its provision serves to support not only foreign, but also home investments inflow to the most disadvantaged localities, and, along with it, to new jobs creation.
Eligible Projects
The Act on Investment Aid divides the projects which may be supported into four categories:
- industry
- technological centres
- shared services centres
- tourism
Minimum investment amount from 1 April 2009 until 31 December 2010
Industry
13 277 567.50 EUR
6 638 783.75 EUR
3 319 391.87 EUR
- half of the minimum investment must be financed by own equity of the investor
- 40% must be used for acquisition of new machinery and equipment
- incentives are available for launch of a new industrial plant as well as for extension of an existing one.
Tourism
9 960 000 EUR
4 980 000 EUR
3 319 391 EUR
- half of the minimum investment must be financed by own equity of the investor
- 20% must be used for acquisition of new machinery and equipment
Technological centres
- minimum investment of 1 327 756.75 EUR on the fixed assets
- at least 50% of the minimum investment must be covered by own equity
- the company must employ at least 60% of employees having university education
Shared services centres
- minimum investment of 1 161 787.16 EUR on the fixed assets acquirement
- at least 50% of the minimum investment must be covered by own equity
- the company must employ at least 30% of employees having university education
Such aid is also named the aid for the initial investment and it may be provided for the foundation of a new establishment as well as for the expansion of the already existing one.The amendment to the Act on Investment Incentives that entered into force is a reaction to the current economic crisis. As it aims to stimulate investments and job creation the amendment decreased minimum amounts of investments that are required in order to apply for incentives. In case of industrial projects the decrease was 50% and in case of projects into tourism 40%. Investors that will apply in the period from 1 April 2009 until 31 December 2010 can thus benefit from this favoured conditions.
Eligible Costs
For the purpose of the regional aid provision the following acquisition costs shall be considered as the eligible costs:
- costs of land acquisition
- costs of buildings acquisition
- costs of technological equipment and machinery acquisition
- intangible fixed assets
– licences, know-how, etc.
- labour costs
Regional Aid Amount
The total amount of the approved aid must take into account the particular regional specifics.The European Commission approved the maximum amount of the aid for particular regions which may be provided to the investor and for such purpose it divided the Slovak Republic into four regions:
- region Bratislava – 0% (since 1 January 2009)
- Western Slovakia – 40%
- Central Slovakia – 50%
- Eastern Slovakia – 50%
Investment Incentives
The investment incentives are the forms in which the regional aid may be provided. The Act onInvestment Aid states the following types of incentives:
- cash grant
- tax relief
- contribution to new jobs
- transfer of the State/municipality property to the investor at the discounted price
The investor may choose any of the aforementioned investment incentives. Their amount, combination and proportion depend only on the investor’s decision. But the basic rule remains still valid - the total sum of the incentives cannot exceed the maximum amount of the regional aid.
