On Promulgating the Act Oninvestment Promotion
THE CROATIAN PARLIAMENT
1971
Pursuant to Article 89 of the Constitution of the Republic of Croatia, I hereby issue the
DECISION
ON PROMULGATING THE ACT ONINVESTMENT PROMOTION
I hereby promulgate the Act on Investment Promotion, passed by the Croatian Parliament at its session on 18 September 2015.
Class: 011-01/15-01/97
Ref. No: 71-05-03/1-15-2
Zagreb, 22 September 2015
President of the Republic of Croatia
Kolinda Grabar-Kitarović, m. p.
ACT
ONINVESTMENT PROMOTION
IGENERAL PROVISIONS
Scope of the Act
Article 1
This Act shall regulate granting of State aid for the purpose of the investment promotion.
Article 2
(1) This Act shall regulate implementation of Commission Regulation (EU) No 651/2014 of 17June 2014declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (OJ L 187, 26.6.2014, p. 1), (hereinafter: Commission Regulation (EU) No 651/2014 of 17 June 2014).
(2) This Act contains provisions on regional State aid to support investment and provisions on State aid fortrainingpursuant to Commission Regulation (EU) No 651/2014 of 17 June 2014. Individual aid granted pursuant to this Act is exempted from obligation of prior notificationofthe European Commission pursuant to Article 108(3) of the Treaty on the Functioning of the European Union provided that the requirements referred to in this Act have been met.
(3) Aid for training and regional aid in accordance with this Act shall be granted pursuant to provisions of Articles 1–14andArticle 31 of Commission Regulation (EU) No 651/2014 of 17 June 2014. For matters not regulated by this Act, i.e. in case of discrepancies betweenprovisions of this Act and Commission Regulation (EU) No 651/2014 of 17June 2014, the provisions of Commission Regulation (EU) No 651/2014 of 17 June 2014 shall prevail.
Article 3
(1) For the purpose of this Act, enterprise shall consist of entities – micro, small and medium-sized enterprises pursuant to AnnexI ofCommission Regulation (EU) No 651/2014 of 17June 2014.
(2) For the purpose of this Act, enterprise shall consist of entities – large enterprises. The category of large enterprise, for the purposes of this Act, means an undertakingthatdoes not meet the criteria referred to inAnnex I of Commission Regulation (EU) No 651/2014 of 17 June 2014.
Article 4
(1) The objective, i.e. the purpose of investment promotion is promotion of the economic growth and fulfilling of the economic policy of the Republic of Croatia,the country’s integration in international trade and strengthening investment capability and competitiveness of Croatian enterprise.
(2) At the level of economic operators the objective and purpose of investment promotion is to buildinternationally competitive, transparent and attractive system of the aidto investments by legal or natural persons registered in the Republic of Croatia, who are profit tax payers engaged in an economic activity, participating in the trading of goods and services in the Republic of Croatia.
Article 5
(1) Investment promotionwithin the meaning of this Act constitutes a system of the aid to investments and the aid for timely performance of the necessary investment activities. It determines the method and time limits for completing all the necessary investment activities, aimed at a successful performance of the investment project in a fixed term, in the territory of the Republic of Croatia.
(2) The aid regulated by this Act pertains to investment projects and to fostering competitiveness in:
– manufacturing and processing activities
– development and innovation activities
– business support activities
– highvalue-added services.
(3) The aid regulated by this Act shall cover the projects referred to in paragraph 2 of this Article, which ensure environmentally friendly business activity and one or more of the following objectives:
– introduction of new equipment and modern technologies
– higher rate of employment and level of training the employees
– development of high value-added products and services
– increase in entrepreneurial competitiveness
– uniform regional development of the Republic of Croatia.
Definitions
Article 6
(1) For the purposes of this Act, these terms shall have the following meaning:
1. Investment, initial investment or investment projectmeansinitial investment for micro, small, medium-sized and large enterprises in fixed assets contributed to the property of the aid beneficiary amounting to:
a) a minimum of EUR 150 000 expressed in equivalent HRK value, with at least five jobs createdin relation to the investment project, or;
b) a minimum of EUR 50 000 expressed in equivalent HRK value,with at least three jobs created for micro-enterprise, or;
c) a minimum of EUR 13 millionexpressed in equivalent HRK value,with at least 10 jobs created in relation to the investment project and requiring university qualifications.
d) Initial investment meansan investment in tangible and intangible assets related to the setting-up of a new establishment, extension of the capacity of an existing establishment, diversification of the output of an establishment into products not previously produced in the establishment or a fundamental change in the overall production process of an existing establishment.
e) Any initial investment started by the same beneficiary (at the group level) in the period of three years from the day of start of works on the second investment for which the aid is granted in the same region at the third level ofthe Nomenclature of Territorial Units for Statistics shall be considered as a part of the same investment project. If this single investment project is a large investment project, a total amount of aid for a single investment project shall not exceed the adjusted aid amount for large investment project.
2. Large investment projects
Large investment projectmeans an initial investment project with eligible costs exceeding EUR 50 millionexpressed in equivalent HRK value, calculated at prices and exchange rates on the date of granting the State aid. For such investments, a special calculation methodology is envisaged to determine the maximum permitted amount of State aid, in line with point 13(c) and(d) of this Article.
3. Notification thresholds
a) Individual regional State aid granted for investments pursuant to this Act shall be notified to the European Commission pursuant to Article 108(3) of the Treaty on the Functioning of the European Union,if the aid from all sources exceeds notification thresholds referred to in this paragraph or when it is granted to a beneficiary that has closed down the same or a similar activity in the European Economic Area in the two years preceding the date of its application for the aid or,at the time of the aid application, hasconcrete plans to close down such an activity within a period of up to two years after the investment for which the aid is grantedis completed:
Aid intensity:Notification threshold:
25 % HRK equivalent of EUR 18 750 000.00
35 %HRK equivalent of EUR 26 250 000.00
A specific notification threshold for the European Commission regarding regional State aid for investments shall be defined in accordance with »adjusted aid amount« calculated in accordance with the mechanism referred to in point 13(c) of this Article for investments with eligible costs amounting to EUR 100 million expressed in equivalent HRK value.
b) IndividualState aid for training which is to be granted pursuant to this Act shall be notified to the European Commission pursuant to Article 108(3) of the Treaty on the Functioning of the European Union if the aid from all sources exceedsnotification threshold amounting to EUR 2 million expressed in equivalent HRK value per training project.
c) Threshold referred to in subparagraphs (a) and (b) of this point shall not be avoided by artificial splitting of programmes oraid projects.
d) »The same or a similar activity« means an activity falling under the same class– a four-digit numerical code of the National Classification of Activities 2007 – NCA 2007, pursuant to Article 2 (50) of Commission Regulation (EU) No 651/2014 of 17 June 2014.
4. A fixed assetmeans tangible and intangible assets contributed to the property of the aid beneficiary, expressed in the balance-sheet of the aid beneficiary. Fixed assets shall be aligned with the accounting principles and shall be active for at least five years for large enterprises, or three years for micro, small and medium-sized enterprises, i.e. for the whole period of using the aid.
Itshall be possible to include fixed assetsof a procurement value of less than HRK 3500.00, but when including this asset to the investment project it shall be necessary to ensure that this asset in addition to accounting principles meets the criteria of a minimum period of maintaining the investment concerned pursuant to provisions of this Act.
Investment value may not include a fixed asset with a period of utilization of minimum of three years for micro, small and medium-sized enterprises or five years for large enterprises, but not shorter than the period of using the aid referred to in this Act.
5. Jobs created as a result of an initial investmentmeans a net increase in the number of employees in the establishment concerned, compared with the average over the previous twelve months, meaning thatany job lost shall be deducted from the apparent created number of jobs during that period. The average number of the employed in the previous twelve months before the beginning of the investment givesan initial situation regarding the number of the employed at the beginning of the investment. Anypostlost shall be filled to reach the initial number of the employed at the beginning of the investment. Jobs created as a result of the investment referred to in point 1 of this Article shall refer to any increase of the number of persons employed in relation to the established initial situation of the persons employed at the beginning of the investment.
The number of persons employed full-time and seasonal has to be considered with their annual work unit fractions, wherein seasonal workers in the tourism sector are counted as fractions of annual work units.
6. Start of the investment or start of works on the investment projectmeans earlier of the start of construction worksrelating to the investment or the first legally binding obligation assumed by an entrepreneur considering an equipment order or any other obligation that makes the investment irreversible. Buying land and preparatory works such as obtaining permits and conducting feasibility studies are not considered as start of the investment, or start of works on the investment project.
7. Minimum period of maintaining the investment concernedmeans five years following the completion of the investment for large enterprises, and three years following the completion of the investment for micro, small and medium-sized enterprises, but not less than the period of use of the aid from this Act. This shall not prevent replacement of plant or equipment that has become outdated or brokenwithin this period, but without the right to use the new aid, and provided that the economic activity is retained in the area concerned for the relevant minimum period. The date of issuing a decision on performing the activity or the date when tangible asset linked with the investment project becomes operational shall be considered as the finalisation of the investment. If the aid is calculated on the basis of wage costs, the new postshall be filled within a period of three years from the completion of works. The new postshall be linked to the implementation of the investment project, and maintained in the specified area for five years after its first filling for large enterprises, or for three years for micro, small and medium-sized enterprises, but no shorter than the period of use of the aid from this Act for which the job was a precondition. For seasonal employment in the tourism sector, the enterprise shall not achieve incentives for new job creation.
8. Eligible investment costs for which regional aid may be granted:
a) Eligible investment costs in tangible and intangible assets
Eligible investment costs in tangible assets means that the procured equipment should be new, i.e. not used.
Costs linked with leasing tangible assets may be taken into consideration provided that for plant or machinerythe financial leasing shall apply and contain the obligation ofthe aid beneficiary to buy the asset after expiration of lease.
Value of buildings and equipment/machinery (standard base).Lands, previously constructed buildings/structures and previously used equipment/machinery shall not be calculated in eligible investment costs.
For investments in fundamental change in the production process of an existing establishment, the eligible costs shall exceed the depreciation(amortization) of the assets linked to the activity to be modernised in the course of the preceding three fiscal years.
For investments in diversification of an existing establishment, the eligible costs shall exceed by at least 200% of the book value of the assets that are reused, as registered in the fiscal year preceding the start of works.
Eligible investment costs in intangible assetsmay include the acquisition of intangible assets via the transfer of technology such as patents, licences, know-how, or unpatented expertise. For large enterprises, the costs of acquiring intangible assets shall be eligible only to the limit of 50% of the total eligible costs of the project investment. For micro, small and medium-sized enterprises, total costs linked with intangible assets shall be considered. Intangible assets, justified for the calculation of the investment costs, shall be linked with the area in which the aid is granted, and shall not be relocated to other regions. Intangible assets that represent eligible investment costs shall meet the following criteria:
– theyshall be used exclusively in the establishment receiving the aid;
– theyshall be considered an asset with the possibility of write-off (amortisable asset);
– theyshall be purchased under market conditions from third parties, excluding enterprises related to the buyer;
– they shall be included in the assets of the beneficiary receiving the aid, i.e. they shall be expressed in the balance sheet of the aid beneficiary and remain related to the project for which the aid is granted for at least five years or three years in the case of micro, small and medium-sized enterprises.
b) Eligible costs of job creationrelated to the investment:
Eligible costs of job creationrelating to the investment are calculated as wage costs. Wage costs are the total amount that the aid beneficiary shall actually pay for the said job and which in a certain period shall consist of gross wage increased by the amount of contributions to the basicwage. The regional aid maybe calculated in relation to the expected wage cost which is a result of job creationrelating to the start of the investment, and the aid may cover only the wage costs of the employed persons calculated over a period of two years, wherein the intensity shall not exceed the applicable intensity referred to in point 13 of this Article.
c) A combination of costs referred to in subparagraphs (a) and (b) of this point, provided that the combined amount is not exceeding the amount referred to in subparagraph (a) or the amount referred to in subparagraph (b) of this point,whichever is higher.
9. Sources of financing the investment projectshall be at least25% of the eligible investment costs provided by the aid beneficiary through its own resources or by external financing, and shall be free of any State aid.
10. The aid beneficiarymeans an undertaking – natural person (craftsman) profit tax payer or a company, registered in the territory of the Republic of Croatia, who use the aid or who are authorised to receive regional aid for the initial investment and job creation, and aid for training linked with the investment.
11. Gross grant equivalentmeansthe amount of the aidprovided in the form of a grant to the beneficiary, before any deduction of tax or other charge.
a) Aid payable in several instalments should be discounted to its value at the moment it is granted. The eligible costs should be discounted to their value at the moment of granting. The interest rate to be used for discounting purposes shall be the discount rateapplicable at the time of the grant.
b) Where aid is granted by means of tax advantages, aid tranches should be discounted on the basis of the discount rates applicable on the various dates when the tax advantages become effective. This Act providesfor cap of the aid in the form of tax advantages ensuring that the applicable threshold is not exceeded.
c) For the purposes of calculating aid intensity and eligible costs, all figures used shall be taken before any deduction of tax or other charge. »Aid intensity« means the gross aid amount expressed as a percentage of the eligible costs,before any deduction of tax or other charge.
12. Aid for the initial investment is established on the basis of the eligible investment costs, i.e.on the basis of the eligible investment costs in tangible and intangible assets, or on the basis of the eligible costs of job creation relating to the investment.
a) If the investment aid, calculated on the basis of investment costs, is combined with regional investment aid calculated on the basis of wage costs, the total aid may not exceed the highest amount of aid that is the result of each calculation, to the maximum permitted aid for a given area.
Investment aid may be granted simultaneously according to several aid programmes, or together with ad hoc aid, provided that the total aid from all sources may not exceed the maximum permitted aid intensity per project, which shall be calculated in advance by the first aid provider.
»Ad hoc aid« means aid not granted on the basis of an aid scheme.
In determining whether thenotification thresholds for the European Commission and the maximum aid intensities referred to in this Actare respected, the total amount of State aid for the aided activity or project or undertaking shall be taken into account.
b) If the funding of the European Union centrally managed by the institutions, agencies, joint undertakings or other bodies of the European Union, not directly or indirectly under the control of Member States, is combined with State aid, only the State aid shall be considered for determining whether notification thresholds and maximum aid intensities or maximum aid amount are respected, provided the total amount of public funding granted in relation to the same eligible costs does not exceed the most favourable funding rate laid down in the applicable rules of the EU law.
c) Aid with identifiable costs and which is granted pursuant to this Actmay be cumulated with any other State aid,as long as those measures concern different identifiable eligible costs, or with any other State aid,in relation to the same eligible costs, partly or fully overlapping, only if such cumulation does not result in exceeding the highest aid intensity or aid amount applicable to this aid under this Act.