Incentives

Investment incentives are defined as the measurable economic benefits that governments provide to a specific enterprise or groups of companies, with an aim of directing investments in preferred sectors or regions, or influencing the nature of such investments.

These benefits can be fiscal, as in the case of tax exemptions, or non-fiscal, such as grants, loans or impairment of liabilities, with an aim to support business development or to enhance competitiveness.

Incentives can come in two forms – as fiscal incentives, which imply any tax/customs benefit with the intent to influence the investment behavior of companies, targeting specific company, or groups of companies or sectors, and non-fiscal incentives that include any financial or regulatory measure intended to influence the investment behavior of companies, and targeting specific companies, or groups of companies or sectors.

The list of incentives in the Republic of Srpska, divided by the institutions of the RS Government which grant them:

The Employment Service of the Republic of Srpska

1. Subsidies for the employment and self-employment of persons belonging to the defined target groups, funded by the Government of the Republic of Srpska through the World Bank loan and through its own financial participation, and implemented by the RS Employment Service and the Project Coordination Unit of the Ministry of Health and Social Welfare of the Republic of Srpska.
2. Subsidies for training and retraining, and improvement of labor mobility, funded by the RS Government through the World Bank loan and through its own participation, and implemented by the RS Employment Service and the Project Coordination Unit of the Ministry of Health and Social Welfare of the Republic of Srpska.
3. Subsidies for the employment of interns and trainees with a secondary education (high school education), funded by the United Nations Development Program.
4. Subsidies for the employment of interns and trainees with a university degree.

Ministry for Scientific and Technological Development, Higher Education and Information Society of the Republic of Srpska

1. Research in the field of technological development, transfer of knowledge and technologies and encouraging the application of the scientific research results. This program consists of the financial support for technology development projects, equipment procurement, or participation in professional scientific events on technology development in the Republic of Srpska.
2. Basic, Applied and Development Research Program. This program/measure refers to the financial support for research projects in the field of basic, applied and developmental research on a given topic or a topic chosen by a project team.
3. Program activities for supporting the innovations.

Ministry of Agriculture, Forestry and Water Management of the Republic of Srpska

The conditions that individuals and legal entities are obliged to fulfill for exercising the right to financial incentives, including the procedures, required documentation and forms, deadlines, type, amount and a manner of payment of financial incentives, as well as the obligations of beneficiaries after receiving them, are regulated by the Rulebook on the conditions and methods of obtaining financial incentives for the development of agriculture and rural areas.

The financial incentives for agricultural and rural development are provided through the support for current production, support for capital investment, support for rural development and other systematic support measures.

As a part of the support for current production, the incentive beneficiary is entitled to the following types of funds:

1) Direct support for the livestock production:

1. Premium for the breeding livestock,
2. Milk premium,
3. Premium for the meat production and fattening,
4. Support for the beekeeping production,
5. Support for the development of horse breeding;

2) Direct support for the plant production:

1. Premium for the fruit and vegetables production (produced and sold),
2. Premium for the production of buckwheat, aromatic and medicinal herbs (produced and sold),
3. Recourse per unit of the sowing area for wheat, soybeans and rapeseed,
4. Recourse per unit of the arable land, and for a diesel fuel,
5. Premium for the wheat (produced and sold),
6. Seed premium,
7. Recourse for the corn seed (domestic hybrid),
8. Planting material premium,
9. Tobacco premium,
10. Organic production.

As a part of the support to capital investments, the incentive beneficiary is entitled to a financial incentive in accordance with the specific regulations:

• Investments in the livestock production,
• Investments in the plant production,
• Investments in the agricultural machinery.

As a part of the support for rural development, the incentive beneficiary is entitled to a financial incentive for:

• Support for the self-employment of agronomists,
• Business activities of agricultural cooperatives and clusters, and associations of women in rural areas,
• Support for providing consumer information and promotion of the agricultural sector,
• Support for the development of experimental-educational and development centers,
• Support for co-financing the modernization of anti-hail protection,
• Support for the joint projects of the Government of the Republic of Srpska (hereinafter: the Government) and the Municipality of Srebrenica,
• Support for the transfer of knowledge and skills, and the introduction of technological innovations in agriculture,
• Support for the standardization and branding of agricultural production,
• Support for co-financing rural development projects,
• Support for the promotion, protection and development of hunting.

Within the systematic and other support measures, the beneficiary is entitled to a financial incentive for:

• Plant health protection measures,
• Measures for the protection of animal health,
• Support for the production of seeds for artificial insemination in cattle breeding,
• Support for the performance of breeding-selection activities,
• support for equipping the laboratories,
• Support for co-financing the insurance of primary agricultural production,
• Support for the analysis of fertility control of agricultural land,
• Support for keeping and maintaining the registers,
• Support for drafting strategic and planning documents,
• Support for conducting cooperative audits,
• Support for the accounting management in agricultural holdings (FADN),
• Restocking of the fishing area, and for the work of the Fisheries Protection Service and the Sports and Fishing Federation of the Republic of Srpska,
• Support for the emergency needs and assistance.

Funds from the court judgments and appeals against decisions of the Agency shall be disbursed by the funds referred to in the paragraph 5 of this Article.

Ministry of Industry, Energetics and Mining of the Republic of Srpska

1. Improving the living conditions and introduction of diversity in generating revenue in the rural economy.
2. Incentive for the employment of unemployed individuals in the Republic of Srpska.
3. Subsidies for the export oriented incentives of business entities which were affected by natural disasters or other exceptional events.
4. Export subsidies.

Ministry of Trade and Tourism of the Republic of Srpska

Financial incentive for the tourism sector – State aid (low-value grants)

Ministry of Finance of the Republic of Srpska

1. Article 11 of the Law on Corporate Income Tax provides a deduction for accelerated depreciation of machinery and equipment which is being depreciated, and it is calculated as follows: a) first year: 40%, b) second year: 30%. v) third year: 30%.
2. Article 12 of the Law on Corporate Income Tax provides that capital gains or losses incurred during a tax year may be offset, and that net profits or losses are added to or deducted from the tax base unless they are included in income or expense.
3. Article 13 of the Law on Corporate Income Tax provides that a tax loss, which represents a negative difference between income and expenses in the process of establishing the tax base, is transferred and compensated by reducing the tax base in next five years, and if the taxpayer has a loss in several tax years, the tax loss from the earlier tax year is offset before the tax loss from recent tax year.
4. Article 14a of the Law on Corporate Income Tax introduced a benefit in the form of a reduction of the tax base for the value of investment in equipment, facilities and real estate of the taxpayer who performs his own registered production activity.
5. Article 14b of the Law on Corporate Income Tax provides a benefit related to the tax base deduction for the calculation of profit tax in the amount of tax paid for the income and contributions for newly employed workers, at least 30 new workers in one business year for a period of three years from the date of employment of those workers.
6. Article 28 (2) of the Law on Corporate Income Tax provides that withholding tax is not paid on the following income: a) profit returned to the country of a foreign legal entity, which relates to its permanent place of business, provided that the foreign legal entity owns 10% or more of the shares in a foreign legal entity in the Republic of Srpska. Profit returned to the country means the residual profit of the legal entity after the taxes are paid; b) interest income from a debt instruments issued or guaranteed by the subjects referred to in Article 7 (1) (v); c) interest income from deposits; d) dividend income; e) income in the form of interests or functional equivalent payed for a debt obligation between a permanent establishment or a business unit to its foreign headquarters, unless the deduction has been made by the payer in determining his tax base; f) copyright income paid by a permanent establishment or a business unit to its foreign headquarters, unless the deduction has been made by the payer in determining its tax base; g) interest on loans used by a resident to invest in equipment, facilities and real estate within the meaning of Article 14a of this Law.
7. Article 18 of the Law on Income Tax prescribes the treatment of loss in the case of self-employment.
8. Article 9 of the Law on Real Estate Tax provides that the following categories are exempted from the payment of real estate tax:
   1. Public goods, except for the objects located on the public ground which serve for economic gain,
   2. Real estate property owned by Bosnia and Herzegovina, the Republic of Srpska, the Federation of BiH, the Brcko District and local self-government units, which is used by their institutions,
   3. Real estate property owned by institutions founded by Bosnia and Herzegovina, the Republic of Srpska, Federation of BiH, Brcko District and local self-government units,
   4. Real estate of diplomatic and consular missions of foreign countries, on the principle of reciprocity,
   5. Real estate of religious communities used in performing religious activities,
   6. Cultural and historical monuments, designated as such by the competent authority,
   7. Real estate used for humanitarian purposes,
   8. Shelters for the protection of people and goods in the case of war,
   9. Facilities or parts of facilities which, in accordance with the law, serve for the performance of public works,
   10. Real estate located in the minefields to which access is not allowed,
   11. Real estate constructed or built by the taxpayer, which are recorded in the taxpayer’s business records, in accordance with the regulations governing accounting and auditing, as assets solely intended for resale, and
   12. Cultivated agricultural land and real estate used for its own agricultural production.

Article 8 (2) of the Law on Real Estate Tax provides that in the case of performing a deficient and craft- production economic activity, the taxpayer may be released from the obligation.

The Republic of Srpska Investment-Development Bank (IRB RS)

1. IRB RS loans for initial business activities
2. IRB RS loans for microbusiness in agriculture
3. IRB RS loans for entrepreneurs and enterprises
4. IRB RS loans for small and medium-sized enterprises (SMEs) from the European Investment Bank (EIB) funds
5. IRB RS agricultural loans

Gender Center of the Government of the Republic of Srpska

1. For the purpose of implementation of the BiH Gender Action Plan, through the donor funds from the FIGAP Program for BiH and through the Agency for the Provision of Professional Services in Agriculture: Organizing trainings through which women have been given the opportunity to gain entrepreneurial skills and enhance their entrepreneurial potential.
2. For the purpose of implementation of the Gender Action Plan of BiH, through the donor funds from the FIGAP Program for BiH and through the Agency for the Provision of Professional Services in Agriculture: Program aimed at empowering women through informing and allocating incentives for the development of women’s business activities in the rural areas (through various forms of organizing – associations and cooperatives).

Environmental Protection and Energy Efficiency Fund of the Republic of Srpska

1. Financing programs, projects and studies.