Incentives in economy of Republic of Srpska
Incentives in the Republika Srpska are granted at the republican and local levels. In order to consolidate data and better exchange of information, a Register of Incentives has been established, which is available on the portal www.regpodsticaja.vladars.rs
Incentives at the republic level
Institutions at the level of the Republic of Srpska grant various incentives to the economy, we highlight the key ones:
Incentives of the Ministry of Economy and Entrepreneurship
The Law on Incentives in the Economy of the Republic of Srpska ("Official Gazette of the Republic of Srpska", No.: 29/26) provides for the following types of incentives:
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Incentive for a salary increase
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Investment incentive
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Incentive for investments of special importance
The right to an incentive for an increase in the salary of employees can be exercised by business entities operating in production and service activities. A business entity is granted the right to an incentive for an increase in the salary individually per employee in an amount corresponding to 70% of the higher paid contributions for a salary increase in the accounting period compared to the paid contributions for the initial salary amount. The initial salary amount represents the average salary of the employee in the year preceding the accounting period. The accounting period is twelve months and lasts from January 1 to December 31 during one calendar year. The amount of the incentive for an increase in the salary individually per employee cannot exceed 1,000 KM in the accounting period.
The investment incentive co-finances a project aimed at:
1) Technological development - includes investments that are recognized as accepted investments, and relate to the purchase of production equipment or machines, apparatus, specialized tools, devices, instruments and other equipment used in the production process, up to five years old.
2) Transition to a green and circular economy - includes investments that are recognized as accepted investments, and relate to the purchase of machines and recycling equipment up to five years old, as well as the purchase of new equipment that includes filters, wastewater treatment plants and other equipment for reducing pollution, and new solar panels next to the production facility or on the production facility itself for the production of electricity exclusively for its own production processes.
3) Technological development with elements of green and circular economy.
The minimum financial value of accepted project investments to exercise the right to the incentive is 50,000 KM excluding VAT. The right to an investment incentive is granted to business entities based in the Republika Srpska whose main and predominant activity is in the processing industry sector (except for the food and oil industries). The amount of the incentive is determined as a percentage of the project's co-financing, with a higher percentage of co-financing being provided for projects implemented in the territory of an undeveloped and extremely underdeveloped local government unit.
The incentive for investments of special importance is realized on the basis of a project whose implementation achieves the following effects: improving business efficiency and technological development, improving the competitiveness of the local government unit in which the investment is implemented, encouraging balanced regional development, creating new jobs and improving the skills of workers.
When it comes to this type of incentive, the right to the incentive is granted to a business entity whose predominant activity is in the processing industry, or services in the catering or tourism industry, or in the field of information and communication technologies.
The incentive for investments of special importance is realized on the basis of a project that has as its subject investment in tangible and intangible assets or new employment, the implementation of which achieves the following effects, as follows:
– Employment of at least 100 workers or investments of at least 10,000,000 KM (excluding VAT) in tangible and intangible assets on the territory of a developed and medium-developed local government unit.
– Employment of at least 50 workers or investments of at least 5,000,000 KM (excluding VAT) in tangible and intangible assets in the territory of an undeveloped and extremely underdeveloped local government unit.
– By combining new employment with investments in tangible and intangible assets.
The amount of incentives that can be granted to a business entity can be:
– for the employment of workers in the amount of paid taxes and contributions per newly employed worker for a maximum of two years
– for tangible investments in the amount of up to 30% of the amount of accepted investments, and a maximum of up to 5,000,000 KM
– as well as for intangible assets (patents, licenses) in the amount of up to 30% of the amount of accepted investments, and a maximum of up to 100,000 KM.
A business entity can submit a request for this type of incentive to the Ministry of Economy and Entrepreneurship throughout the year.
Also, based on the Law on the Development of Small and Medium-sized Enterprises ("Official Gazette of the Republic of Srpska", No. 50/13, 56/13, 84/19, 115/24, 100/25), the Ministry of Economy and Entrepreneurship also grants the following incentives:
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Incentives for improving the competitiveness of small and medium-sized enterprises
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Incentives for the promotion of small and medium-sized enterprises
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Incentives for the establishment and strengthening of entrepreneurial infrastructure
They aim to support the strengthening, development and more dynamic growth of small and medium-sized enterprises (SMEs). The procedure for granting incentives is carried out according to the refund principle, which implies that the payment of incentives is made after it is determined that the investment has been fully implemented. It is envisaged that incentives will be granted for: establishing international standards regarding SME operations, digital transformation of business processes, procurement of equipment for SMEs, application of business and technical innovations in business, provision of professional services and education in the field of SMEs and preservation of traditional crafts. Investments for all purposes of incentives may be new, ongoing and completed. The following are eligible for incentives: small and medium-sized enterprises (companies and sole proprietors with up to 250 employees) for all incentives, local development agencies, institutions, chambers and associations established with the aim of representing the interests of SMEs only for incentives related to education and traditional crafts and entities that have the status of social enterprises to support vulnerable categories. The main activities that are encouraged are the processing industry and craft activities under the jurisdiction of the ministry, as well as entities in the field of the wood industry.
The percentage of co-financing of investments is determined depending on the level of development of the local government unit in which the entity is headquartered: up to 80% for underdeveloped and extremely underdeveloped, up to 70% for developed and moderately developed, and 100% for traditional crafts. The percentage value is determined based on the total value of accepted investments and the amount of incentive funds available for allocation. The procedure for granting incentives is prescribed by the Regulation on the Procedure for Granting Incentives for Improving the Competitiveness of SMEs ("Official Gazette of the Republic of Srpska", No. 107/25).
They aim to support the presentation of SME products and services in order to establish business relationships and cooperation with business entities, investors and customers. The procedure for granting incentives is carried out according to the refund principle, which means that the payment of incentives is made after it is determined that the investment has been fully implemented. The purpose of the incentive is to organize a joint appearance of SMEs at fairs abroad, organize a fair and organize a conference. Investments for all purposes of incentives can be new, ongoing and completed.
The following are eligible for the incentive: local development agencies, institutions, chambers and associations established with the aim of representing the interests of SMEs for all incentive purposes, small and medium-sized enterprises and enterprises registered for organizing a fair (code 82.30) only for the incentive for organizing a fair and entities that have the status of social enterprises for the incentive for organizing a conference.
The percentage of co-financing of investments is determined depending on the level of development of the local government unit in which the entity is headquartered, as follows: up to 80% for entities headquartered in underdeveloped and extremely underdeveloped municipalities and up to 70% for investments by entities headquartered in developed and medium-developed local government units. The value of the percentage is determined based on the total value of accepted investments and the amount of incentive funds available for allocation. The procedure for granting incentives is prescribed by the Regulation on the Procedure for Granting Incentives for the Promotion of SMEs ("Official Gazette of the Republic of Srpska", No. 107/25).
They aim to support the construction and improvement of spatial and technical forms to support the development of entrepreneurship, with a special emphasis on the establishment and development of SMEs. The procedure for granting incentives is implemented according to the refund principle, which implies that the payment of incentives is made after it is determined that the investment has been fully implemented. The purpose of the incentive is to build infrastructure in the business zone and adapt space and purchase equipment for the needs of the business incubator and other forms of entrepreneurial infrastructure, except for business zones. Local self-government units are entitled to the incentive.
The percentage of co-financing of investments is determined depending on the level of development of the local self-government unit in which the entity is headquartered, as follows: up to 50% for investments implemented in underdeveloped and extremely underdeveloped local self-government units and up to 40% for investments implemented in developed and medium-developed local self-government units. The percentage value is determined based on the total value of accepted investments and the amount of incentive funds available for allocation. The procedure for granting incentives is prescribed by the Regulation on the Procedure for Granting Incentives for the Establishment and Strengthening of Entrepreneurial Infrastructure ("Official Gazette of the Republic of Srpska", No. 107/25).
Incentives of the Ministry of Energy and Mining
In order to support the improvement of business activities and improve the operations of companies under its jurisdiction, the Ministry of Energy and Mining, in accordance with the Regulation on the Granting of Incentives under the Jurisdiction of the Ministry of Energy and Mining ("Official Gazette of the Republic of Srpska", No. 103/25) and available budget funds, allocates funds to business entities under its jurisdiction.
The funds allocated in this way are intended for:
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investment in tangible assets (land, buildings, production or sales facilities, machinery or equipment or other similar tangible assets) and
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investment in intangible assets (business software packages, patents, licenses, certification, accreditation, quality management standards or information security management standards, controlling systems or marking of products with the "CE" mark of conformity or the creation of industrial design, i.e. redesign of products or packaging or other similar intangible assets).
Incentives of the Ministry of Agriculture, Forestry and Water Management
Each year, the Ministry of Agriculture, Forestry and Water Management adopts the Regulation on the conditions and manner of obtaining financial incentives for the development of agriculture and villages, which prescribes the conditions for obtaining incentives for the development of agriculture and villages, as well as the types of support.
Employment Bureau Incentives
There are several different categories of employment programs implemented by the Employment Bureau of the Republika Srpska, and the process of subsidized employment in the Republika Srpska takes place in accordance with the provisions of the Employment Strategy of the Republika Srpska 2021-2027, on the basis of which the Government of the Republika Srpska adopts annual employment action plans. More information is available at https://zzzrs.net/javni-pozivi
Tax and other incentives
The Law on Profit Tax of the Republic of Srpska ("Official Gazette of the Republic of Srpska", No. 94/15, 1/17, 58/19, 48/24, 114/25) stipulates that a taxpayer who invests in equipment and facilities for carrying out a registered production activity on the territory of the Republic of Srpska has the right to reduce the tax base by the value of the investment made.
The Law on Income Tax ("Official Gazette of the Republic of Srpska", No. 60/15, 5/16, 66/18, 105/19, 49/21, 119/21, 56/22, 112/23, 110/24, 114/25) contains benefits for investors. This law abolished the dividend tax and introduced significant positive innovations for the taxation of income from foreign sources. The conditions for obtaining the status of a qualified investor were defined, on the basis of which the investor acquires tax benefits for annual income (Articles 42-50).
The Law on Real Estate Tax ("Official Gazette of the Republic of Srpska", No. 91/15) stipulates that in the case of performing a deficit production and craft activity, the taxpayer may be exempted from the obligation, on which a special decision is made by the municipal or city assembly. The following are exempt from paying real estate tax, among others: cultivated agricultural land and real estate used for one's own agricultural production.
Incentives in the textile sector - Workers in the textile, clothing, leather and leather products sector who earned less than the average gross salary in the Republic in the previous year have a lower contribution base, which is 25% of the average gross salary paid in the Republic in the previous year. This stimulates investment in this sector, which employs a large number of workers (labor-intensive sector).
Amendments to the Law on Communal Fees ("Official Gazette of the Republic of Srpska", No. 4/12, 123/20, 119/21) have abolished the obligation of business entities, legal entities and entrepreneurs to pay an annual fee for displaying a business name. This measure aims to further relieve the economy by reducing non-tax contributions, which will bring significant savings to business entities.
Also, in order to facilitate investment in the construction of production facilities, amendments to the Law on Agricultural Land ("Official Gazette of the Republic of Srpska", No. 93/06, 86/07, 14/10, 5/12, 58/19, 119/21, 106/22) have made it possible to exempt the construction of facilities in the field of processing industry from the obligation to pay a fee for changing the purpose of agricultural land to non-agricultural purposes, regardless of whether the construction is planned in an urban area or in a rural area, which has not been the case so far.
The Law on Audiovisual Activities ("Official Gazette of the Republika Srpska", No. 56/22) in Article 17 provides that in order to encourage investors to finance the production of audiovisual works in the Republika Srpska, the investor shall be paid 30% of the total funds spent for the production of an audiovisual work on the territory of the Republic, in accordance with the funds provided to the budget of the Republic.
Exemption from payment of import duties - The provisions of Article 207 of the Law on Customs Policy in Bosnia and Herzegovina ("Official Gazette of BiH", No. 58/15), prescribe cases of exemption from payment of import and export duties. The exemption procedure is regulated by the Decision on the conditions and procedure for exercising the right to exemption from payment of import and export duties ("Official Gazette of BiH", No. 24/18). The following are exempt from import duties:
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Equipment placed in free circulation and representing a deposit by a foreign person, except for passenger vehicles, amusement machines and games of chance;
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Production equipment imported for new or expansion of existing production, modernization of production, introduction of new or modernization of existing production technology, and used for direct production activities;
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Production assets and other equipment belonging to a company that definitively ceases its activities in another country and moves to the customs territory of Bosnia and Herzegovina for the purpose of performing similar activities.
Investment and Development Bank of the Republic of Srpska
The Investment and Development Bank of the Republic of Srpska offers several credit lines, of which we highlight a credit line for entrepreneurs and companies, whose purpose is the acquisition of fixed and working capital, payment of tax liabilities and refinancing, under more favorable credit terms. More information about all IRBRS credit lines is available on the website https://www.irbrs.org/
Guarantee credit lines of the Guarantee Fund of the Republic of Srpska
The Guarantee Fund of the Republic of Srpska issues guarantees to secure part of the credit that the bank approves to beneficiaries of funds under guarantee lines, in the event that beneficiaries of funds cannot offer adequate credit security required by the bank. There are several types of guarantee lines, such as for start-up business activities, for companies, for entrepreneurs, for export support, for agriculture, etc., and the Guarantee Program for Economic Support to Mitigate the Consequences of the COVID-19 Pandemic Caused by the SARS-CoV-2 Virus has also been established. More information about the guarantee lines of the Guarantee Fund of the Republika Srpska can be found on the website www.garantnifondrs.org
Local level incentives
Local level incentives vary, and information about them can be found on the single portal www.regpodsticaja.vladars.rs as well as on the official websites of local government units.
