Introduction
Investment promotion – the sum of all government activities with the goal to try to attract foreign direct investments
The basic types of investment promotion activities
Main objective:to improve a country’s image within the
investment community as a favorable location (image-building activities)
to generate FDI directly (investment-generating activities)
to provide services to prospective and current investors (investment service activities)
Tools of image buildingAdvertising in the general financial media
Participating in investment exhibitions
Advertising in industry or sector specific media
Conducting general investment missions in other countries
Conducting seminars on general investment opportunities
Tools of direct FDI generationDirect mail or telemarketing campaign
Industry or sector specific investment missions abroad
Industry or sector specific investment seminars
Engaging in firm-specific research followed by “sales” presentations
Services to prospective and current investorsPre-investment counseling and services
business matchmaking, domestic market information, advice on employment conditions, finding suitable sites, advice on financial services, feasibility studies, environmental impact studies …
Post-investment servicesassistance with registration, legal assistance,
assistance with work permits, customs assistance, help with selecting local personnel…
Investment promotion agencies (IPA)Relatively new institutions, but their
number was growing fast in the recent two decades
Ex. SARIO, Czechinvest, PAIZIZ, Invest in Germany…
Today we can find around 160 national IPAs and approx. 250 regional IPAs
Usually they are public institutions
Financial incentivesFiscal
the goal is to decrease the level of taxation of the investor
Financialto goal is to give direct financial aid to the
investor
Other incentivesusually indirect ways to help the foreign
investor
Examples of incentivesTax discount or tax holidaySubsidies for new workplacesSubsidies for training of the new
employeesSubsidized loans to finance the investmentSubsidized land/free land transferBuilding of the necessary infrastructureSpecial economic zonesIndustrial parks…
Investment incentives in SlovakiaFour types of projects eligible for incentives
industry technological centers centers of strategic services
Investment incentives are region basedThe 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.
Maximum amount of the aid approved by the EU
The percentage expresses the so called intensity of the aid, i.e. the maximum proportion of the eligible costs, which may be approved for the investor in the form of particular investment incentives.
Investment incentives in SlovakiaKey Slovak legal regulations:
Act No. 231/1999 Coll. on State Aid Act No. 561/2007 Coll. on Investment Aid Act No. 595/2003 Coll. on Income Tax Act No. 5/2004 Coll. on Employment Services Bylaw No. 342/2008 Coll. issuing the investment aid application
form
Important European regulations: Treaty on establishing the European Community Regulation (EC) No. 800/2008 Guidelines of the Commission on National Regional Aid for the Years
2007 2 2013
Technological centersBasically the technological centers are the establishments in
which the company performs activities leading to the improvement of the production process and its quality, in other words perform research and development. But production does not fall within the technological centre scope of activities.
The investor must expend at least 1 327 756.75 EUR (approx. 40 mil. SKK) on the fixed assets acquirement to be allowed to apply for the State aid concerning the technological centre establishment.
Similarly as in the case of the industrial projects at least 50% must be covered by own equity.
Furthermore the company must employ at least 60% of employees having university education.
Shared Services Centers These are places where the company provides the services
with the high added value supporting the employment of qualified experts, centers for the development of computer software, customer support centers and so on as the centers of strategic services. Such centers are named the „shared services centers“.
In the case that the investor shall decide to apply for the regional aid for such kind of a project, it must expend minimum 1 161 787.16 EUR (approx. 35 mil. SKK) on the fixed assets acquirement, whereas at least 50% must be covered by own equity, and employ at least 30% of university educated employees.
Large Investment ProjectsThe investments with eligible costs exceeding 50 million
EUR constitute a special situation. The European legislative considers such investments as the so called large projects and determines stricter rules for them.
Maximum aid amount = R * (50 + 0.50*B + 0.34*C)
Forms of investment incentivesCash grant Fax relief Contribution to new jobs Transfer of the State/municipality property to
the investor at the discounted price