Ing. Tomáš Dudáš, PhD.

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

IndustryThe conditions for the so called industrial

investment projects are the strictest ones

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

Method and time frame of the investment aid approval