The latest amendment to the Investment Promotion Act (IPA), applicable from 10 April 2024, redefines the concept of investment and extends the possibility of obtaining incentives to foreign investors – companies established in EU Member States. Other companies established in third countries will be subject to the requirement to establish or register a company in Slovenia before the incentive can be paid.

The amendment to the Article of the Investment Promotion Act (IPA) defines an investment as an investment in tangible and intangible assets relating to the setting up of a new company, the expansion of the capacity of an existing company, the diversification of the production of a company into new products not previously produced by the company or substantial changes in the overall production process of a company in the territory of the Republic of Slovenia, or eligible costs for which State aid for research and development and innovation is permissible under the Act and in accordance with Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market.

According to Article 4 of the Investment Promotion Act, incentives are granted for an investment that meets the following conditions:

1. that the value of the investment:

• between €1 million and €12 million in manufacturing, where investment in machinery and equipment represents at least 50% of the investment value,
• between €3 million and €3.5 million in the service sector, where investment in machinery and equipment represents at least 50% of the investment value,
• between €0.5 million and €2 million in research and development activities, with investment in machinery and equipment representing at least 50% of the investment value,

2. that the recipient of the incentive maintains at least the average number of employees in the 12 months preceding the month of application for the period during which the investment is maintained,

3. the value added per employee in the beneficiary of the incentive two years after the completion of the investment is higher than the value added per employee in the beneficiary of the incentive in the financial year preceding the year of application.

4. that the proposed construction of the investment is located on a site that is compatible with the zoning act, as evidenced by the attached opinion of the local self-governing community,

5. that the investment meets the minimum threshold of points on the basis of the evaluation of the investment according to the criteria referred to in Article 5(1) of the Investment Act and that it has a positive impact on the region in which the investment is to be carried out, from an economic, environmental, spatial and social point of view,

6. that the investment has been shown to be economically, financially, technically, spatially and technologically feasible and justified,

7. that the investment is not started before the application for the incentive is submitted; and

8. that the investment will be completed no later than three years from the start of the investment, with the possibility of an extension if the investor proves that there are compelling reasons (e.g. war, natural disaster, epidemic) for not being able to complete the investment within that period.

The incentive cannot be granted for investments in the activities of agricultural production, fisheries and aquaculture, processing and marketing of agricultural products, coal mining, including newly lignite activities, steel, transport and related infrastructure, broadband, energy production, storage, transmission and distribution and energy infrastructure, arms and munitions production, construction, education, health and social care. In line with the amendments, incentives can now be granted in the shipbuilding and synthetic fibres industries.

An applicant cannot receive an incentive if

• the investment is for the same purpose and contains State aid components, has already been co-financed from other State, local or European budget resources, and the total amount of the funds received under this heading exceeds the maximum co-financing allowed under the State aid rules,
• the investor or recipient of the incentive is on the list of companies with which state institutions are prohibited from doing business under the law on the prevention of corruption,
• the investor or the recipient of the incentive has outstanding outstanding financial obligations arising from compulsory levies and other monetary non-tax obligations in the Republic of Slovenia in accordance with the law governing the financial administration, which are collected by the tax authority, if the value of the outstanding outstanding financial obligations on the date of submission of the application and up to the date of conclusion of the grant agreement amounts to EUR 50 or more and, on the date of submission of the application, the investor or the recipient of the incentive did not have submitted all payroll withholding tax returns for the period of the most recent year up to the date of the submission of the application or up to the date of conclusion of the grant agreement for the period of the most recent year up to the date of submission of the application or up to the date of conclusion of conclusion of the grant agreement, as the case may be,
• the investor or beneficiary of the incentive is a company in difficulty within the meaning of Article 18(2) of Regulation (EU) No 651/2014/EU.

It should be pointed out that, according to Article 4 of the Regulation on the method of establishing the conditions and criteria for granting investment incentives and the conditions for strategic investment, costs relating to the purchase of fixed assets to replace existing fixed assets and costs relating to the acquisition of shares or a business interest in a company are not considered eligible costs. Only any investment relating to the same or a similar activity will now be considered as part of a single investment undertaken by the same undertaking (at group level) within three years of the date of commencement of the investment in another investment.

The IPA sets out the content of the call for tenders and the conditions for obtaining a subsidy through a call for tenders, as well as for obtaining a subsidy without a call for tenders. According to Article 15 of the IPA, subsidies may be granted without a call for tenders in the case of investments in research and development and innovations that make a significant contribution to the development of the Slovenian economy.

According to Article 13 of the Regulation, the investor or the recipient of the incentive must provide, from its own resources or by means of external financing in a form other than public funds, at least 25 % of the eligible costs of the investment. However, small and medium-sized enterprises may receive aid for investment up to a maximum of 20 % of the value of the eligible costs (small enterprises) and up to a maximum of 10 % of the value of the eligible costs (medium-sized enterprises).

The amended IPA also newly regulates the notification of foreign direct investment, which must be notified by the investor to the Ministry of Economy, Development, Sport and Tourism within 15 days of the conclusion of the transaction if the foreign investor acquires at least 10% of the capital or voting rights. Otherwise, the investor may be liable to a fine of between EUR 100,000 and EUR 500,000.According to the new Article 31.č of the Act, a direct foreign investment is considered to be an investment that may affect the security or public order of the Republic of Slovenia, in particular in cases where the target company or the acquired company or a newly established company with its registered office in the Republic of Slovenia actually and predominantly carries out activities in one of the listed critical areas:

• critical infrastructure in the energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial sectors, and sensitive facilities and land and real estate essential for the use of such infrastructure;
• сritical technology and dual-use goods, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace and defence, energy storage, quantum and nuclear technologies, as well as nanotechnology and biotechnology;
• supply of critical resources, including energy or raw materials, and food security;
• access to, or the ability to control, sensitive information, including personal data;
• freedom and pluralism of the media, or
• projects or programmes of interest to the European Union as defined in Annex I of Regulation 2019/452/EU.

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