1. GATE TO EUROPE Legal Aspects Branislav MALAGURSKI Subotica 27 11 2012

2. Legal Aspects in Serbia  From the legal point of view, there are few key conditions to establish cross border industrial park on Serbian-Hungarian border.  There is no special law on industrial parks in Serbia. It means that the legal system of Serbia needs to allow legal entities on its territory to hold the name of company for management of industrial parks, as well as that it can be determined territory of such park which is suitable for the activities usual for industrial parks (industrial production, logistics, etc), in order to form an industrial park.  So, there is needed to be used similar institutes, which have activities and forms compatible with the industrial park in EU countries.  The most similar institute in Serbia are Free zones and industrial zones, which comprise determined territory, to organize industrial production, which is defined.

3. Legal Aspects in Serbia  In Serbia in general we can define industrial parks as generic notion, being an area on which various tools are used for real estate development that will have as its result development of industry within the particular region.  One of its definitions can be that the industrial park is an area zoned and planned for the purpose of industrial development. In some countries it appears in concrete form of the business park, industrial district, technology centre, in other as free zone, science parks or campuses.  it can be said that the closest legal instrument to industrial parks in Serbia are Free zones, which are regulated with the special law. On the other hand, there are around numerous cities and towns formed industrial zones under the name of Industrial zones or parks. There are even companies managing development of Industrial parks (such as for example Economic and Technology Parks of Subotica).

4. Legal Aspects in Serbia  Free zones are fenced and marked part of the Republic of Serbia's territory where activities are carried out with many business benefits. Preferential customs treatment, tax relief and simplified administrative procedure make free zones investment attractive. free zones represent highly developed centers of technology, telecommunications, modern infrastructure, industry and logistics. The free zone area shall be established when the Government grants Approval. The rights of the Zone Founder, Company for Zone management and Zone User, laid down by the Law on free zones, may not be diminished by any other law or regulation.  The Company for the Zone Management shall submit the application to the Government through the Ministry of Finance to obtain the approval for establishing the zone area. Zone Founder is a local self-government body, company, i.e. entrepreneur who adopted the decision or concluded contract with other Founder on establishing a zone.

5. Legal Aspects in Serbia  The Subotica Free Zone is located in the northern part of Serbia and the province of Vojvodina - next to the border with Hungary and the European Union.  The E-75 international highway passes through Subotica and represents a major pan-European road that leads from north to south and connects with an international road network heading to the Near East. The existing rail line that passes through Subotica is an integral part of the European rail network.  The Subotica Free Zone was founded in 1996, when a joint stock company was formed to manage the Zone  Infrastructure in the free zone: The Zone encompasses 15 hectares of land. It possesses 13.000 square meters of production space, 26.000 square meters of closed storage space, and pertinent office space.

6. Legal Aspects in Serbia  Beside free zones in Serbia there is a number of industrial zones that are managed by various legal entities. Industrial zones are defined usually by local self-governments, which define them in their urban plans and determine a set of incentives that will be given to their users. There are in addition incentives defined by the state for various categories and amounts of investments.  In such situation, where in Hungary there are Industrial parks regulated by the law and in Serbia only similar legal forms (free zones, industrial zones), from the legal point of view, the best solution would be to form cross-border industrial park as one entity from the point of view of economy, consisting of two legal entities, from the legal point: one industrial park in Hungary and one industrial park-free zone in Serbia, each formed according to laws of the country it is located in. This means that the decision on the formation of the Cross-border Industrial park would be brought by founders of each national industrial park-free zone (Municipality Tompa and City of Subotica). So, each of them would be founder of national industrial park, i.e. free zone, which is on its territory, as well as of the cross-border industrial park formed through the Consortium agreement.

7. Legal Aspects in Serbia  In their joint decision and the Consortium agreement, they will not only define locations of Cross-border industrial park, its objectives, surface, infrastructure, companies/businesses to be set up, but also the common management structure of it. That way, the Cross-border industrial park will have common body administering it, although not being legal person itself, where the legal personality will possess company appointed by the Consortium agreement to administer cross-border industrial park.  This will be the integrative entity around which will be set the cross-border industrial park and that will ensure combined and synergy activities of its founders, from both side of the border. Simultaneously Cross-border industrial park will consist of two legally defined entities, the Industrial park of Tompa (acting based of Hungarian laws) and the Free zone of Subotica (acting based on Serbian laws).

8. Legal Aspects in Serbia  Legally it will consist of two legal entities, but economically and technically it will represent one Industrial park. The uniformity will be ensured by the Consortium agreement concluded between the founders from both Hungarian and Serbian side (Municipality Tompa and City Subotica, etc.). This unity of the two entities on two cross-border locations and being a functional unit will be guaranteed by common administration/management.  The common administration/management will be ensured by founders of the Cross-borer industrial park, being both Municipality of Tompa and City of Subotica. They will together define who will be the manager of the cross border industrial park, as well as that functional unity will be ensured not only by the common administration/management of the zone, but also through common adopted policies, criteria for tenants, common investment attraction plans, cooperation of companies that will set up businesses on their territory (exchange of goods and services), etc.

9. Legal Aspects in Serbia  The cross border industrial park on behalf of Serbia can have a substantial benefits for the part of production and other activities held in Serbia, as there are substantial financial incentives and benefits which are described in more details below.  Such financial and other benefits for investors entering into Free zones or industrial zones or parks in Serbia enhance their competitiveness on the market and help easier to handle goods which are imported, processed or exported from the territory of such industrial park, i.e. zone.

10. Legal Aspects in Serbia  Incentives: For standard-scale Greenfield and Brownfield projects in the manufacturing, export-related services sector and tourism, non- refundable state funds are offered in the range between €4,000 and €10,000 per new job created within three years. For standard-scale Greenfield and Brownfield projects in the manufacturing, export-related services sector and tourism, non- refundable state funds are offered in the range between €4,000 and €10,000 per new job created within three years. For large investors, special financial packages are available: For large investors, special financial packages are available:  If a project's value exceeds €200 million, with the minimum of 1,000 new jobs created within an agreed-upon timeframe of no longer than 10 years, the state may cover 17% of the investment.  Large investment projects - over €100 million that create a minimum 300 new jobs within a timeframe of no longer than 10 years - can be subsidized for up to 17% of the project's value.  Large investment projects - investments of over €50 million and less than €100 million that create a minimum of 300 new jobs within an agreed-upon timeframe of no longer than 10 years - can be subsidized for up to 20% of the project's value.  Medium-sized projects - investments of over €50 million that create at least 150 new jobs within an agreed-upon timeframe of no longer than 10 years - are eligible to receive up to 10% of the total investment value.

11. Legal Aspects in Serbia  The amount of tax payable can be reduced by 20% or 80% of the amount invested in fixed assets for the respective tax period. This reduction cannot exceed 50% of the total tax liability for a single year.  A 5-year tax holiday is granted for concession-related investments, from the day the concession investment has been completed.  Income generated through commercial activities in the Free Zones in Serbia is exempted from Value Added Tax.  Foreign investors in Serbia can enjoy the benefit of customs free import of raw material and semi finished goods for export oriented production.  Foreign investors are exempt from paying customs duty on imported equipment and machinery which represents the share of a foreign investor in a capital of a company in Serbia.

12. Legal Aspects in Serbia  There is no specific law on industrial parks in Serbia, and that we use for them as synonyms industrial zones or free zones. Therefore, in Serbia it is just needed to have registered the company for management of the particular industrial zone under the name of industrial park for the particular territory or to register free zone according to the law regulating free zones.  In the first case it is sufficient that he company managing the particular territory for purposes of industrial development can get the name by being registered at the Agency for Commercial Registrations (APR) in Belgrade and after registration, fulfilling the conditions needed to register any company (defined name and seat, founding members, equity capital not less than EUR1,00 for LLC, defined basic field of activities, bodies and manager), can be active under the name of industrial park for the particular territorial zone, provided not already such entity has been registered previously.  It is needed by the local self-government to determine the territory on there will be a piece of land for green field investment, plus the extent to which the infrastructure on such piece of land will be prepared by the local self-governance.

13. Legal Aspects in Serbia  The advantages of Free zones in Serbia:  Customs duties and other import charges shall not be paid for import of goods intended for carrying out of activities and construction of facilities in the zone.  The goods brought into and moved out of the zone, as well as the goods stored in the zone shall be treated as customs goods.  Person who trades the goods from the zone on the territory of Serbia shall be liable to declare such goods to the customs office; therefore adequate customs procedure may take place.  Control of the goods is carried out by customs authority  Transportation is free of VAT

14. Legal Aspects in Serbia  So, the cross-border industrial park should be formed as a consortium, without representing a legal person with tax number, but being based on private law (law of obligations in Serbia). This consortium should consist of the common management organization, found according to laws of Hungary, by cross border partners (at least municipality of Tompa and City of Subotica, but possibly including project partners and some other entities), which should be appointed to be the head of the Consortium, and by other stakeholders interested for the success of this industrial park (both local self-governments, development support organizations from their territories, some companies interested to do business in this CBC industrial park, for example).  The participants of the Consortium beside the municipality Tompa and City of Subotica, should be new formed Company for management of the Cross-border industrial park, Free zone of Subotica, project partners and eventually other entities capable of supporting this concept.

15. GATE TO EUROPE Legal Aspects Branislav MALAGURSKI Subotica 27.11.2012.