EMCC European Monitoring Centre on Change

Subsidy for eligible costs of creating new jobs related to investment projects

Croatia
Phase: Anticipation
Típus:
  • Access to finance
  • Employment incentive
  • Fostering innovation
  • Support of companies' growth
  • Support of SMEs
Utoljára módosítva: 27 August, 2020
Név:

Potpora za opravdane troškove novih radnih mjesta povezanih s projektom ulaganja

Angol név:

Subsidy for eligible costs of creating new jobs related to investment projects

Coverage/Eligibility

Incentive measures can be used by enterprises registered in the Republic of Croatia investing in fixed assets the minimum amount of:

  • €50,000 together with creating at least 3 new jobs for micro enterprises
  • €150,000 together with creating at least 5 new jobs for small, medium and large enterprises
  • €50,000 together with creating at least 10 new jobs for ICT system and software development centres
  • €500,000 for investment projects in modernising and increasing business process productivity

Micro enterprises have fewer than 10 employees, annual turnover or annual balance sheet less than or equal to €2 million; small enterprises have fewer than 50 employees, annual turnover or annual balance sheet less than or equal to €10 million; medium enterprise which has fewer than 250 employees, an annual turnover less than or equal to €50 million and annual balance sheet less than or equal to €43 million; large enterprises have at least 250 employees or more, annual turnover of more than €50million and annual balance sheet €43million.

The amount of aid is calculated as a percentage of investment value, which is based on eligible investment cost. Eligible investment costs are:

  • tangible (value of  land/buildings and plant/machinery) and intangible assets (patent rights, licences, know-how), or
  • gross wage calculated over two years

The minimum period for maintaining the investment and newly created jobs linked to investment is five years for large enterprises, and three years for small and medium-sized enterprises, but no less than the period of use of the incentive measures.

Main characteristics

An employer who creates new jobs with investments in regions where the regional unemployment rate is at 10% will be approved a grant of a maximum of 10% of justifiable investment costs or up to €3,000 per created job. If new jobs are created in the counties with an unemployment rate between 10% and 20%, a maximum of 20% of the costs of opening a new job are refunded (up to €6,000) per created job. If the unemployment rate exceeds 20%, a maximum of 30% of eligible costs of creating a new job is refunded, which is an equivalent of up to €9,000 per job created. 

The specified amount of the grant refers to the unemployed who are registered with the Croatian Employment Service (CES) for at least 6 months, regardless of the length of the work experience and level of education, people older than 50 years registered as unemployed with CES and people without work experience registered as unemployed with CES. For other categories of workers, the incentive rate is 40% of the above-specified amount (Investment Promotion Directive, OG 31/16, 2/19). 

Increase for development and innovation activities is 50%: €1,500 per created job in the first type of county; to €3,000 per created job in the second type; and to €4,500 per created job in the third type. Development and innovation activities are activities that affect the development of new and significantly improving existing products, production series, manufacturing processes and/or production technologies. 

Increase for business support activities and high added value activities is further 25%: €750 per created job in the first type of county; to €1,500 per created job in the second type, and to €2,250 per created job in the third type.

Business support services are the following:

  1.  Customers/clients relationship centres – all types of call centres, multimedia contact centres and other types of contact and service centres focused on technical support and problem solving for customers/clients
  2. Centres of outsourced business activities – focused on outsourcing and pooling of business activities, such as finance, accounting, marketing, product design, audio-visual activities, human resources development and development of information technology
  3. Logistics and distribution centres – aimed at establishing and building high-technology logistics and distribution centres providing intermodal transportation, warehousing, packaging and handling in order to significantly improve logistics and distribution activities within the business process and delivery of goods
  4. ICT system and software development centres: development and application of information systems, outsourcing of IT management operating systems, development of telecommunications network operation centres and development and application of new software solutions

High Added Value Activities:

  1.  Creative service activities: activities in the field of architecture, design, different forms of media communication, advertising, publishing, culture, creative industry and other activities in the field of fine arts
  2.  Hospitality and tourism activities – hospitality and tourism accommodation facilities categorised as at least four stars, such as hotel, aparthotel, tourist resort and camps; heritage hotels, diffused hotels, other types of accommodation facilities created by the renovation of cultural and historical structures, with the mandatory submission of conservation requirements of reconstruction; supporting services of the aforementioned types of accommodations which include; health tourism, congress tourism, nautical tourism, golf tourism, cultural tourism, entertainment and/or recreation centres and parks, ecological tourism projects and other innovative projects in tourism with high added value as well as nautical tourism projects with categories of four or more anchors; amusement and theme park projects
  3. Industrial engineering services

Increase for business support activities and high added value activities is further 25%: €750 per job created in the first type of county; to €1,500 per job created in the second type, and to €2,250 per job created in the third type. Business support services for investment in development and innovation activities, a non-repayable grant shall be approved for the purchase of plant/machinery amounting to 20% of the actual eligible costs for purchasing plant/machinery, for the maximum amount of €500,000 in equivalent HRK value, provided that the purchased plant/machinery represents high technology equipment.

The total amount of non-repayable financial grant, tax and other incentives that the beneficiary can use during the period of use of grants shall be determined in absolute terms. Obligations of the recipient of incentive measures include submission of an annual report on the status of the investment project to the responsible ministry and the Ministry of Finance/tax authority. The annual report is submitted together and in accordance with the deadlines for the submission of, an annual income tax statement. 

Funding

  • National funds

Involved actors

National government
Funding.

Effectiveness

During the first quarter of 2020, 47 applications were received in Croatia for the use of subsidies by the Ministry of the Economy, Entrepreneurship and Crafts under the Investment Promotion Act. Of these, as many as 39 applications relate to small and medium-sized enterprises, whose planned investment value is over HRK 500 million (€ 66.6 million), with the simultaneous planned creation of 551 new jobs. The remaining 8 applications relate to large enterprises, whose planned investment value is almost HRK 1000 million (€ 133.4 million), with 135 planned new jobs. Thus, the total planned investments amount to almost HRK 1,500 million (€ 200 million), with the planned creation of 686 new jobs (poslovni.hr, 3 April 2020). 

Strengths

This measure benefits regions with higher unemployment rates. If a new position is not preserved for at least five years, the grant beneficiary must return the entire grant received with interest (the rate will be determined by the Ministry of Finance).

Weaknesses

There are no available evaluations of this measure, but according to Bartlett (2016) the 'programme was also overly bureaucratic, raising transaction costs, while the subsidies were insufficiently backed up by the provision of business services, in the form of advice, counselling and training due to the limited scope and quality of consultancy services, themselves subject to rent-seeking and political bias in the selection of registered consultants'.

The maximum salary can be determined according to the grant size. There is no guarantee that an employer will not deliberately reduce the gross salary of workers after the period that grant rules specify. The employer is obliged to keep newly created job positions for five years, however, there are no conditions regarding the maintenance of any rate of salary in the period of grant usage. Rules for awarding grants can be changed during the process of investment as the government is in charge of determining the criteria for the exact amount of grant allocation by a special decree, creating greater insecurity for the employer. Finally, the grant payable can change subject to certain employee characteristics and may encourage an employer to temporarily hire less qualified people to meet the criteria for a larger grant, thus disadvantaging more qualified employees. The measure does not specify whether the same individuals need to be employed for the entire period of grant usage.

Példák

SYSTEMCOM Ltd. new products developer of information and communication technology, offers products and services in building information system and microelectronic design.
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