The SELA regional newsletter features an overview of the most important regional legislative developments recently announced in the jurisdictions of SELA coverage. Many of the changes recently implemented impact the regions ability to attract foreign investments and related to tax, customs and other investment incentives, illustrating just how strategically important the governing bodies of the region see foreign investment.
Albania
The New Law on Cadaster
In February 2019 the Albanian Parliament approved a new law on cadaster (no. 111/2018), effective as of 21 March 2019. The Cadaster Law repeals the existing law 33/2012 on the registration of immovable properties.
A new state cadaster agency has been established under the new Cadaster Law, which will take over the functions of the following existing agencies:
- Immovable Property Registration Office;
- Agency for Legalization, Urbanization and Integration of Informal Constructions;
- Agency for the Inventory and Transfer of Public Properties;
The aim of the new Cadaster Law is to improve the legal framework for property and address existing shortcomings of the previous system. In addition, by merging public functions of exiting agencies involved in propriety managing, the new Cadaster Law aims to establish a cohesive and coherent set of property data across different areas, including the long-lasting problem of registries of state land.
With the new Cadaster Law, the government also aims to implement the new taxation system of immovable properties on the basis of their cadastral value.
New Draft Law on the Albanian Investments Corporation
The Albanian Government has submitted a draft proposal to the Parliament for a new law on the Albanian Investment Corporation (AIC).
Under this proposal, the AIC will be established as a joint stock company fully owned by the Government. Equity participation in the AIC will be also offered to internarial financing institutions.
The AIC is expected to be involved in relevant projects in Albania, by investing state funds on a commercial basis, and /or partnering with foreign inventors. It will manage public properties, which will be made available for the realization of complex investment projects.
Bosnia & Herzegovina
Introduction of E-Construction Permits
The Ministry of Spatial Planning, Construction and Ecology of the Republic of Srpska initiated legislative changes and pilot projects aiming to introduce e-construction permits.
As a first step, one-stop shop system for issuance of construction permits has been piloting in few local communities. The Ministry expects that by mid this year all local administrations will introduce a one-stop shop system for issuance of construction permits.
The electronic system of issuance of construction permits will be completely introduced upon the completion of the reform of the Land Registries, which is a basis for the issuance of electronic permits.
The World Bank has donated a software for issuance of electronic construction permits to the Government of the Republic of Srpska. The World Bank will implement the procedure, will select experts who will install the software, after what the issuance of construction permits may begin.
The Municipalities shall hold the entire implementation planning documentation in an electronical format, while the basis for the implementation of the electronical construction permits shall be the deeds, solving property-legal issues.
Introduction of the one-stop shop system for issuance of construction permits in all municipalities within the Republic of Srpska is the first phase towards the issuance of construction permits, due to which 17 laws containing provisions that obstruct the issuance of these permits will have to amended.
Having finalized these procedures, the person in charge of a procedure within the Ministry or a local community, will be provided with all relevant consents electronically and will submit a decision to a citizen within a day or two stating whether the person is entitled to build at a certain location.
The guiding idea for the whole process of reform is to attract investors through shortening procedures, making sure that those processes and procedures required by the Stabilization and Accession Agreement, as well as the European Directives are fulfilled.
Bulgaria
All Legal Entities to Declare Their UBO by 31 May 2019
The amendments to the Bulgarian Anti-money laundering legislation have imposed new specific requirements to the Bulgarian legal entities. Some of them refer only to the obliged entities specified in the Measures Against Money Laundering Act (MAMLA). However, the obligation to disclose the ultimate beneficial owner (UBO) is affecting all legal entities registered in the Republic of Bulgaria. Therefore, any legal entity should take the necessary steps in order to be compliant with this requirement, namely:
- Define the persons who are the UBOs of the company. The law contains a detailed definition of a beneficial owner. In general, these are the natural persons who actually own or control the company. If the beneficial owners cannot be defined after all other means provided by the MAMLA have been exhausted, senior managers are considered as such.
- Collect, maintain and periodically update documents evidencing who the beneficial owners are.
- If the entity does not have a legal representative permanently residing in Bulgaria, it shall appoint a contact person for the purposes of MAMLA. This person shall be responsible for collecting, maintaining and updating the documents under item 2 above and should be able to provide them to the competent authority upon request.
- Submit to the Commercial Register information about the UBOs and contact persons no later than 31st May 2019. It should be noted that the information regarding the UBO shall be publicly available.
Failure to comply with the above requirements could result in sanctions to the amount of BGN 1,000 to 10,000. In case the UBO is not registered with the Commercial Register until 31 May 2019, the entity could be sanctioned every subsequent month until the registration is completed.
New “Employment Quota” Will Ensure the Employment of People with Permanent Disabilities
On 1 January 2019 the Persons with Disabilities Act (PDA) entered into force. The Act establishes new tools for assessment of people with disabilities’ needs and introduces obligations for some of the employers.
Enhanced policy to ensure the employment of people with permanent disabilities
The PDA introduces the so-called “employment quota” according to which all employers are obliged to allocate part of their work positions for hiring people with permanent disabilities, as follows:
- employers with 50 to 99 employees are required to allocate 1 position for a person with permanent disability; employers with 100 and more employees – 2% of their average number of employees.
Obligation to notify the Employment Agency
According to the new regime, employers are required to notify the Employment Agency of their vacancies allocated for people with disabilities. Within 3 months from the notification, employers shall hire the corresponding number of persons meeting the requirements for the respective job positions, as well as to notify the Agency accordingly.
Pecuniary sanctions
In case of failure to comply with the obligations for achieving the “employment quota”, each employer shall owe a monthly installment of 30% of the national minimum wage for any vacancy allocated for a person with permanent disability. The amounts shall be paid to the Labor Inspectorate budget. In the event of failure by employers to pay these monthly installments pecuniary sanctions between BGN 2,000 and BGN 5,000 may be imposed. For a repeated violation the sanction is between BGN 4,000 and BGN 10,000.
The regime provides for several exceptions. Employers shall be exempted from the above-mentioned requirements in cases where specific production factors hinder hiring people with permanent disabilities, as well as in cases where the Employment Agency/employment agents have not referred any such people to the respective employer. There is still no clarity as to what criteria these factors will be assessed.
DOs and DON’Ts under the new Bulgarian data protection law
On 28 February 2019 the long-awaited amendments to the Personal Data Protection Act (the “Act/PDPA”) aimed at harmonizing the Bulgarian legislation with the General Data Protection Regulation (GDPR) are already a fact. In addition, the Act brings about certain specific national regulations.
Below you will find a short list of some of the most important requirements introduced by the new Act:
DOs
Adopt explicit internal rules in case certain activities or processes are carried out; Inform employees about the adopted internal rules and provide them with access to these documents; Store the personal data collected within recruitment procedures for no more than 6 months. The applicant’s consent is required to store his/her data for a longer period; Appoint a Data Protection Officer (DPO) in case the company falls within the definition of a “public authority” in accordance with the Act; Provide the names, PIN and contact details of the DPO (if designated) to the Commission for Personal Data Protection; Whenever minors’ personal data (under the age of 14) is processed based on consent, require consent from parent exercising parent’s rights/from guardian; In cases where personal data of deceased persons is processed, such processing shall only be carried out in case there is a legal ground therefore and by taking appropriate measures not to adversely affect the rights or freedoms of others or any public interest; When processing personal data for the purposes of journalistic, academic, artistic and/or literary expression, always try to strike a balance between freedom of expression, right to information and privacy in compliance with the criteria set out in the PDPA.
DON’Ts
Do not copy identification documents (ID card, passport, driver’s license) or residence permit (unless you have ensured a legal ground provided for by law); Do not allow free public access to information containing PIN, unless otherwise provided by law; Do not use PIN as passwords.
Croatia
New amendments of the Companies Act
New amendments of the Croatian Companies Act entered into force on 20 April 2019. The goal of the amendments was harmonization with EU legislative, improvement of corporate culture and governance, simplification of limited liability company incorporation procedure by introducing new digital incorporation model, although the latter is expected to become fully operational in September this year. Most significant amendments are:
- transposition of Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement (Shareholders Rights Directive II; SRD II);
- introduction of new rules on summarized winding up procedure of companies;
- introduction of rules on distance incorporation of limited liability companies via court registry electronic system;
- new obligation of companies to establish a remuneration policy and to draw up a remuneration report for joint stock companies and
- rules on publication on related person transactions for joint stock companies
Provisions regarding certain aspects of remuneration policy and reporting shall enter into force in May 2020, while certain amendments related to exercising voting rights and transmission of information will enter into force in January 2021.
New Whistleblower Protection Act
The new Whistleblower Protection Act includes general regulations, principles of protection and rights of whistleblowers, as well as obligations imposed towards the employers relating to whistleblower protection. It also regulates the procedure for reporting irregularities and the conduct following the report. Whistleblowers are entitled to court protection, compensation, identity protection and confidentiality. The protection measures are extended to the persons connected to whistleblowers. The Act shall enter into force on 1 July 2019.
Amendments of the Investment Promotion Act
Significant changes to the Investment Promotion Act include lowering of minimum investment thresholds for investments and new tax relief measures. Promotions threshold of initial investments in information-communication systems sector have been lowered from former EUR 150.000 to EUR 50.000, with the commitment of creating 10 new employment positions. This is paired by the tax relief – reduced taxation rate on income tax for 50%.
Threshold for achieving the said tax relief measure with regards to investors in other sectors is also lowered and applies to investments in the value range between HRK 150.000 and HRK 1 million.
Additionally, the new provisions provide the ability for entrepreneurs to use passive (unused) state-owned real property, under the condition of investment of EUR 3 million within the next 3 years and creation of minimum 15 employment positions, and must result in an increase of said state property for 50%. Investor who successfully realize the investment shall be granted a no-fee lease of the state-owned property – with the right of purchase after expiry of the lease period or achievement of upper limit of investment incentive thresholds.
Montenegro
The Law on Mediation in Employment and Rights during Unemployment
In April 2019 the National Assembly of Montenegro adopted the Law on Mediation in Employment and Rights during Unemployment. The aim of the Montenegrin government was to adapt the legal framework to the current conditions on the market in the field of labor. This piece of legislation regulates the activities in relation to employment, rights and obligations of the unemployed person, preparation for employment, employment mediation, active employment policy, procedure for exercising rights during unemployment, records in the field of employment and other issues of importance for increasing the employment in Montenegro. The law is fully harmonized with relevant directives of the European Union and international conventions in this field. The law introduced some important novelties such as prescribed minimum insurance period which is now 9 months (12 months previously) and also envisages monetary compensation in the amount of 40 percent of the minimum wage (56 percent previously).
The Law on Amendments to the Law on Enforcement and Securing of Claims
In April 2019 the National Assembly of Montenegro adopted the Law on Amendments to the Law on Enforcement and Securing of Claims in order to harmonize with the relevant legislation of the European Union. In that respect, the amendments introduced the following important changes:
- Enforcement documents issued in another country of the European Union and confirmed in accordance with Regulation no 805/2004 of the European Parliament and the Council as a European Enforcement Order are enforceable in Montenegro under the same conditions as domestic enforcement documents i.e. without prior initiation of a special procedure for the recognition of this document and proclamation of its suitability for enforcement.
- European payment orders introduced by Regulation no. 1896/2006 of the European Parliament and of the Council, issued by the court in Montenegro, represent enforceable documents on the basis of which an enforcement creditor may initiate the enforcement procedure in Montenegro. On the other hand, European payment orders issued in another country of the European Union, and which became enforceable, may be used in Montenegro under the same conditions as domestic enforcement documents i.e. without prior initiation of a special procedure for the recognition and proclamation of its suitability for enforcement.
North Macedonia
The Law on Public Procurement
The new Law on Public Procurement entered into force on 1 April 2019. It represents harmonization with the EU public procurement rules, providing legal basis for more transparent and efficient procurement procedures, as well more effective allocation of the public funds, thus improving the public procurement system.
The most important novelty introduced with the law is the prescription of the ‘most economically advantageous tender’ as main contract award criteria, as opposed to the so far applicable ‘lowest price’ criteria. The application of this criterion can include three different approaches: the price only, the cost only or the best price-quality ratio. Along with the need for EU harmonization, the introduction of this change is due to the inefficiency of the previous practice which demonstrated that the lowest price did not always bring the greatest quality.
As for other novelties, the new law simplifies lower value procurement procedures through the introduction of procurement procedures such as small value procurement, an electronic market for small-scale public procurement and a simplified open procedure.
Another novelty is the establishment of an obligation for the contracting authorities for publishing of an annual plan for public procurements each January via the Electronic System for Public Procurements. This provides market transparency, as well as space for better and timely preparation for the upcoming public calls.
The Law also provides a series of anti-corruption rules and rules that will prevent the conflict of interest in the performance of public procurements.
Additionally, the Law contains solutions that will protect the rights of employees participating in the performance of public procurement contracts, as well as subcontractors. It also contains provisions for inclusion of social aspects in public procurement procedures via the so-called “reserved contracts”. Starting from 1 January 2020, contracting authorities will be able to use these contracts in order to encourage inclusive growth and employment of socially disadvantaged groups, or for socially vulnerable groups and those who reinvest their earnings for this aim.
Serbia
The Law on amendments to the Law on Planning and Construction
The recent amendments to the Law on Planning and Construction adopted by the National Assembly of Serbia in March 2019 additionally facilitate the process of obtaining a building permit for certain categories of facilities. However, some solutions have opened a discussion of legal certainty and predictability of the business environment. For example, the procedure for obtaining a building permit for infrastructure facilities (e.g. roads, railroads) has been simplified by envisaging that those facilities can be built even before the investor has settled ownership relations on the land, only based on the investor’s statement that it will resolve such relations before the use permit is obtained. The previously problematic provision which prevented the issuance of a building permit was also amended, where an inscription of a dispute over the property’s ownership had been filed with the real estate cadaster. In practice, this provision used to be abused for vexatious litigations to harass or subdue an investor, blocking the real estate project until the final resolution of frivolous litigation. After adoption of these amendments of the law, the inscription of a dispute over the property’s ownership no longer prevents the issuance of a building permit (however, the permit will be issued at the investor’s risk).
The Law on Health Insurance
In early April 2019 the National Assembly of Serbia has adopted a completely new Law on Health Insurance. The main reason for the adoption of the new Law on Health Insurance is the need for harmonization of the Serbian health insurance system with the current modern achievements in this field, particularly through establishment of compulsory and voluntary health insurance plans. Also, there was a need to include as many Serbian citizens as possible in the system of compulsory health insurance, expanding the scope of rights of compulsory health insurance in accordance with available financial resources and the need to harmonize the compulsory health insurance system with other systems that regulate compulsory social security. One of the most significant novelties is the registration of the health care institution and its organizational unit in the new Register of Health Care Institutions and the Unique Record of Health Care Subjects kept within the Serbian Business Registers Agency. The Register and the Unique Record will be established within 18 months from entering into force of the Law. Further, the provisions regarding new health care technology are expanded and the qualification and qualities of the health care employees, health care associates, directors and other bodies of a health care institution, as well as the procedure of appointment of the director, are now prescribed in more detailed manner.
The Law on Amendments to the Law on Foreigners
The Law on Amendments to the Law on Foreigners was adopted by the National Assembly with the main reason to further speed up and simplify the procedure for issuance of work permit in order to make business, employment, and investments in Serbia more attractive to foreigners.
The new Amendments to the Law of Foreigners introduced the possibility for submission of the respective request for issuing a temporary residence permit electronically including submission when the foreigner is abroad – as of 1 January 2020, and introduced a single administrative place for submitting a consolidated request for temporary residence and a permit for work of foreigners – as of 1 December 2020. The aforementioned changes will improve should business environment in Serbia, raising its competitiveness with regards to employment of foreigners.
The Law on Amendments to the Law on Employment of Foreigners
The Law on Amendments to the Law on Employment of Foreigners introduces certain novelties mainly when it comes to the procedure of obtaining specific work permits based on secondment and moving through the company. Namely, the respective procedure for extension of these types of work permits is now significantly simplified since the Serbian National Employment Service will ex officio obtain the opinion and the consent of the competent ministries. Therefore, unified procedure is now introduced. The maximum duration of the work permit based on secondment and moving through the company still remains the same – one year plus one year extension, i.e. the limit remains 2 years. Further to the aforementioned, the possibility of obtaining a work permit for a foreigner who was granted visa for a longer period of time is now introduced. Also, according to the recent amendments the employer may initiate the procedure of obtaining a work permit before the national Employment Service even before the procedure for granting the visa is finalized. Finally, after these amendments, certain provisions are now more precise which was also one of the aims of the legislator.
The Law on Amendments to the Law on Registration before the Business Registers Agency
The Law on Amendments to the Law on Registration before the Business Registers Agency harmonizes the main piece of legislation governing registration procedure before the competent authority with the relatively recent significantly amended Law on Companies and the Law on General Administrative Procedure. Simplification of the registration procedure is one of the main goals of the Serbian Government in order to advance on the World Bank’s Doing Business list which will certainly lead to a more competitive business environment when it comes to attracting foreign investments. The amendments introduced a more precise and clear provision when it comes to who are the authorized persons for submitting the registration form. Also, submitting the electronic registration form is now regulated in a more detailed manner. The new deadline for the register to decide on the submitted applications is now 5 business days instead of 5 calendar days.
The Law on Amendments to the Law on Security Rights on Movable Property Entered in the Register
The Law on Amendments to the Law on Security Rights on Movable Property Entered in the Register introduced certain novelties in order to make data on potential encumbrances on movable property and rights of legal entities and individuals more complete, publicly available, and transparent. In the past years the pledge on movable property without delivering into possession was widely used and had significant importance for business performance. On the other hand, the respective legislation framework was set out back in 2003 with few changes thus far. In that respect one of the main requirements of the World Bank was to enable the description of the subject of the pledge and the secured claim in a way to be determinable (not strictly determined as so far prescribed) and without strictly precise reference to each object and claim. Further, the amendments introduced more precise provisions in order to decrease or prevent the previously existing legal vacuum and uncertainty.
Slovenia
Novelties in the field of Slovenian legislation
In newsletter for the first quarter of the year 2019 we will, in particular, highlight the adoption of a completely new and comprehensive act regulating trade secret and further, changes in the regulation of the Slovenian agricultural land policy that are anticipated. In addition, legislative amendments affecting employees’ rights were adopted.
New Trade Secrets Act
In March a new Trade Secrets Act was adopted aiming to fully regulate the area of trade secret both in terms of material and procedural provisions, since until recently the mentioned area was regulated in various sector-specific acts.
The first important novelty worth mentioning is the very definition of the concept of trade secret, which must meet all three requirements set out in the adopted act itself. Up until now, as a trade secret has been considered manly data classified as such by a company’s written decision (i.e. a subjective criterion).
The new regulation distinguishes more clearly between lawful and unlawful acquisition, as well as use and disclosure of trade secret. As far as judicial protection is concerned, legal claims that the proprietor of a trade secret may file against the infringer, as well as the right to compensation for damages under general rules, are now defined. Civil penalty is also foreseen, i.e. up to 200% increased compensation for the use of a trade secret if the right under this law was violated intentionally or through gross negligence. Moreover, new act contains measures to preserve the confidentiality of trade secret during the court proceedings and provides for exceptions when no legal protection is given to the proprietor of a trade secret. The act also defines the possibility of issuing an interim decision for the immediate cessation of violations.
Anticipated changes in agricultural land policy
The Slovenian Ministry of Agriculture, Forestry and Food (MAFF) recently proposed amendments designed to encourage the generational renovation of farms, as young farmers are, in many cases, currently unable to obtain agricultural land due to restricting legislation. The draft act is currently in public discussion until the end of May.
MAFF is proposing to change the policy of agricultural land by improving the ability of young farmers to lease state-owned agricultural land by offering them areas gradually taken away from large leaseholders (i.e. those who lease more than 100 hectares) at the expiration of the lease. First, they would take 5%, in ten years 7%, and in the next ten years another 10% of the surface. For large leaseholders (mainly agricultural companies) this of course means a land loss. For example, a company leasing 500 hectares would lose a total of approximately 100 hectares.
Unsurprisingly, some of MAFF’s proposals are facing strong opposition from agricultural companies, which oppose the planned limitation of lease of state-owned agricultural land to a maximum of 100 hectares (1 square km). They also oppose the gradual withdrawal of land, which is likely to affect their individual business activities.
Higher minimum wage and non-taxation of the payment for annual leave
At the end of the year 2018 amendments to the Minimum Wage Act were adopted, resulting in a gradual increase in minimum wage from 1 January this year onward. In addition, the amendments also specify that extra payments (e.g. for night work, overtime work, years of service etc.), part of the wage for job performance and remuneration for business performance, are not to be included in minimum wage.
Moreover, the payment for annual leave up to 100% of the average monthly wage[1] of employees in Slovenia will not be a subject to taxation in terms of social security contributions and personal income tax. Employees will therefore receive higher payments already for this year’s vacation.
[1] EUR 1,714.49 gross (last data available for period: February 2019)