Cities in the Adriatic region with investment opportunities – SarandaAdriatic Journal 19 February 2021
2020 has perhaps been the most exceptional year. With everything we know being put into a new perspective due to the pandemic, it has likewise been the year when humans were reminded what can make us be better prepared for the future – knowledge and collaboration, interest in improving existing solutions and processes, and investment in businesses that develop products and services that allow us to survive and thrive. There is no silver bullet on how to put economies “back on track” but we can witness the operating landscapes being heavily influenced by the governments and global supply chains. Such events offer unique moments for investors to make a meaningful contribution – by identifying regions that offer economic and political cooperation and by investing in business opportunities with good prospects.
Author: Barbara Matijašič
The Adriatic region is situated on the Balkan peninsula, easternmost of Europe’s three great southern peninsulas. Adriatic region is usually characterised as comprising Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, North Macedonia, Romania, Serbia, and Slovenia. Portions of Greece and Turkey are also located within this geographic region.
As analysed by East Capital, a leading active asset manager specialising in emerging and frontier markets, the region has a lot of untapped business opportunities, as it is on course to receive one of the largest stimulus packages globally (equivalent to 17% to 35% of GDP) through the facilities of the EU Recovery Fund and budget: Bulgaria and Croatia will receive funding equivalent to 35% of their 2019 GDP, while Greece, Romania and Slovenia will get support amounting to 27%, 26% and 17% of their 2019 GDP respectively.
The Balkans are set to benefit from the key post-coronavirus economic and business trends through investments in infrastructure, via opportunities for digital transformation, by the implementation of green technologies and by levering innovative start-ups. A new awakening is set for the local manufacturing which can reverse long-standing Western trends to push manufacturing trends overseas. Additionally, the Balkan region is also recognizable for its educated and highly trained workforce. OECD estimates that around 5.6 million Romanians and 800,000 Greeks were living abroad at the end of 2019. The return of at least part of the diaspora would cause a sizable boost to the potential GDP growth level. Also not negligible is data on labour cost in comparison to the high level of education and professional skills. According to OECD, the average salary in Romania in the first quarter of 2020 amounted to EUR 1,082 per month, compared to EUR 4,035 per month for Germany. To ensure progress in the region and to get economies back on their feet, collaborative and systematic frameworks between governments, the public and private sector, as well as investors, are needed. Key areas for economic development identified by the European are: sustainable transport and energy connectivity, green and digital transformation, strengthening health support and creating job opportunities for young people. When deciding where to start your business, keep in mind the golden rule of investing: diversification.
1. Maribor, the second largest city in Slovenia
The city is located at a superb geographical spot, surrounded by one of the strongest economic areas in the world: Germany, Italy, France, etc. Quality roads, air, rail and maritime infrastructure provide connections to Europe and an excellent starting point to enter other Balkans markets.
One of the advantages of the Slovenian business environment (and Maribor), is its openness to foreign investment. This is reflected in competitive tax policies, investment incentives, access to finances and a highly skilled workforce. In 2019 OECD ranked Slovenia among the three countries (besides Luxembourg and Portugal) with the least restrictive foreign direct investment rules. The United Nations report, which rates the human development index, recognizes Slovenia as one of the best in the world. Access to education, technological development, gender equality, environmental and other factors that add to the high quality of life contribute to the high ranking. Slovenia demands 0% for profits generated in EU countries, and 15% for profits generated in non-EU countries, unless bilateral agreements provide other arrangements.
Corporate income tax
19% taxation of profits and the with holding tax rate of 15%.
Up to 100% tax relief for investments in research and development.
Up to 40% tax relief for investment in equipment and intangible fixed assets.
Taxed with personal income tax at a proportional rate, which is in principle 27.5% without taking into account tax reliefs.
Income tax on capital gains is calculated and paid for the tax base at a rate of 25% and is considered a final tax. For each completed 5 years
of capital ownership, the tax rate is reduced.
after 5 years capital gains are taxed at 15%, after 10 years at 10% and after 15 years at 5%.
2. Saranda, a coastal town and municipality in southern Albania
The city is a historic as well as up and coming tourist hotspot. Saranda experienced the significant economic growth thanks to tourism, commerce, maritime transport, fishing, and the textile industry. Tourism is not just a priority for Saranda, but the whole country as Albania boasts nearly 400 km of coastline with its unspoiled Adriatic and Ionian beaches. World Bank ranked Albania 82 of 190 countries regarding the ease of doing business in 2020.
Corporate income tax
Entities registered for corporate income tax (usually those with an annual revenue exceeding or anticipated to surpass ALL 8 million) are subject to corporate income tax rate of 5% of the taxable benefit if their annual income does not exceed ALL 14 million and 15% of the taxable profit if their annual income exceeds ALL 14 million.
For companies registered for streamlined corporate income tax purposes (usually those with an annual turnover of not more than or planned to surpass ALL 8 million), the rate is 0% if their annual turnover is less than ALL 5 million, and 5% if their annual turnover is between ALL 5 million and ALL 8 million.
Automotive firms, tech production/development companies, agricultural cooperative companies, and companies accredited as agro-tourism corporations by 2021 are subject to a lowered 5% corporate income tax limit (reduced rate is applicable for 10 years).
Concerning opportunities in tourism, four- and five-star hotels with “special status” that are an internationally recognized brand and operate under a registered trademark are exempt from corporate income tax for 10 years. This incentive is available to all hotels granted the special status until December 2024.
Charged at the corporate income tax rate of 0%, 5%, or 15%, if appropriate, along with all kinds of income.