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The new model of Fiat is made in Serbia through the old system of state subsidies

At the promotion of the new Fiat model “500L” produced in Kragujevac, Prime Minister and President-elect Aleksandar Vucic stated that the FCA, producer of the car, is dedicated to further investments in Serbia.

Srdjan Ilic: Fiat produced in Serbia
Photo: Srdjan Ilic / Fiat produced in Serbia

During the promotion on Thursday, PM Vucic also stated that the Kragujevac based FCA factory contributes to the rise of Serbian GDP by three per cent and it makes eight per cent of Serbia’s export.

When asked what would happen with the factory after the contract between the state of Serbia and the FCA expires on 31 December 2018, PM Vucic said that he is convinced that, even after the contract expires, Fiat factory will remain in Serbia and continue production.

“I cannot guarantee anything, but I can express hope and conviction that they will stay in Serbia and we [the Government] will work hard on it.” said PM Vucic.

Fiat freed of paying numerous taxes

FAC factory in Kragujevac is a joint venture of the Serbian state and Fiat. Although the state officials have for years refused to reveal how high Serbia’s investments in Fiat are, a lot of data could be obtained from the factory’s financial reports.

Journalists of the Insajder Production found in the Notes of financial reports that the contract between the state and Fiat was amended in December 2009. In accordance with it and the state’s incentive plan, Serbia provides different subsidies to Fiat and frees this company from many taxes.

Fiat Serbia is exempt from income tax and social security contributions for all employees, the profit tax for 10 years from the first year when taxable income is generated, the real estate tax, the tax for implementation of the urban plan, the tax for displaying trademark, and so on. In Serbia, employers are obliged by law to pay income tax and social security for employees.

The system of tax exemption for the FAC is designed in such a way that, at the end of the year, the company reports to the state how much it spent on tax, and then the state of Serbia reimburses it.

Fiat also receives from the Serbian state the subsidies for investments, it can achieve savings on the loans approved by the state of Serbia, and it receives funds for training workers, as well as reduced energy prices.

In the notes of the company’s financial report for 2015, it is stated that Serbia allocated 21 billion RSD (170.7 million euros) to Fiat, out of which eight billion RSD (65 million euros) went to Fiat’s special account for utilities and replacement of the factory’s roof, cleaning the environment, and building of Supplier Park.

Interestingly, as stated in the financial report for 2014, the state paid to Fiat a total of 161 million RSD (1.3 million euros) for the utilities, replacement of the roof, cleaning the environment, and building of Supplier Park. Financial report for 2016 has not yet been published by the Agency for Business Registers.

The contract between Serbia and Fiat still confidential

The content of the contract between Serbia and Fiat is still classified. Serbian authorities claim that they cannot reveal its content or what the state promised to do because, according to them, Fiat does not allow them to.

About ten days before the presidential and parliamentary elections in 2008, the then Minister of Economy Mladjan Dinkic and Vice-president of FIAT Alfredo Altavilla signed a Memorandum on joint investment between Serbia and Fiat, which stipulated the opening of the car factory in Kragujevac.

Fiat's investment in the Serbian market was used in presidential campaign by Boris Tadic who won the election, and the United Regions of Serbia, led by Mladjan Dinkic, used Fiat’s investment as one of the main results. The then opposition, including the current ruling party of the PM Aleksandar Vucic, criticized the investment as well as the confidentiality of the contract.

The opening ceremony of the factory was twenty days before the parliamentary elections of 2012 and was attended by Prime Minister at the time, Mirko Cvetkovic, and other Serbian officials.

All Serbian governments in the past nine years refused to reveal the details from the contract with Fiat. In May 2014, current PM Vucic stated that he would release the contract to the public. However, in August 2014, PM Vucic said that “revealing the contract is not possible.”

“Unfortunately, the contract will not be released to the public because the other party does not allow us to.” said PM Vucic.

Published details of the joint venture contract

The Contract on joint venture signed on 29 September 2008 between Serbia and Fiat Group Automobile is the only contract that was publicly revealed.

By the contract, it was agreed that the joint company will have 300 million euros capital, of which Serbia will invest 33 per cent.

The contract also stipulated that Fiat’s payment will be 469,000 euros and Serbia’s 231,000 euros for founding the company. Assets that Serbia brought into the joint venture are estimated at 50 million euros.

The contract stipulated that the transaction ends when Serbia paid an additional 49.7 million euros, a FIAT 199.5 million.

In addition, the contract states that, from 2012, the joint venture will invest 709 million euros in the production and that the factory will employ 2,433 workers.

When it comes to the state’s loans and incentives in the publicly revealed contract, these parts of the contract were concealed by “text redaction” written over them.

Meanwhile, Serbian public learned that Fiat also received subsidies allocated from the budget of Serbia for each employee, amounting to 10,000 euros per employee.

Mina Milanovic

 

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