The new Law on Innovation Activities and Law on Incentives for Research and Innovation Development
The new Law on Innovation Activities (hereinafter: „Law on Innovation“) and Law on Incentives for Research and Innovation Development (hereinafter: „Law on Incentives“) entered into force on 14 August 2020. The principal aim of the new laws is to encourage and support the development of the innovative projects and activities in Montenegro which should ultimately result in, among other things, the improvement of the productivity of the economy as well as creation of the added value. Below are some of the novelties introduced by the Law on Innovation and Law on Incentives.
I Introducing new concepts – National Innovation System and Innovation Policy
The Law on Innovations defines the area of innovation activities in a more detailed and thorough way and incorporates a number of new concepts such as the National Innovation System (system of mutually connected entities, including the Government, state and local administration bodies, Council for Innovations and Smart Specializations and Innovation Fund), with a purpose of managing, encouraging development and financing the innovation activities.
The Law on Innovations also defines the Innovation Policy as a policy encompassing strategies such as the Smart Specialization Strategy and programs enacted by the Government containing development priorities, trends, and improvement of National Innovation System.
II Council for Innovations and Smart Specializations and Innovation Fund of Montenegro
The Law on Innovation introduces two new bodies in the field of innovation activities.
The first one is the Council for Innovations and Smart Specialization (hereinafter: “Council”) which will have advisory purpose and shall have the competence to propose policies and strategies to the Government, to give opinion on the law proposals and other legislation in the area of innovation activities and related areas, as well as to monitor the realization of strategies which govern the area of innovation. The Council shall be funded from the budget and it shall be formed within 60 days from the day of entering into force of the Law on Innovations.
Besides the Council, the Law on Innovation prescribes that the Government shall form an Innovation Fund of Montenegro (hereinafter: “Fund”) as a limited liability company, for the purpose of implementation of efficient innovation policy, securing and executing the funds to encourage the innovation activities. One of the most important roles of the Fund will be to implement the innovation policy by securing and directing the financial funds to the development of innovation businesses, developing cooperation with international organizations and state bodies for the purpose of financing the innovation activities.
The act of incorporation of the Fund shall be adopted within 30 days following the entry into force of the Law on Innovations.
III Implementation of innovation activities
The innovation activities that are financed by the state or local administration body or the Fund shall be implemented through innovative programs and projects, in line with the priorities established by the strategies and programs that regulate the field of innovation. Grants for financing the innovating activities shall be made through the public calls. The projects applied for financing shall be evaluated by independent experts appointed by the public administration body in accordance with the principles of independence, impartiality, objectivity, and precision.
Mutual rights and obligations between the body financing the innovation activity and the subject of innovation shall be regulated by the Agreement on implementation of the innovative program and project.
IV Types of innovation activities
The Law on Innovations defines innovation activities as: activities of research and development, engineering, design and other creative activities, marketing and branding, activities related to creation and protection of intellectual property, education, software development and data base and other activities performed in the process of creating innovations.
V Types of Incentives
The Law on Incentives introduces the possibility for the subjects of innovation activity to receive incentives for research and innovation development. These incentives include reduction, exemption from or relief in relation to (i) personal income tax and surtax (ii) contributions for compulsory social insurance (iii) corporate income tax (iv) fees for developing communal infrastructure at construction land (v) use of real estate and/or land owned by the state and (vi) real estate tax. The total amount of all reductions, exemptions or reliefs exercised through the use of incentives may not exceed EUR 300,000 for a single legal entity or natural person over a three-year period. Innovation activity subjects can use more than one Incentive if the total amount does not expand over the limit set by the Law on providing State Aid. The Law on Incentives prescribes in detail the amount of each incentive, the conditions and which subject has the right to apply.
VI Eligibility for the use of Incentives
In accordance with the conditions set by the Law on Incentives, any domestic or foreign person or legal entity performing scientific research or innovation activity in Montenegro, or other person or legal entity investing or in other way connected to these activities is eligible for receiving the incentives.
The Law on Incentives prescribes detailed conditions for eligibility depending on the type of the subject.
For example, a legal entity performing innovation activities which is registered with the Registry of Business Entities of Montenegro may apply for a scientific research or innovation project worth at least 25.000 EUR, if it has no tax debt, is not in a bankruptcy or liquidation proceedings and it did not indirectly acquire incentives.
VII The process of receiving the Incentives
The party interested in receiving the incentives must submit a request for acquiring the status of the beneficiary of incentives along with the evidence of fulfillment of the conditions set by the law. The Ministry of Science (hereinafter: “Ministry”) forwards the request to the Commission for Granting the Status of the Beneficiary of Incentives, which has the competence to assess the project and make a proposal for granting the status of the beneficiary of incentives. The Ministry decides within 15 days of receiving this proposal on granting the status of the beneficiary of incentives to the interested party.