There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted.

The Invest Bulgaria Agency (IBA), the government’s investment attraction body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website (www.investbg.government.bg/en)  contains general information for foreign investors. IBA serves as a one-stop shop for foreign investors and certifies proposed investments for eligibility for administrative services.

There are no limits to foreign and domestic private entities establishing and owning businesses in Bulgaria. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) in which companies registered in offshore jurisdictions with more than 10 percent foreign participation are banned from participating. The law, however, allows those companies to do business if the physical owners of the parent company are Bulgarian citizens and known to the public, if the parent company’s stock is publicly traded, or if the parent company is registered in a jurisdiction with which Bulgaria enjoys a bilateral tax treaty for the avoidance of double taxation (including the United States).

Bulgaria has no specific law or coordinated mechanism in place for screening individual foreign investments. A potential foreign investment can be scrutinized on the grounds of its potential national security risk or through the Law on the Measures against Money Laundering. As each ministry is responsible for screening investments within its purview, interagency coordination is lacking, and there are no common standards. As of April 2022, Bulgaria has not publicly reported any initiative on the introduction of a national investment screening mechanism.

There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations. An Investment Policy Review by the Organization for Economic Cooperation and Development (OECD) is planned for 2022. In January 2022 the OECD decided to open accession discussions with Bulgaria. A key milestone toward Bulgaria’s overarching OECD Action Plan was its having joined the Nuclear Energy Agency (NEA) in January 2021. In 2019, the OECD published reviews of Bulgaria’s healthcare sector and state-owned enterprises, and in January 2021 the OECD published an Economic Assessment in which it acknowledged the successful integration of Bulgarian manufacturing firms into global production chains and sound macroeconomic policies prior to the pandemic. At the same time the report highlighted as key policy challenges Bulgaria’s high income inequality, relative poverty, and an ageing and rapidly shrinking population. In February 2021 the OECD published a study of Bulgarian municipalities that acknowledged solid progress in local governance standards but also noted insufficient progress in bridging regional disparities.

Bulgaria typically supports small- and medium-sized business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export capacity. The state-owned Bulgarian Development Bank has committed to supporting small- and medium-sized businesses in Bulgaria, including through the post-COVID-19 recovery period. Typically, a new business is expected to register an account with the state social security agency and, in some cases, with the local municipality as well. Electronic company registration is available at: https:// portal.registryagency.bg/commercial-register . Women receive equitable treatment to men, and the Bulgarian law does not discriminate against minorities doing business.

There is no government agency for outward investment promotion, and no restrictions exist for local businesses to invest abroad.

Restrictions still exist on the ownership of agricultural land by non-EU citizens.  Companies whose shareholders are registered offshore are banned from acquiring or owning Bulgarian agricultural land.  Non-EU citizens who have resided in Bulgaria for at least five years or their Bulgaria-registered companies can acquire Bulgarian agricultural land.

Mortgages are recorded centrally with the Bulgarian Registry Agency, at registryagency.bg .

Bulgaria was taken off the USTR’s Special 301 Watch List in 2018, following passage of amendments to the Copyright Law, improvements in royalty collection, and government procurement of licensed software. However, high levels of online piracy continue to exist, and IP enforcement and prosecution efforts continue to be areas of concern.

The 2021 Notorious Markets Report lists two online providers of pirated content which operate from Bulgaria.

Bulgaria is a member of the Convention on Granting of European Patents (European Patent Convention) and a contracting state of the European Patent Office (EPO). Bulgaria has also signed the London agreement for facilitating the validation process but has yet to amend its own law accordingly. Bulgaria is also part of the Patent Cooperation Treaty (PCT).

Bulgaria is a member of the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration.  Bulgaria enforces EU legislation for protecting geographical indications (GIs) and Traditional Specialties Guaranteed (TSG).  A 2019 Law on Marks and Geographical Indications updated procedures for trademark registration. The law introduced response deadlines as short as three days.

Trademarks and service marks are protected via registration with the Bulgarian Patent Office, or registration as a European Union Trademark, or an international registration under the Madrid Agreement and the Madrid Protocol that designates Bulgaria. A trademark is normally granted within ten months of application filing. Pending applications are published to allow for objections. Rejections can be appealed to the Patent Office’s Disputes Department. Decisions of this department can be appealed to the Sofia Administrative Court within three months.

The Bulgarian law on patents and utility model registrations is harmonized with EU law.  The latest amendments in the law provide for new electronic state registers on patents and utility models and services. The state registers are public and available on the website of the Patent Office.

Trademark infringement is a significant problem in Bulgaria for U.S. cigarette and apparel producers, and smaller-scale infringement affects other U.S. products. Bulgarian legislation provides for criminal, civil, and administrative remedies against trademark violation. Bulgaria has implemented simplified border control procedures for the destruction of seized fake goods without civil or criminal trial.  In addition to civil penalties prescribed by the Trademarks and Geographical Indications Act (TGIA), the Criminal Code prohibits the use of a third person’s trademark without the proprietor’s consent.  In practice, criminal convictions for trademark and copyright infringement are rare and sentencing tends to be lenient.  Legal entities cannot be held liable under the Criminal Code.

A 2019 law on trade secret protection allows for civil action for trade secret infringement. There is no special court for cases related to trade secrets.

Bulgarian customs maintain a section on its official web site customs.bg instructing rightsholders of the procedure for filing IPR infringement cases. In 2021, the main countries of origin of counterfeit goods were Turkey, China, and Hong Kong. The most frequently confiscated goods were clothing, perfumes and cosmetics, shoes, toys, bags, and wallets.

Online and broadcast piracy remain an enforcement issue in Bulgaria. While the cybercrime unit at the General Directorate for Combating Organized Crime (GDBOP) is generally responsive to reports of online copyright infringements, investigation of other computer-based IPR crimes is slow, and few result in criminal convictions.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: www.wipo.int/directory/en .

In 2007 the government adopted a National Corporate Governance Code to encourage companies to adhere to the principles of responsible business conduct (RBC).  In 2019, the government approved a Corporate Social Responsibility Strategy for the period until 2023. The non-governmental Bulgarian Network for Social and Corporate Responsibility (CSR – csr.bg)  promotes CSR among Bulgarian companies and highlights good business practices.

There is a growing awareness of RBC standards and business’ obligation to proactively conduct due diligence to ensure they are doing no harm, with larger international firms generally further along than smaller domestic companies. Bulgarian companies are more frequently building RBC awareness through events organized in partnership with employer associations.

Bulgarian NGOs continued to report the exploitation of children in certain industries, particularly small family-owned shops, textile production, restaurants, construction businesses, and periodical sales. Children living in vulnerable situations, particularly Roma children, were exposed to harmful and exploitative work in the informal economy, mainly in agriculture, construction, and the service sector.

Bulgaria is not a member of either the OECD or the Extractive Industries Transparency Initiative.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Bulgaria’s Integrated Energy and Climate Plan sets out the country’s key objectives of encouraging low-carbon economic development, developing a competitive and secure energy sector, and reducing dependence on fuel and energy imports. EU Green Transition goals are reflected in Bulgaria’s National Recovery and Resilience Plan (NRRP), which anticipates EUR 3.7 billion to fund green transition initiatives, including EUR 1.7 billion in grants to decarbonize the energy sector.  These opportunities are attracting private investment interest in renewable energy, especially large-scale solar and geo-thermal projects buttressed by battery storage. The NRRP includes projects such as: pilot projects for the production of green hydrogen and biogas; infrastructure for hydrogen transport; and a program to finance ad hoc renewable energy measures in buildings not connected to heat or gas transmission networks.

Bulgaria will need to improve efficiency and coordination if it is to meet the EU target of net-zero carbon emissions by 2050.  To aid in implementation the green transition, the government is considering regulatory incentives.  However, the current system of subsidies oftentimes benefits a small group of businesses and oligarchs associated with corruption or opposed to diversification away from traditional dominant suppliers.  The government will need to overcome this resistance in order to finalize viable projects within the required timeframe, or Bulgaria could lose a percentage of its EU funds allocation, threatening fulfillment of national and international goals.

While the Bulgarian Procurement Act technically requires that public procurement comply with environmental and climate protection requirements, these requirements are not easily understood or enforced; nor is the process of procurement generally transparent or effective in supporting climate protection.  For this reason, the NRRP seeks to drive public procurement reforms.

Bulgaria is developing pollution standards based on EU standard policies for pollution prevention and control. National level eco-labelling practices also follow EU directives. New EU legislation will grant offset opportunities and tradable permits for forests, agricultural land carbon capture, and other carbon minimization efforts.

Corruption remains a significant issue in Bulgaria. Bulgaria ranks 78th out of 180 countries in Transparency International’s Corruption Perception Index for 2021, the worst in the EU.  Human trafficking, and narcotics and contraband smuggling all contribute to corruption.  With the gradual introduction of technologies in public administration, including e-filing and the electronic issuance of certificates, some progress has been made in addressing petty corruption.  However, high-level corruption, particularly in public procurement, remains a serious concern.  The high-profile prosecutions that do take place are often seen as selective or politically motivated and typically end in acquittals after a lengthy judicial process.  The lack of serious convictions against senior officials and the need for reforms in the criminal justice sector remained high on the public agenda throughout 2021 when it took three elections to finally form a government. While the new governing coalition has demonstrated political will to undertake serious reforms, including to reorganize the Anti-Corruption Commission and increase its powers, it is yet to pass new laws and build capacity to secure final convictions for public corruption.

The Anti-Corruption Commission, established in 2018 on the foundations of several previously independent bodies for asset recovery and conflict of interest prevention, has been marred by leadership scandals and an insignificant anti-corruption record. The Anti-Corruption Fund (acf.bg), a civic organization created in 2017, conducts its own investigation of cases suspected either of corruption or conflict of interest among Bulgarian senior politicians and policy makers.

Bulgaria has ratified the Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery. Bulgaria has also ratified the Council of Europe’s Convention on Laundering, Search, Seizure, and Confiscation of Proceeds of Crime (1994) and Civil Convention on Corruption (1999). Bulgaria has signed and ratified the UN Convention against Corruption (2003); the Additional Protocol to the Council of Europe’s Criminal Law Convention on Corruption; and the UN Convention against Transnational Organized Crime.  In 2018, the Bulgarian Parliament adopted the Anti-Money Laundering Act, which transposes the 2015 EU Directive on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing.  The new law required registered business groups to declare by May 2019 their beneficial owners. Some companies continue to avoid ownership publication by registering shell entities in tax heavens and offshore zones. Local capacity to detect suspicious and potentially illicit money flows remains low as evidenced by a 2019 case involving millions in money transfers from a Venezuelan state-run oil company through the Bulgarian banking system.

Conflict of interest is legally defined in the Law on Combatting Corruption and Illegal Asset Forfeiture, Article 52: “Conflict of interest exists when the contracting authority, its employees or employees outside its structure who are involved in the preparation or award of the contract or who may influence the outcome of the contract have an interest, which may lead to a benefit and which could be considered to affect their impartiality and independence in connection with the award of the public contract.” Article 81 also defines conflict of interest as “receiving a material benefit” by senior public officials and related persons. In 2021 authorities levied fines on individuals in 22 conflict of interest cases.

Bribery is a criminal act under Bulgarian law both for the giver and for the receiver. Individuals who mediate and facilitate a bribe are also held accountable, but according to observers, enforcement of this provision has been arbitrary as prosecutors have de facto discretion not to charge individuals who opt to cooperate as witnesses.

Government agencies responsible for combating corruption:

Commission on Corruption Prevention and Illegal Assets Forfeiture
6, Sveta Nedelya Sq. Sofia, 1000
Email: caciaf@caciaf.bg

Mr. Boyko Stankushev
Director and Member of the Managing Board

Mr. Joeri Buhrer Tavanier
Chairman of the Managing Board

Anticorruption Fund
71, Knyaz Boris Str., Office 2
Email: acf@acf.bg 

Mr. Ognyan Minchev
Board President
Transparency International Bulgaria
PO Box 72, Sofia
Email: mbox@transparency.bg

Daily anti-government protests that took place throughout the summer of 2020 in Sofia generated sporadic reports of excessive force by protestors and police, but otherwise there has been no significant political violence in recent years.

The Bulgarian Constitution recognizes workers’ rights to join trade unions and to organize. The National Council for Tripartite Cooperation (NCTC) provides a forum for dialogue among the government, employer organizations, and trade unions on issues such as cost-of-living adjustments and social security contributions. Currently, there are five nationally recognized employer organizations, based on membership thresholds. Bulgaria has two large trade union confederations represented at the national level, the Confederation of Independent Trade Unions of Bulgaria (CITUB) and the Confederation of Labor Podkrepa (Support). CITUB, the larger of the two, has an estimated membership of about 300,000. Podkrepa has a large share of unionized labor in education.

There are very few restrictions on trade union activity, but employees in smaller private firms are often not represented.  Unionized labor is most commonly seen in the highly subsidized railway and postal sectors.  Under the Bulgarian Labor Code, employer-employee relations are regulated by employment contracts. Collective labor contracts can be concluded at the sectoral level, enterprise level, regional, and municipal levels. The Labor Code addresses worker occupational safety and health issues and mandates a minimum wage (set by the Council of Ministers).  The minimum wage in 2022 is BGN 710 (USD 405) per month.  The Bulgarian Labor Code provides for benefits for departing employees depending on the reason for termination of the employment contract and on whose initiative the termination was enacted.  In cases of forcible termination, the employee is normally entitled to compensation from the employer, generally up to one month of gross salary.

Disputes between labor and management can be referred to the courts, but resolution is often slow.  The National Institute for Conciliation and Arbitration (NICA) has developed a framework for collective labor dispute mediation and arbitration. However, NICA-sponsored collective labor dispute resolutions remain few.

The Bulgarian labor market continues to be rigid in classifying different forms of employment (part-time, per-hour, etc.). Driven by business disruption due to the COVID-19 pandemic, in 2020 the Bulgarian Labor Code was amended to allow businesses to reclassify full-time workers as part-time while the state of emergency is in force. The Bulgarian Labor Code limits overtime work to 300 hours per calendar year. Undeclared work is the most common informal labor market practice. The share of the informal economy has decreased from 36.7 percent in 2010 to 22.5 percent in 2020.

An EU “Blue Card” work permit can be obtained by high-skilled foreigners who have a visa or a long-term residence permit in Bulgaria. The long-term residence permit and the “Blue Card” are issued for a period of up to four years. As of March 2022, Ukrainians and members of their families with the right to temporary protection under Art. 1a, para. 3 of the Asylum and Refugees Act have the right to work in Bulgaria without a labor permit. Persons with temporary protection status can register as jobseekers with the Labor Office Directorate at their permanent or current address. Additional information about the procedure for obtaining temporary protection can be found here: (www.aref.government.bg/bg/node/499) . Ukrainian citizens have the right to seasonal work of up to 90 days in agriculture, forestry and fisheries, hotels and restaurants in Bulgaria without interruption for 12 months. For this purpose, registration with the Employment Agency is required based on a declaration submitted by the employer. As of March 2022, Bulgarian business have estimated they have the capacity to employ up to 200,000 new workers, including for eligible Ukrainians, mostly in the IT, textile, and construction sectors.

Bulgarians’ literacy rate (aged 15 and older) is 98.4 percent, have an average 14.4 years of schooling, and have strong backgrounds in engineering, medicine, economics, and the sciences, but there is a shortage of professionals with management skills as well as of skilled workers. Foreign and local investors have also complained of a mismatch between the educational system and the labor market’s demands. Employers have also been slow to offer training. Emigration, particularly among young skilled professionals, has exacerbated the shortages. Bulgaria slipped two places to 56th in the UN Human Development Index for 2020, the lowest score among EU countries.

The Roma community makes up an estimated 10 percent of the total population and a higher percentage of the labor force. These numbers are increasing as a result of demographic trends. The Roma community is subject to discrimination and is socially marginalized, with lower levels of educational attainment. Consequently, Roma are overrepresented among unskilled workers and in the grey economy. Large numbers of Roma also seek unskilled, seasonal employment in other EU member states.

Croatia is generally open to foreign investment and the Croatian government continues to make efforts, through financial incentives, to attract foreign investors.  All investors, both foreign and domestic, are guaranteed equal treatment by law, with a handful of exceptions described below.  However, bureaucratic and political barriers remain.  Investors highlight that an unpredictable regulatory framework, lack of transparency, judicial inefficiencies, lengthy administrative procedures, lack of structural reforms, and unresolved property ownership issues all weigh heavily upon the investment climate.

Croatia is partnered with the World Bank through European Commission Directorate-General for Structural Reform Support on the “Croatia Business Environment Reform” project which intends to help Croatia implement various business reforms. The Ministry of Economy and Sustainable Development Directorate for Internationalization assists investors, including by offering services such as providing information on investment opportunities, offering support through all phases of business development, organizing tours of investment locations and arranging meetings, and promoting Croatia as an investment destination.  For more information, see:  http://investcroatia.gov.hr/ .  The Strategic Investment Act fast-tracks and streamlines bureaucratic processes for large projects valued at $10.7 million or more on the investor’s behalf.  Various business groups, including the American Chamber of Commerce, Foreign Investors’ Council, and the Croatian Employers’ Association, are in dialogue with the government about ways to make doing business easier and to keep investment retention as a priority.

Croatian law allows for all entities, both foreign and domestic, to establish and own businesses and to engage in all forms of remunerative activities.  Article 49 of the Constitution states all entrepreneurs have equal legal status.  However, the Croatian government restricts foreign ownership or control of services for a handful of strategic sectors:  inland waterways transport, maritime transport, rail transport, air to ground handling, freight-forwarding, publishing, ski instruction, and primary mandated healthcare.  Apart from these, the only regulatory requirements to market access involve occupational licensing requirements (architect, auditor, engineer, lawyer, and veterinarian, etc.), about which detailed information can be found at http://psc.hr/en/sectoral-requirements/ .  Business services such as consulting, marketing, creative industries, accounting (bookkeeping), and IT are not licensed. Relevant international comparison of the level of regulatory restrictiveness (including for Croatia and the U.S. which is represented by NY and TX) is available at https://www.oecd.org/economy/reform/indicators-of-product-market-regulation/ . Over 90 percent of the banking sector is foreign owned.

Croatia does not have a foreign investment screening mechanism, but the government designated the Ministry of Economy and Sustainable Development Internationalization Directorate as the “National Contact Point” for reviewing direct investments and responding to requests for information from EU Member States or the European Commission, per European Union Directive 2019/452.

The latest International Monetary Fund Article IV Staff Report from September 2021 includes a broad overview of economic and financial developments and is available at:

https://www.imf.org/en/Publications/CR/Issues/2021/09/10/Republic-of-Croatia-2021-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-465424 

The American Chamber of Commerce in Croatia publishes position papers on various topics related to the economy and investment climate, which can be found at: https://www.amcham.hr/en/position-papers-d207 .

The European Commission’s Country Report Croatia 2020 assesses the country’s economic situation and outlook: https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1584545612721&uri=CELEX%3A52020SC0510 .

B.  Prior to the COVID-19 pandemic, there were no civil society organizations that provided useful reviews of investment policy related concerns.  In March 2020, the Voice of Entrepreneurs business association was formed to advocate for economic measures and reforms to stimulate private sector growth.  The association has not yet published its policy recommendations.  

The Croatian government offers two e-government options for on-line business registration,  www.hitro.hr  and  start.gov.hr , both of which provide 24-hour access.  Start.gov.hr provides complete business registration for a limited liability company (d.o.o.), simple limited company (j.d.o.o.), or general business, without any need to physically enter a public administration office.  The procedure guarantees a short turnaround on requests and provides deadlines by which the company can expect to be registered.  The Start.gov.hr procedure eliminates fees for public notaries, proxies, seals and stamps, and reduces court registration fees by 50 percent.  Hitro.hr also provides on-line services but maintains offices in 60 Croatian cities and towns for those who want to register their business in person.

In 2021, the Global Enterprise Registration website ( www.GER.co ) rated Croatia’s business registration process 7 out of 10, up from 4 out of 10 in 2020.  The government pledged to improve conditions for business registration and continues to identify areas for removing burdensome regulations and processes.  Croatia’s business facilitation mechanism provides for equitable treatment to all interested in registering a business, regardless of gender or ethnicity.

The United Nations Conference on Trade and Development (UNCTAD) provides an outline of investment facilitation proposals at  https://investmentpolicy.unctad.org/country-navigator/53/croatia .

Croatian foreign direct investment totals approximately $85.84 million in the United States, according to Croatian National Bank figures.  The government does not promote or incentivize outward investment.  Croatia has no restrictions on domestic investors who wish to invest abroad.

The right to ownership of private property is enshrined in Croatia’s Constitution and in numerous acts and regulations.  The Ownership and Property Rights Act establishes procedures for foreigners to acquire property by inheritance as well as through legal transactions such as purchases, deeds, and trusts.  Croatia has a well-functioning banking system, which provides mortgages, while courts and cadaster offices handle property records.

Real property ownership can be particularly challenging in Croatia owing to unique titling issues, separate ownership of buildings and the land on which they sit, reciprocity laws, special treatment of agricultural land and coastal regions, and zoning disputes.  Inheritance laws have led to situations in which some properties have claims by dozens of legal owners, some of whom are deceased and others who have emigrated and cannot be found. For all these reasons, investors should seek competent, independent legal advice in this area. The U.S. Embassy maintains a list of English-speaking attorneys ( https://hr.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/). The Ministry of Economy and Sustainable Development Directorate for Internationalization helps those seeking information about property status in Croatia. For more information, see:  http://investcroatia.gov.hr/ .

While the cadaster offices reliably maintain records, there is a portion of property in Croatia which has changed hands without appropriate documentation for various reasons, including avoidance of paying the title transfer fees or hiding wealth.  Historically, individuals and companies spent years in court attempting to resolve improper real estate documentation.  For this reason, potential buyers should seek to verify that the seller possesses clear title to both the land and buildings (which can be titled and owned separately).

A foreign investor, incorporated as a Croatian legal entity, may acquire and own property without ministry approval, with the caveat that the purchase by any private party of certain types of land (principally land directly adjacent to the sea or in certain geographically designated areas) can be restricted to foreign investors for purposes of national security. In order to acquire property by means other than inheritance or as an incorporated Croatian legal entity, foreign citizens must receive approval from the Ministry of Justice and Public Administration, a process which can be lengthy due to the need for interagency clearance.  While EU citizens are afforded the same rights as Croatian citizens in terms of purchasing property, the right of all other foreigners to acquire property in Croatia is based on reciprocity.

In the case of the United States, reciprocity exists on a state-by-state basis.  Croatia’s Ministry of Foreign and European Affairs has confirmed the existence of positive reciprocity for real estate purchases for residents of states listed in the table in the “S.A.D” line at https://mpu.gov.hr/informacije-o-uzajamnosti-u-stjecanju-prava-vlasnistva-nekretnina-izmedju-republike-hrvatske-i-drzava-izvan-europske-unije-republike-island-knezevine-lihtenstajn-kraljevine-norveske-te-svicarske-konfederacije/6186 .  Alternatively, for U.S. citizens from Arkansas, Hawaii, Kentucky, Minnesota, Mississippi, New Hampshire, Oklahoma and Vermont, property acquisition is only allowed with the condition of Croatian permanent residence.  Residents of other states could face longer waiting periods.

Land ownership is distinct from ownership of buildings or facilities on the land.  Investors interested in acquiring state-owned companies from the Ministry of Physical Planning, Construction, and State Assets should seek legal advice to determine whether any deal also includes the right to ownership of the land on which a business is located, or merely the right to lease the land through a concession.

Inconsistent regulations and restrictions on coastal property ownership and construction have also provided challenges for foreign investors in the past.  Croatian law restricts construction and commercial use within 70 meters of the coastline. It is important to verify zoning regulations and the existence of necessary building permits, as some newer structures in coastal areas have been subject to destruction at the owner’s expense and without compensation for not conforming to local zoning regulations.  Investors should be particularly wary of promises that structures built without permits will be regularized retroactively.  The Act on Legalization of Buildings and Illegal Construction is intended to resolve ambiguities regarding ownership of real estate.

When purchasing land for construction purposes, potential buyers should determine whether the property is classified as agricultural or construction land.  The Agricultural Land Act provides for additional fees for re-zoning of up to 50 percent of the value of the land that is diverted from agriculture to construction purposes.  The Agricultural Land Agency works with local governments to review potential agricultural land purchases.  The sale of privately owned farmland is treated solely as the subject of a sales agreement between the parties.  Buyers of this type of land should still proceed with caution and be aware of potentially unresolved legacy issues with land ownership.  Land in Croatia is either publicly or privately owned and cannot be transferred to squatters solely based on physical presence.

The Ministry of Justice and Public Administration and the State Geodetic Office co-manage the National Program for Resolving Land Registration and Cadaster Issues.  This program includes a One Stop Shop system, which is a single point for accessing land registry and cadaster data.  For more information see http://www.uredjenazemlja.hr/default.aspx?id=17   where information is available in English.

Croatia is also working with the World Bank on implementation of the Integrated Land Administration System project (ILAS) to modernize the land administration and management system.  Croatia continues to process a backlog of cases and potential investors should seek a full explanation of land ownership rights before purchasing property. There is no property tax in Croatia.

Note that Croatia’s land records are available online at https://www.katastar.hr/en/#/ . Katastar.hr includes information on over 14 million pieces of land throughout the country and provides information in English.

Croatian intellectual property rights (IPR) legislation includes the Patent Act amended in January 2020, the Trademark Act, the Industrial Design Act, the Act on the Geographical Indications of Products and Services, the Act on the Protection of Layout Design of Integrated Circuits, and the Act on Copyrights and Related Rights, which was entirely rewritten and adopted in 2021.  The Law on Protecting Unpublished Information with Market Value went into force in 2018.  These acts define the process for protecting and enforcing IPR in Croatia.  Texts of these laws are available on the website of the State Intellectual Property Office at https://www.dziv.hr/en/ip-legislation/national-legislation/ .  The Law on Fees for the Intellectual Property Sector was adopted in 2021 in addition to the Regulation on Fees in the Intellectual Property Sector and Expert Services of the State Intellectual Property Office. All laws are harmonized with EU legislation.

The legal structure is strong, enforcement is good, and infringement of rights and theft of intellectual property are not common, although there are isolated incidents.

Croatian law enforcement officials keep public records of seized counterfeit goods.  According to a 2021 report from the Croatian Customs Office, officials stopped 472 international imports on the grounds of intellectual property rights violations, resulting in 657 procedures for temporary detainment of goods for a total of 209,972 items.  Customs also issued 94 domestic violations, seized 22,957 counterfeit goods, and initiated 26 criminal proceedings against individuals involved in violation of trademarks.  Croatian customs officials and the Ministry of Interior work together to locate and seize infringing goods.

Although some areas of IPR protection and enforcement remain problematic, Croatia is currently not included in the U.S. Trade Representative’s Special 301 Report or the Notorious Markets List.  Problem areas are piracy of digital media and counterfeiting.  Due to its geographic location, Croatia is also a transit route for various illegal products bound for other countries in the region.  There have been no problems reported with regard to registration of IPR in Croatia by American companies.  The American Chamber of Commerce maintains dialogue with the Croatian government on IPR issues.

As a WTO member, Croatia is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Croatia is also a member of the World Intellectual Property Organization (WIPO) and party to the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.  For a list of international conventions to which Croatia is a signatory, consult the State Intellectual Property Office’s website at http://www.dziv.hr/hr/zakonodavstvo/medjunarodni-ugovori/ .

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

There is a general awareness of societal expectations regarding responsible business conduct which is regulated by law.  The Croatian Financial Services Supervisory Agency has established a Corporate Governance Code of Ethics for all Zagreb Stock Exchange (ZSE) participants, and the Company Act, Audit Law, Accounting Law and Credit Institutions Law are the sources for corporate governance provisions.  Publicly listed companies are required to upload their annual corporate governance reports on the ZSE website.  The Governance Code lays out guidelines for ensuring transparency of business operations, avoidance of conflicts of interest, efficient internal control, and effective division of responsibilities.

No high profile or controversial instances of private sector labor rights violations have occurred in Croatia.  There were no claims during the last five years by indigenous or other communities that a government entity improperly allocated land or natural resources. Forced labor, forced evictions of indigenous peoples, or arrests of and violence against environmental defenders are not permitted by law. The government effectively implements and enforces domestic laws to maintain consumer and environmental protection and avoid infringement of human and labor rights. Sometimes these regulations exceed EU standards.  Croatia implements all EU legislation which requires a due diligence approach to responsible business conduct.  Labor unions are considered watchdogs for responsible business conduct and draw attention to issues they find to be impeding on labor, environmental, or consumer rights in the business sector. In terms of security, the government employs private security companies for security of buildings. Security for defense purposes is handled by Croatian state authorities, such as the army or police forces. Croatia became a signatory of the Montreaux Document on Private Military and Security Companies in May 2013. Croatia is not currently a supporter of the International Code of Conduct for Private Security Service Providers, nor a member of the International Code of Conduct for Private Security Service Providers Association.

Although Croatia is not a member, Croatia supports the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and considers minerals from conflict affected areas to be illegal.  Croatia does not participate in the Extractive Industry Transparency Initiative.  Various laws related to forest and water management, concessions, and environmental protection are implemented in extractive and mining businesses to maintain high environmental and human rights standards.  All procedures for mining or extraction tenders are publicly available and transparent.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain

Croatia has a number of climate-related strategies including a “Low Carbon Development Strategy 2030-2050,” “Energy Development Strategy 2030-2050,” an “Integrated National Energy and Climate Plan,” and a “Climate Change Adaptation Strategy.” The Climate Change Adaptation Strategy focuses on the vulnerability of eight key sectors – water resources, agriculture, forestry, fisheries, biodiversity, energy, tourism and health – and two cross-cutting thematic areas – spatial planning and risk management. A total of 83 climate change adaptation measures are defined for all the sectors. Croatia has committed to reach net-zero carbon emissions by 2050 and joined the Global Methane Pledge. In addition, Croatia’s National Recovery and Resilience Plan, under which the country will have access to more than $7 billion in EU funds, has a strong focus on climate-related reforms and projects. Some of the proposed projects are electricity grid modernization to facilitate increased renewable energy source connections, greater co-financing opportunities for alternative fuel vehicles and investments in hydrogen-powered heavy vehicles, and renovation and reconstruction of buildings and homes to improve energy efficiency.

Croatia has a suitable legal framework, including laws and penalties, to combat corruption.  The Criminal Code and the Criminal Procedure Act define the tools and sanctions available to the investigative authorities to fight corruption and both acts provide for asset seizure and forfeiture.  In terms of a corruption case, where the defendant has assets that are determined to be disproportionate to his/her lawful income, it is presumed by law that the defendant’s property was acquired through criminal means. In such cases, the onus is on the defendant to prove the legal origin of the assets in question.  Financial gain, if it is in possession of a third party in such cases can also be confiscated if it is determined the gain was not acquired in good faith. However, the good faith principle does not apply to a spouse, relatives, or family members.  Croatian laws and provisions regarding corruption apply equally to domestic and foreign investors, to public officials, their family members and political parties.  The Croatian Criminal Code covers such acts as trading in influence, abuse of official functions, bribery in the private sector, embezzlement of private property, money laundering, concealment and obstruction of justice.  The Act on the Office for the Suppression of Corruption and Organized Crime provides broad authority to prosecute tax fraud linked to organized crime and corruption cases.

The Croatian Parliament adopted a new Anti-Corruption Strategy for 2021-2030 to strengthen existing anti-corruption administrative and legal mechanisms. It also aims to identify new, systemic solutions to raise awareness of the harmful effects of corruption, increase citizen involvement, and utilize civil society and the media as indispensable institutional partners to prevent and fight corruption. Croatian prosecutors have secured corruption convictions and launched investigations against a number of high-level former government officials, former ministers, other high-ranking officials, and senior managers from state-owned enterprises, although many such convictions have later been overturned.

The Law on Public Procurement is harmonized with EU legislation and prescribes transparency and fairness for all public procurement activities.  Government officials use public speeches to encourage ethical business.  The Croatian Chamber of Economy created a Code of Business Ethics which it encourages all companies in Croatia to abide by, but it is not mandatory. The Code can be found in Croatian at:   https://www.hgk.hr/documents/kodeksposlovneetikehrweb581354cae65c8.pdf .

Additional laws for the suppression of corruption include: the State Attorney’s Office Act; the Public Procurement Act; the Act on Procedure for Forfeiture of Assets Attained Through Criminal Acts and Misdemeanors; the Budget Act; the Conflict of Interest Prevention Act; the Corporate Criminal Liability Act; the Money Laundering Prevention Act; the Witness Protection Act; the Personal Data Protection Act; the Right to Access Information Act; and the Act on Civil Services. Other regulations include the Code of Ethics for Civil Servants and the Code of Judicial Ethics. Whistleblowers are protected by the Law on the Protection of Irregularities, as well as by provisions in the Labor Law and the Civil Servants Act.

Croatia has requested to join the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Croatia is a member and currently chairs the Group of States Against Corruption (GRECO), a peer monitoring organization that allows members to assess anticorruption efforts on a continuing basis.  Croatia has been a member of INTERPOL since 1992.  Croatia cooperates regionally through the Southeast European Co-operative Initiative (SECI), the Southeast Europe Police Chiefs Association (SEPCA), and the Regional Anti-Corruption Initiative (RAI).  Croatia is a member of Eurojust, the EU’s Judicial Cooperation Unit, and is a signatory to the UN Convention Against Corruption.

Croatian legislation provides protection for NGOs involved in investigating or drawing attention to corruption.  GONG, a non-partisan citizens’ organization founded in 1997, which also acts as a government watchdog, monitors election processes, educates citizens about their rights and duties, encourages communication between citizens and their elected representatives, promotes transparency within public services, manages public advocacy campaigns, and assists citizens in self-organizing initiatives.  A new anti-corruption association, Udruga Pomak, was formed by a group of prominent whistleblowers to advocate for greater whistleblower protections.  Even though the law provides for the protection of whistleblowers, in practice there are still issues.

The business community has identified corruption in the healthcare and construction sectors, as well as lack of transparency in the public procurement process as obstacles to foreign investment.

The State Prosecutor’s Office for the Suppression of Corruption and Organized Crime (USKOK) is tasked with directing police investigations and prosecuting cases.  USKOK is headquartered in Zagreb, with offices in Split, Rijeka, and Osijek.  In addition, the National Police Office for the Suppression of Corruption and Organized Crime (PN-USKOK) conducts corruption-related investigations and is based in the same cities.  Specialized criminal judges in the four largest county courts in Zagreb, Rijeka, Split, and Osijek are responsible for adjudicating corruption and organized crime cases.  The cases receive high priority in the justice system, but still encounter excessive delays and lengthy proceedings.  The Ministry of Interior, the Office for Suppression of Money Laundering, the Tax Administration, and the Anti-Corruption Sector of the Ministry of Justice and Public Administration all have a proactive role in combating and preventing corruption.

Contact information below:

Office of the State Attorney of the Republic of Croatia
Gajeva 30, 10000 Zagreb, Republic of Croatia
+385 1 4591 855
tajnistvo.dorh@dorh.hr 

Office for the Suppression of Corruption and Organized Crime
Vlaska 116, 10000 Zagreb,
Republic of Croatia
+385 1 2375 654
tajnistvo@uskok.dorh.hr 

GONG
Vodnikova cesta 4. Zagreb 10 000.,
10000 Zagreb, Republic of Croatia
+385 1 4825 444
gong@gong.hr 

The risk of political violence in Croatia is low.  Following the breakup of Yugoslavia and the subsequent wars in the region, Croatia has emerged as a stable, democratic country and is a member of NATO and the EU.  Relations with neighboring countries are generally fair and improving, although some disagreements regarding border demarcation and residual war-related issues persist.

Croatia has an educated, highly skilled, and relatively high-value labor force compared to regional averages, but labor remains relatively low cost compared to the entire EU.  Employment is regulated by the constitution, international conventions, treaties, labor law, collective agreements, and employment agreements. A list of International Labor Organization conventions implemented into labor legislation can be found at https://www.ilo.org/dyn/normlex/en/fp=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102700 . There are no recent reliable reports on the size of the grey economy, but estimates range from 10 percent to 35 percent of GDP.  According to the latest report available from the Croatian Employment Agency, unemployment in the third quarter of 2021 decreased to 6.3 percent from 7.5 for the same period in 2020 due to the government’s financial support packages for job retention throughout the COVID-19 pandemic. According to the latest available statistics from the Croatian Bureau of Statistics, of the total number of employed persons in December 2021, 47.8 percent were women and 52.2 percent were men.

The Labor Law governs employment and prescribes general labor regulations.  Among other items, the Labor Law prohibits discrimination, defines various types of leave including maternity, and provides terms for striking, salaries, and other labor related issues.  The government is committed to increasing jobs, especially for youth, through various programs funded by the EU.  Companies report that Croatia’s labor law makes it relatively expensive to hire and dismiss employees in comparison to the United States and other countries in Europe at the same level of development.

There are currently labor shortages reported in the construction, food production, and tourism sectors.  The Law on Foreigners was amended in November 2020 to abolish employment quotas for foreign workers. Foreign or migrant workers do not play a significant role in any sector yet, but there are growing numbers of foreign workers in the construction sector.  Croatia continues to experience a brain drain, with an estimated 60,000 Croatians (mostly young and educated) leaving the country annually.  The government has indicated, however, that a significant number of Croatians returned to Croatia during the COVID-19 pandemic as jobs became scarce in other EU countries. The Government maintains the www.mjere.hr  website with information regarding measures to keep workers in Croatia.  These measures are divided into nine categories and include financial support for employers and the self-employed, as well as for training and seasonal work programs.  A large portion of the funding is intended to support active employment, while a portion will fund specialized programs for groups that have a hard time entering the labor market.

Croatian law does not require the hiring of Croatian nationals.  Employers are bound by law to offer severance pay to individuals laid off due to restructuring or down-sizing.  The labor law defines the conditions and amounts of severance pay.  To be eligible for severance: 1) the employer must terminate the employee, 2) the termination must not be the result of behavioral issues, and 3) the employee must have been employed for two consecutive years.  The Croatian Employment Agency provides unemployment payments for those laid off due to economic reasons.

Labor laws are strictly implemented and not waived to retain or attract investment.  Collective bargaining is a common tool, mostly implemented by unions, which overwhelmingly represent workers associated with government spending and state-owned enterprises.  The http://baza.kolektivni-ugovori.info/ website provides an updated database of collective agreements signed in 1995 to date. The Labor Law provides a mechanism for resolving collective and individual labor disputes by arbitration. No appeal is permitted against an arbitration award.

* GDP for 2021 estimate and FDI   for Q1-Q3 2021 at www.hnb.hr Note:  U.S. Bureau of Economic Analysis do not have GDP or FDI data available for 2020 at time of publishing.

*FDI at  www.hnb.hr    for Q1-Q3 2020

Estonia is open to FDI and foreign investors are treated on an equal footing with local investors, though the government is developing a screening mechanism to adhere to the EU Foreign Investment Screening Regulation  entered into force on April 10, 2019. This new regulation was launched in October 2020, creating an information-sharing mechanism between Member States and allows Member States and the European Commission to comment on foreign investments foreseen in other Member States.

The Estonian Investment Agency (EIA), a part of Enterprise Estonia, is a government agency promoting foreign investments in Estonia and assisting international companies in finding business opportunities in Estonia. EIA offers comprehensive, one-stop investment consultancy services, free of charge. The agency’s goal is to increase awareness of business opportunities in Estonia and promote the image of Estonia as an attractive country for investments. More info: http://www.investinestonia.com/en/estonian-investment-agency/about-the-agency 

Estonia’s government has not set limitations on foreign ownership. Licenses are required for foreign investors to enter the following sectors: mining, energy, gas and water supply, railroad and transport, waterways, ports, dams and other water-related structures, and telecommunications and communication networks. The Estonian Financial Supervision Authority issues licenses for foreign interests seeking to invest in or establish a bank. Additionally, the Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investment and export-oriented companies. Creating favorable conditions for FDI and openness to foreign trade has been the foundation of Estonia’s economic strategy. Existing requirements are not intended to restrict foreign ownership but rather to regulate it and establish clear ownership responsibilities.

Since becoming a member of the EU, Estonia is included in World Trade Organization (WTO) Trade Policy Reviews (TPRs) of the EU/EC. The fourteenth review of the trade policies and practices of the European Union took place in February 2020. Full report available here: WTO | Trade policy review -European Union (formerly EC) 2020 .

The World Bank’s Ease of Doing Business report ranks Estonia in 18th place out of 190 countries on the ease of Starting a Business. Economic freedom, ease of doing business, per capita investments, low national debt, euro zone membership, and low corruption scores – all these factors play a role in fostering a good climate for business facilitation.

In Estonia there are two ways to register your business:

• Electronic registration via the e-Commercial Register’s (takes between 5 minutes and 1 business day).

• Through a notary (takes 2-3 business days)

More info on registering the business entity and link to the Register: https://www.eesti.ee/en/doing-business/establishing-a-company/comparison-of-each-form-of-business/ 

On July 1, 2014, an amended Taxation Act establishing the employment register entered into force, requiring all natural and legal employers to register the persons employed by them with the Estonian Tax and Customs Board. The company must register itself as a value-added tax payer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 40,000 as calculated from the beginning of the calendar year.

There are certain areas of activity (like construction, electrical works, fire safety, financial services, security services, etc.) in which business operation requires an additional registration in the Register of Economic Activities (MTR), but this can be done after registration of the company in the Commercial Register: https://mtr.mkm.ee/ 

Estonia does not restrict domestic investors from investing abroad nor does it promote outward investment. Estonia companies have invested abroad about USD 12.5 billion, mostly into EU countries. The main sectors for outward investments are services, manufacturing, real estate and financial.

Secured interests in property are recognized and enforced. Mortgages are quite common for both residential and commercial property, and leasing as a means of financing is widespread and efficient.

The legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. As of October 1, 2011, land reform in Estonia was almost complete. Restitution and privatization of lands commenced in 1991, but in almost every municipality there remain several complicated cases to be settled. In total, less than 4 percent of the Estonian territory (waterbodies included) lacks a clear title.

Foreign individuals and companies are allowed to acquire real estate with the permission of the local authorities. There are legal restrictions on acquiring agricultural and woodland of 10 hectares or more, and permission from the county governor is needed. Foreign individuals are not allowed to acquire land located on smaller islands, or listed territories adjacent to the Russian border.

Property may be taken from the owner without the owner`s consent only in the public interest, pursuant to a procedure provided by law, and for fair and immediate compensation. Everyone whose property has been taken from them without consent has the right to bring an action in the courts to contest the taking of the property, the compensation, or the amount of the compensation.

More info: http://www.globalpropertyguide.com/Europe/Estonia/Buying-Guide 

http://www.doingbusiness.org/en/data/exploreeconomies/estonia/registering-property#DB_rp 

Estonia maintains a robust IPR regime. The quality of IP protection in legal structures is strong, enforcement is good, and infringements and theft are uncommon. Estonia adheres to the World Intellectual Property Organization (WIPO) Berne Convention, the Rome Convention, the Geneva Convention, and the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Estonian legislation fully complies with EU directives granting protection to authors, performing artists, record producers, and broadcasting organizations. Equal protection against unauthorized use is provided via international conventions and treaties to foreign and Estonian authors.

Companies should recognize that IP is protected differently in Estonia than in the United States, and U.S. trademark and patent registrations will not protect IP in Estonia. Registration of patents and trademarks are on a first-in-time, first-in-right basis, so companies should consider applying for trademark and patent protection before selling products or services in the Estonian market. Intellectual property is primarily a private right and the U.S. government generally cannot enforce rights for private individuals in Estonia. It is the responsibility of the rights’ holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants.

Estonia is not listed in USTR’s Special 301 Report or on the Notorious Markets List.

Estonian Customs tracks and reports periodically on seizures of counterfeit goods. In 2021, the Estonian Tax and Customs Board processed 262 cases involving counterfeit goods resulting in seizures of 3690 items, primarily footwear, clothes, bags, toys, electronics. Most of the infringed goods were detected in mail, and the volume of goods seized by case was small. In Estonia, IPR crimes are prosecuted.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en

The majority of OECD Guidelines for Multinational Enterprises are incorporated into Estonian legislation. The non-profit organization, Responsible Business Forum in Estonia, aims to further corporate social responsibility (CSR) in Estonia, and is a partner in the CSR360 Global Partner Network. CSR360 ) is a network of independent organizations, which work as the interface of business and society to mobilize business towards socially responsible aims.

The Estonian Ministry of Economic Affairs and Communications works closely with CSR on educating private businesses and SOEs on responsible business conduct, recognizing best practices, and factoring RBC policies or practices into its procurement decisions.

Estonia generally enforces the labor, human rights, employment rights, consumer protection, and environmental protection related laws effectively and these requirements cannot be waived to attract foreign investment. These laws apply also to the private security industry. Estonia has adhered to the OECD Guidelines for Multinational Enterprises since 2001. The National Contact Point can be accessed here:

https://www.mkm.ee/en/objectives-activities/economic-development/oecd-guidelines-and-surveillance%20 

Natural resource extraction related revenues, including mining licenses, are less than 0.6 percent of government budget revenues and less than 0.3 percent of the GDP. The revenues are reflected in the national budget.

Here you can find a summary of the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain: http://www.doingbusiness.org/data/exploreeconomies/estonia/protecting-minority-investors/ 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

Estonia’s 2030 National Energy and Climate Plan (ENCP), passed in 2019, is a ten-year integrated document mandated for all European Union member states in order to ensure the EU meets its overall greenhouse gases emissions targets.

Estonia’s long-term objective is to transition to a low-carbon economy by gradually reforming the economy and energy system to be resource-efficient, productive, and environmentally friendly.

Estonia plans to reduce the use of fossil fuels and decrease CO2 emissions through energy savings in transport, agriculture, waste management, and industrial processes, in addition to utilizing small-scale heat and power cogeneration plants in regional centers. The share of renewables will be increased by converting fossil fuel boilers to use renewable fuels, increasing electricity generation from fuel-free sources, and increasing use of biofuels in transport. In the electricity and heating sector, Estonia’s plans focus on increasing renewable sources.

The Government has committed to reach carbon neutrality by 2050.

Estonia has laws, regulations, and penalties to combat corruption, and while corruption is not unknown, it has generally not been reported to pose a major problem for foreign investors. Both offering and taking bribes are criminal offenses which can bring imprisonment of up to five years. While “payments” that exceed the services rendered are not unknown, and “conflict of interest” is not a well-understood issue, surveys of American and other non-Estonian businesses have shown the issue of corruption is not a serious concern.

In 2021, Transparency International (TI) ranked Estonia 13th out of 180 countries on its Corruption Perceptions Index.

Anti-corruption policy and implementation are coordinated by the Ministry of Justice and the strategy is implemented by all ministries and local governments. The Internal Security Service is effective in investigating corruption offences and criminal misconduct, leading to the conviction of several high-ranking state officials. Until recently corruption was most commonly associated with public sector activities. Recently the government-initiated efforts to educate private sector businesses about the risks of business-to-business corruption, for example within procurement activities.

Estonia cooperates in fighting corruption at the international level and is a member of GRECO (Group of States Against Corruption). Estonia is a party to both the Council of Europe (CoE) Criminal Law Convention on Corruption and the Civil Law Convention. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and accounting offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia.

More info on the corruption level in different sectors in Estonia can be found at: Estonia – Transparency.org 

The UN Anticorruption Convention entered into force in Estonia in 2010. Estonia has been a full participant in the OECD Working Group on Bribery in International Business since 2004; the underlying Convention entered into force in Estonia in 2005. The Convention obligates Parties to criminalize bribery of foreign public officials in the conduct of international business.

The United States meets its international obligations under the OECD Anti-bribery Convention through the U.S. Foreign Corrupt Practices Act.

Government agency contacts responsible for combating corruption:

+372 6123657 Central Criminal Police corruption hotline
Or e-mail: korruptsioonivihje@politsei.ee
Transparency International in Estonia: Estonia – Transparency.org 

Civil unrest generally is not a problem in Estonia, and there have been no incidents of terrorism. Public gatherings and demonstrations may occur on occasion in response to political issues, but these have proceeded, with very few exceptions, without incidence of violence in the past.

Estonia has a small population – 1.31 million people. The average monthly Estonian salary at the end of 2021 was about USD 1,900. About 75 percent of the workforce is employed in the services sector. With an aging population and a negative birth rate, Estonia, like many other countries of Central and Eastern Europe, faces demographic challenges affecting its long-term supply of labor. Improving labor efficiency is a key focus for Estonia in the short-to-mid-term. At the end of 2021, the unemployment rate was 5.2 percent. More on the labor market: Labour Market Review 2/2021 | Publications | Eesti Pank 

The Law of Obligations Act, the Individual Labor Dispute Resolution Act, and the Occupational Health and Safety Act address employment and labor issues. Labor laws may not be waived in order to attract or retain investment. Labor laws are generally strict, and the principle of employee protection is applied in which the worker is considered the economically weaker party. Upon termination of an employment contract due to a lay-off, an employer must pay an employee compensation in the amount of one month’s average wage. In addition, an insurance benefit shall be paid to an employee by the Estonian Unemployment Insurance Fund depending on the length of service.

Trade union membership remains low compared to most countries in the EU. Estonia has ratified all eight ILO Core Conventions.

Estonian labor regulations on labor abuses, health and safety standards, labor disputes etc. are effectively monitored by the Estonian Labor Inspectorate: http://www.ti.ee/en/ 

Hungary’s government actively courts FDI; net annual FDI in 2020 amounted to $3.2 billion, and gross FDI totaled $98.1 billion. EU countries account for approximately 89 percent of all FDI in Hungary in terms of direct investors and 62 percent in terms of ultimate controlling parent investor.  In terms of ultimate investor – i.e., country of origin – the United States was the second largest investor after Germany in 2019. In terms of direct investor location, Germany was the largest investor, followed by the Netherlands, Austria, Luxembourg, and then the United States; approximately 450 U.S. companies maintain a presence in Hungary. Most U.S. investment falls within the automotive, software development, and life sciences sectors. According to Hungarian Investment Promotion Agency (HIPA) data, U.S. foreign direct investment produced more jobs in Hungary in 2020 than investment from any other country.

Total cumulative FDI from Asian sources has doubled since 2010, accounting for over five percent of total FDI stock in 2019. According to HIPA, South Korea, Japan, China, India, and other Asian countries accounted for about 40 percent of the value of new foreign investment projects in Hungary in 2020 and in 2021, with $3.1 billion in investments creating 3,500 jobs.

The GOH has implemented tax changes to increase Hungary’s regional competitiveness and attract investment; the government reduced the personal income tax rate to 15 percent in 2016, the corporate income tax rate to 9 percent in 2017, the employer-paid welfare contribution to 13 percent in 2021, and employers’ payroll tax to 13 percent.  Hungary’s Value-Added Tax (VAT), however, is the highest in Europe at 27 percent. As of 2016, the GOH streamlined the National Tax and Customs authority (NAV) procedure to offer fast-track VAT refunds to customers categorized as “low-risk.” In 2020 Hungary committed to join the OECD Global Minimum Tax Agreement with a 10-year transitionary period.

Government policies have resulted in some foreign investors selling their stakes to the government or state-owned enterprises in other sectors, including banking and energy.  Many foreign companies have expressed displeasure with the unpredictability of Hungary’s tax regime, its retroactive nature, slow response times, and the volume of legal and tax changes.  According to the European Commission (EC), a series of progressively tiered taxes implemented in 2014 disproportionately penalized foreign businesses in the telecommunications, tobacco, retail, media, and advertisement industries, while simultaneously favoring Hungarian companies.  Following EC infringement procedures, the GOH phased out most discriminatory tax rates by 2015 and replaced them with flat taxes. Another 2014 law required retail companies with over $53 million in annual sales to close if they report two consecutive years of losses.  Retail businesses claimed the GOH specifically set the threshold to target large foreign retail chains.  The EC likewise determined that the law was discriminatory and launched an infringement procedure in 2016, leading the GOH to repeal the law in November 2018.

In 2017, the GOH passed a regulation that gives the government preemptive rights to purchase real estate in World Heritage areas.  The rule has been used to block the purchase of real estate by foreign investors in the most desirable areas of Budapest. In April 2020 the GOH issued a decree that levied sector-specific taxes on the banking and retail sectors to fund COVID-19 pandemic economic support. This progressive tax on retail grocery outlets is structured such that it applies mainly to large foreign retail firms. In December 2021, the Parliament fast-tracked a legislation to increase the retail tax and compelled retail chains with an annual revenue over $310 million to offer their food items nearing expiry date to a state-owned nonprofit company, introducing another measure which hits only foreign-owned retailers.

The GOH publicly declared its intention to reduce foreign ownership in the banking sector in 2012. Accordingly, various GOH initiatives have reduced foreign ownership from about 70 percent in 2008 to 40.5 percent by the end of 2020. These initiatives included a 2010 bank tax; a 2012 financial transaction tax levied on all cash withdrawals; and regulations enacted between 2012-2015 that obligated banks to retroactively compensate borrowers for interest rate increases on foreign currency-denominated mortgage loans, even though these increases were spelled out in the original contracts with customers and had been permitted by Hungarian law.

While the pharmaceutical industry is competitive and profitable in Hungary, multinational enterprises complain of numerous financial and procedural obstacles, including high taxes on pharmaceutical products and operations, prescription directives that limit a doctor’s choice of drugs, and obscure tender procedures that negatively affect the competitiveness of certain drugs.  Pharmaceutical companies also complain about the lengthy procedure to accept innovative medications in the national reimbursement system, making business planning challenging for them.

The Hungarian Investment Promotion Agency (HIPA), under the authority of the Ministry of Foreign Affairs and Trade, encourages and supports inbound FDI.  HIPA offers company and sector-specific consultancy, recommends locations for investment, acts as a mediator between large international companies and Hungarian firms to facilitate supplier relationships, organizes supplier training, and maintains active contact with trade associations.  Its services are available to all investors. For more information, see:  https://hipa.hu/main.  

Foreign investors generally report a productive dialogue with the government, both individually and through business organizations.  The American Chamber of Commerce (AmCham) enjoys an ongoing high-level dialogue with the GOH and the government has adopted many AmCham policy recommendations in recent years.  In 2017, the government established a Competitiveness Council, now chaired by the Minister of Finance, which includes representatives from multinationals, chambers of commerce, and other stakeholders, to increase Hungary’s competitiveness.  Many U.S. and foreign investors have signed MOUs with the GOH to facilitate one-on-one discussions and resolutions to any pending issues. The GOH has regularly consulted foreign businesses and business associations as it has developed economic support measures during the pandemic. For more information, see: HYPERLINK “https://kormany.hu/kulgazdasagi-es-kulugyminiszterium/strategiai-partnersegi-megallapodasok” HYPERLINK “https://kormany.hu/kulgazdasagi-es-kulugyminiszterium/strategiai-partnersegi-megallapodasok”  https://kormany.hu/kulgazdasagi-es-kulugyminiszterium/strategiai-partnersegi-megallapodasok and  https://www.amcham.hu/.  

The U.S.-Hungary Business Council (USHBC) – a private, non-profit organization established in 2016 – aims to facilitate and maintain dialogue between American corporate executives and top government leaders on the U.S.-Hungary commercial relationship.  Most significant U.S. investors in Hungary have joined USHBC, which hosts roundtables, policy conferences, briefings, and other major events featuring senior U.S. and Hungarian officials, academics, and business leaders. For more information, see:   https://www.us-hungarybusinesscouncil.com/  .

Foreign ownership is permitted except for certain “strategic” sectors including farmland and defense-related industries which require special government permits.  As part of its economic measures during the COVID-19 pandemic, the GOH passed a decree which requires foreign investors to seek approval for foreign investments in Hungary.

Foreign law firms and auditing companies must sign a cooperation agreement with a Hungarian company to provide services on Hungarian legal or auditing issues. According to the Land Law, only private Hungarian citizens or EU citizens resident in Hungary with a minimum of three years of experience working in agriculture or holding a degree in an agricultural discipline can purchase farmland.  Eligible individuals are limited to purchasing 300 hectares (741 acres). All others may only lease farmland. Non-EU citizens and legal entities are not allowed to purchase agricultural land. All farmland purchases must be approved by a local land committee and Hungarian authorities, and local farmers and young farmers must be offered a right of first refusal before a new non-local farmer is allowed to purchase the land.  For legal entities and those who do not fulfill these requirements, the law allows the lease of farmland up to 1200 hectares for a maximum of 20 years. The GOH has invalidated any pre-existing leasing contract provisions that guaranteed the lessee the first option to purchase, provoking criticism from Austrian farmers. Austria has reported the change to the European Commission, which initiated an infringement procedure against Hungary in 2014.  In March 2018, the European Court of Justice ruled that the termination of land use contracts violated EU rules, opening the way for EU citizens who lost their land use rights to sue the GOH for damages.

The GOH passed a national security law on investment screening in 2018 that requires foreign investors seeking to acquire more than a 25-percent stake in a Hungarian company in certain sensitive sectors (defense, intelligence services, certain financial services, electric energy, gas, water utility, and electronic information systems for governments) to seek approval from the Interior Ministry.  The Ministry has up to 60 days to issue an opinion and can only deny the investment if it determines that the investment is designed to conceal an activity other than normal economic activity. In 2020, as part of the measures to mitigate the economic effects of the COVID-19 pandemic, the GOH passed an additional regulation requiring foreign investors to seek approval from the Ministry of Innovation and Technology (MIT) for greenfield or expansion of existing investments. Some observers have suggested this law could be used to disadvantage foreign firms or deny them access to the Hungarian market.

Hungary has not had any third-party or independent civil organization investment policy reviews in the last five years.

In 2006, Hungary joined the EU initiative to create a European network of “point of single contact” through which existing businesses and potential investors can access all information on the business and legal environment, as well as connect to Hungary’s investment promotion agency.  In recent years, the government has strengthened investor relations, signed strategic agreements with key investors, and established a National Competitiveness Council to formulate measures to increase Hungary’s economic competitiveness.

The registration of business enterprises is compulsory in Hungary.  Firms must contract an attorney and register online with the county-level courts of justice operating as courts of registration.  Registry courts must process applications to register limited liability and joint-enterprise companies within 15 workdays, but the process is usually complete within three workdays.  If the Court fails to act within the given timeframe, the new company is automatically registered. If the company chooses to use a template corporate charter, registration can be completed in a one-day fast track procedure.  Registry courts provide company information to the Tax Authority (NAV), eliminating the need for separate registration. The Court maintains a computerized registry and electronic filing system and provides public access to company information.  The minimum capital requirement for a limited-liability company is HUF 3,000,000 ($8,500); for private limited companies HUF 5,000,000 ($14,300), and for public limited companies HUF 20,000,000 ($57,100). Foreign individuals or companies can establish businesses in Hungary without restrictions.

Further information on business registration and the business registry can be obtained at the GOH’s information website for businesses: http://eugo.gov.hu/starting-business-hungary  or at the Ministry of Justice’s Company Information Service   https://ceginformaciosszolgalat.kormany.hu/elektronikus-cegeljaras  , and the Tax Authority  https://en.nav.gov.hu/taxation/registration/specific_rules.html.  

Hungarian business facilitation mechanisms offer no special preference or assistance for them in establishing a company.

Outward investment is mainly in manufacturing, pharmaceuticals, services, finance and insurance, and science and technology.  The stock of total Hungarian investment abroad amounted to $36.8 billion in 2019.  There is no restriction in place for domestic investors to invest abroad. The GOH announced in early 2019 that it would like to increase Hungarian investment abroad and it is considering incentives to promote such investment.

Hungary maintains a reliable land registry, which provides public information for anyone on the ownership, mortgage, and usufruct rights of a real estate or land parcel.  Secured interests in property (mortgages), both moveable and real, are recognized and enforced but there is no title insurance in Hungary.

Please see the section on Limits on Foreign Control and Right to Private Ownership and Establishment for information regarding restrictions on purchasing farm landfarmland.

Hungarian law allows acquisitive prescription for unoccupied real property if the user of the property occupies it continuously for at least 15 years. Real estate and land purchase contracts must be countersigned by an attorney registered in Hungary.

Hungary has an adequate legal structure for protecting intellectual property rights (IPR), although sentences for civil and criminal IPR infringement cases are not usually adequately harsh to serve as a deterrent.  There has been no new major IPR legislation passed over the last year. According to some representatives of the pharmaceutical and software industries, enforcement could be improved if the Prosecutor General’s Office were to establish specialized IPR units.  The most common IPR violations in Hungary include the sale of imported counterfeit goods, including pharmaceuticals and Internet-based piracy. Most counterfeit goods sold in Hungary are of Chinese origin.

Hungary acceded to the European Patent Convention in 2003 and has accordingly amended the Hungarian Patent Act.  Hungary is a party to the World Trade Organization’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and many other major international IPR agreements, including some administered by the World Intellectual Property Organization (WIPO), such as the Berne Convention, the Paris Convention, the WIPO Copyright Treaty, and the WIPO Performance and Phonograms Treaty.  As an EU Member State, Hungary is required to implement EU Directives and so is party to the EU Information Society Directive and EU Enforcement Directive, among others.

The United States and Hungary signed a Comprehensive Bilateral Intellectual Property Rights Agreement in 1993 that addresses copyright, trademarks, and patent protection.

In 2010, the U.S. Patent and Trademark Office (USPTO) and the Hungarian Intellectual Property Office (HIPO) launched a pilot program to facilitate patent recognition between the United States and Hungary.  In 2012 the USPTO and HIPO signed a Memorandum of Understanding to further streamline and expedite bilateral patent recognition. More details about this Patent Processing Highway (PPH) program can be found on HIPO’s website at   www.hipo.gov.hu/English/szabadalom/pph/  .

Hungary is not included in the U.S. Trade Representative’s (USTR’s) Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at HYPERLINK “http://www.wipo.int/directory/en/” HYPERLINK “http://www.wipo.int/directory/en/”  http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Hungary encourages multinational firms to follow the OECD Guidelines for Multinational Enterprises, which promotes a due diligence approach to responsible business conduct (RBC).  The government has established a National Contact Point (NCP) in the Ministry of Finance for stakeholders to obtain information or raise concerns in the context of RBC. The Hungarian NCP has organized events to promote OECD guidelines among the business community, trade unions, government agencies, and NGOs.  Members of the Hungarian NCP include representatives of the Ministries of Finance, Foreign Affairs and Trade, Innovation and Technology, and Agriculture. The Hungarian NCP submits annual reports to the OECD Investment Commission, except for 2020 when its activity was strongly impacted by the COVID-19 pandemic. For more information, see:   http://oecd.kormany.hu/a-magyar-nemzeti-kapcsolattarto-pont  .

In recent years, the Hungarian NCP has organized several conferences, the last one in January 2020, to promote RBC and OECD guidelines. It announced in 2017 its intention to formulate a new National Action Plan on Businesses and Human Rights.  According to the first National Corporate Social Responsibility (CSR) Action Plan formulated in 2015, key RBC priorities of the GOH included the employment of discriminated, disadvantaged, and disabled groups, environmental protection, and the expansion of sustainable economy.  Hungary’s NCP peer review is scheduled in 2023. The Hungarian Public Relations Association, CSR Hungary, and other NGOs are involved in elaborating the second National Action Plan. The Hungarian NCP reviews complaints from trade unions against multinational companies’ subsidiaries operating in Hungary and coordinates with relevant NPCs of the multinational company’s home country. RBC does not typically play a role in GOH procurement decisions, although the 2015 Public Procurement Act integrates concepts of CSR, responsible business conduct, and good practice.

Several NGOs and business associations promote RBC and CSR.  The one with the most members, CSR Hungary Forum, created in 2006, established an annual award and trademark in 2008 to recognize business CSR efforts; others include the Hungarian Public Relations Association, “Kovet.”

According to a 2018 survey conducted by CSR Hungary, 60 percent of businesses have a CSR policy and 44 percent of businesses attribute a CSR orientation to increased competitiveness.  However, only about 34 percent of multinational and SOEs and 9 percent of SMEs report formally formulating a CSR action plan. According to a 2021 study on corporate social responsibility in Hungary, stakeholder pressure is weak, and they expect increased state-level intervention in CSR issues.

In 2017, Hungary’s independent agencies for labor rights protection, consumer protection, cultural heritage protection, and environment protection were merged into relevant ministries and county-level government offices.  Environmental NGOs criticized the transformation of the system and warned about the lack of independent agencies.

Climate Issues

In January 2020, the GOH approved and published its new long-term energy strategy and an EU-required National Energy and Climate Plan – both of which focused heavily on decarbonization and sustainable climate policy. According to the documents, Hungary aims to reduce its carbon emissions by at least 40 percent by 2030 (compared to the 1990 level), an additional 10 percent by 2040, and achieve carbon neutrality by 2050.  Given that Hungary emits 33 percent less CO2 than it did in 1990, the real cut would be seven percent in the next eight years and 17 percent in the next 20 years. The seven percent cut would be easily achieved with the phase-out of the lignite coal fired Matra Power Plant by 2025. Experts have noted that the plan to have Hungary cut the remaining 50 percent (to achieve carbon neutrality) in the 2040-2050 period is an ambitious goal. Although in December 2020, the GOH committed itself to the new EU goal (“Fit for 55”) of reducing carbon emissions by 55 percent by 2030, the details of achieving the more ambitious goal are to be worked out. The GOH estimates the total costs of Hungary achieving climate neutrality by 2050 at $145 billion.

Private sector contributions to reach the climate goals include increasing Hungary’s solar power capacity from the currently available more than 2000 MW to 6000 MW by 2030 and to 10,000 MW by 2040. In energy efficiency, the GOH’s aim is to limit Hungary’s total final energy demand on the 2005 level by 2030. To reach this goal, the GOH introduced a tax incentive for businesses investing into energy efficiency. Although the GOH strategies stress the great potential in decreasing the energy demand of households, so far there have been only limited efforts.

Despite the February 2021 ruling of the European Court of Justice saying that Hungary had “systematically and persistently” breached legal limits on air pollution, the GOH still has failed to take any efficient measures to deal with the problem. Although the GOH maintains an extensive system of national parks and nature reserves, there are no other government policies, or regulatory incentives helping to preserve biodiversity. The second National Climate Change Strategy adopted in 2018 contains the National Adaptation Strategy which is based on the climate vulnerability assessment of ecosystem and industrial sectors.

Although Hungary’s Public Procurement Act of 2015 allows the government to consider environmental and green growth aspects, the GOH has not yet issued a decree governing the detailed rules of green procurements. Hungary is one of the five EU member states without a national action plan on green public procurements according to the State Audit Office. In April 2021, Hungary’s Public Procurement Authority launched a sustainability working group and in September 2021 issued a Green Codex to provide some guidelines on green procurements.

The Hungarian Ministry of Justice and the Ministry of Interior are responsible for combating corruption.  Although a legal framework exists to support their efforts, critics have asserted that the government has done little to combat grand corruption and rarely investigates cases involving politically connected individuals, even when recommended to do so by the European Antifraud Office (OLAF). Hungary is a party to the UN Anticorruption Convention and the OECD Anti-Bribery Convention and has incorporated their provisions into the penal code, as well as subsequent OECD and EU requirements on the prevention of bribery.  Parliament passed the Strasbourg Criminal Law Convention on Corruption of 2002 and the Strasbourg Civil Code Convention on Corruption of 2004. Hungary is a member of GRECO (Group of States against Corruption), an organization established by members of Council of Europe to monitor the observance of their standards for fighting corruption.  GRECO’s reports on evaluation and compliance are confidential unless the Member State authorizes the publication of its report.  For several years, the GOH has kept confidential GRECO’s most recent compliance reports on prevention of corruption with respect to members of parliament, judges, and prosecutors, and a report on transparency of party financing.

Following calls from the opposition, NGOs, and other GRECO Member States, and a March 2019 visit by senior GRECO officials to Budapest, the GOH agreed to publish the reports in August 2019. The reports revealed that Hungary failed to meet 13 out of 18 recommendations issued by GRECO in 2015; assessed that Hungary’s level of compliance with the recommendations was “globally unsatisfactory,” and concluded that the country would therefore remain subject to GRECO’s non-compliance procedure. The compliance report on transparency of party financing noted some progress but added that “the overall picture is disappointing.” A November 2020 GRECO report came to the same conclusion, adding that Hungary had made no progress since the prior year on implementing anticorruption recommendations for MPs, judges, and prosecutors.

In December 2016, the GOH withdrew its membership in the international anti-corruption organization the Open Government Partnership (OGP).  Following a letter of concern by transparency watchdogs to OGP’s Steering Committee in summer 2015, OGP launched an investigation into Hungary and issued a critical report.  The OGP admonished the GOH for its harassment of NGOs and urged it to take steps to restore transparency and to ensure a positive operating environment for civil society. The GOH, only the second Member State to be reprimanded by the organization, rejected the OGP report conclusions and withdrew from the organization.

In recent years, the GOH has amplified its attacks on NGOs including transparency watchdogs, accusing them of acting as foreign agents and criticizing them for allegedly working against Hungarian interests.  Observers assess that this anti-NGO rhetoric endangered the continued operation of anti-corruption NGOs crucial to promoting transparency and good governance in Hungary. In 2017 and 2018, Parliament passed legislations that many civil society activists criticized for placing undue restrictions on NGOs. In its June 2018 and November 2021 rulings, the European Court of Justice found both legislations in conflict with EU law.

Transparency International (TI) is active in Hungary.  TI’s 2021 Corruption Perceptions Index rated Hungary 73 out of 180 countries.  Out of the 27 EU member states, Hungary ranked 26th, outperforming only Bulgaria. TI has noted that state institutions responsible for supervising public organizations were headed by people loyal to the ruling party, limiting their ability to serve as a check on the actions of the GOH.  TI and other watchdogs note that data on public spending remains difficult to access since the GOH amended the Act on Freedom of Information in 2013 and 2015. Moreover, according to watchdogs and investigative journalists, the GOH, state agencies, and SOEs are increasingly reluctant to answer questions related to public spending, resulting in lengthy court procedures to receive answers to questions.  Even if the court orders the release of data, by the time it happens, the data has lost significance and has a weaker impact, watchdogs warn. In some cases, even when ordered to provide information, state agencies and SOEs release data in nearly unusable or undecipherable formats.

U.S. firms – along with other investors – identify corruption as a significant problem in Hungary.  According to the World Economic Forum’s 2017 Global Competitiveness Report, businesses considered corruption as the second most important obstacle to making a successful business in Hungary.

State corruption is also high on the list of EC concerns with Hungary.  The European Anti-Fraud Office (OLAF) has found high levels of fraud in EU-funded projects in Hungary and has levied fines and withheld development funds on several occasions.  Over the past few years, the EC has suspended payments of EU funds several times due to irregularities in Hungary’s procurement system.

TI and other anti-corruption watchdogs have highlighted EU-funded development projects as the largest source of corruption in Hungary.  A TI study found indications of corruption and overpricing in up to 90 percent of EU-funded projects. Reports by Corruption Research Center (CRCB) from April and May 2020 found – after analyzing more than 240,000 public procurement contracts from 2005-2020 – that companies owned by individuals with links to senior government officials enjoy preferential treatment in public tenders and face less competition than other companies. The studies also revealed that the share of single-bidder public procurement contracts was over 40 percent in 2020, and that the corruption risk reached its highest level since 2005. In a March 2022 report CRCB found that in the 2011-2021 period, more than 20 percent of the EU-funded public contracts were won by 42 companies owned by 12 entrepreneurs closely affiliated with the government. In 2020, a year which was particularly difficult for many businesses because of the Covid-crisis, this small group of entrepreneurs won almost one-third of the EU-funded public tenders.

Hungary has legislation in place to combat corruption.  Giving or accepting a bribe is a criminal offense, as is an official’s failure to report such an incident.  Penalties can include confiscation of assets, imprisonment, or both. Since Hungary’s entry into the EU, legal entities can also be prosecuted.  Legislation prohibits members of parliament from serving as executives of state-owned enterprises. An extensive list of public officials and many of their family members are required to make annual declarations of assets, but there is no specified penalty for making an incomplete or inaccurate declaration.  It is common for prominent politicians to be forced to amend declarations of assets following revelations in the press of omission of ownership or part-ownership of real estate and other assets in asset declarations. Politicians are not penalized for these omissions.

Transparency advocates claim that Hungarian law enforcement authorities are often reluctant to prosecute cases with links to high-level politicians.  For example, they reported that, in November 2018, Hungarian authorities dropped the investigation into $50 million in EU-funded public lighting tenders won by a firm co-owned by a relative of the prime minister, despite concerns raised by OLAF about evidence of conflict of interest and irregularities involving the deal. According to media reports, OLAF concluded that several of the tenders were won due to what it considered organized criminal activity. In December 2021, the Prosecutor General’s Office charged a senior government politician for accepting bribes to influence cases at the request of the president of the Court Bailiff Chamber. The senior government official resigned immediately but kept his position as an MP and was left at large for the time of the investigation.

Annual asset declarations for the family members of public officials are not public and only parliamentary committees can investigate them if there is a specified suspicion of fraud.  Transparency watchdogs warn that this makes the system of asset declarations inefficient and easy to circumvent as politicians can hide assets and revenues in their family members’ names.

The Public Procurement Act of 2015 initially included broad conflict of interest rules on excluding family members of GOH officials from participating in public tenders, but Parliament later amended the law to exclude only family members living in the same household.  While considered in line with the overarching EU directive, the law still leaves room for subjective evaluations of bid proposals and tender specifications to be tailored to favored companies.

While public procurement legislation is in place and complies with EU requirements, private companies and watchdog NGOs expressed concerns about pervasive corruption and favoritism in public procurements in Hungary.  According to their criticism, public procurements in practice lack transparency and accountability and are characterized by uneven implementation of anti-corruption laws.  Additionally, transparency NGOs calculate that government-allied firms have won a disproportionate percentage of public procurement awards.  The business community and foreign governments share many of these concerns.  Multinational firms have complained that competing in public procurements presents unacceptable levels of corruption and compliance risk.  A 2019 European Commission study found that Hungary had the second-highest rate (40 percent) of one-bidder EU funded procurement contracts in the European Union.  In addition, observers have raised concerns about the appointments of Fidesz party loyalists to head quasi-independent institutions such as the Competition Authority, the Media Council, and the State Audit Office. Because it is generally understood that companies without political connections are unlikely to win public procurement contracts, many firms lacking such connections do not bid or compete against politically connected companies.

The GOH does not require private companies to establish internal codes of conduct.

Generally, larger private companies and multinationals operating in Hungary have internal codes of ethics, compliance programs, or other controls, but their efficacy is not uniform.

Resources to Report Corruption

GOH Office Responsible for Combatting Corruption:

National Protective Service
General Director Zoltan Bolcsik
Phone: +36 1 433 9711
Fax: +36 1 433 9751
E-mail: nvsz@nvsz.police.hu  

Transparency International Hungary
1055 Budapest
Falk Miksa utca 30. 4/2
Phone: +36 1 269 9534
Fax: +36 1 269 9535
E-mail: info@transparency.hu  

The security environment is relatively stable.  Politically motivated violence or civil disturbance is rare.  Violent crime is low, with street crimes the most frequently reported crimes in the country. Political violence is not common in Hungary.  The transition from communist authoritarianism to capitalist democracy was negotiated and peaceful, and free elections have been held consistently since 1990.

Hungary’s civilian labor force of 4.7 million is highly educated and skilled.  Literacy exceeds 98 percent and about two-thirds of the work force has completed secondary, technical, or vocational education.  Hungary’s record low 3.3 percent unemployment rate at the end of 2019 increased to 3.8 percent in December 2021 as a result of the pandemic, but it is lower than the EU average of 7.3 percent.  Hungary’s employment rate for the population aged 15-64 years was 73.9 percent in 2021, higher than the EU average of 68.3 percent. Hungary is particularly strong in engineering, medicine, economics, and science training, although emigration of Hungarians from these sectors to other EU member states has increased in recent years. In the first wave of the COVID-19 pandemic, out-migration temporarily declined but resumed during the second half of 2020.

Multinationals increasingly cite a skilled labor shortage as their biggest challenge in Hungary and note that Hungarian vocational institutions and universities need to adapt more quickly to changes in the marketplace.  An increasing number of young people are attending U.S.- and European-affiliated business schools in Hungary. Foreign language skills, especially in English and German, are becoming more widespread, yet Hungary still has the lowest level of foreign language proficiency in the EU.  According to 2018 data, only 37 percent of working-age Hungarians speak at least one foreign language, while the EU average is 66 percent.

As the unemployment rate has declined, certain sectors have begun to face shortages of skilled and highly educated employees.  As Hungarians increasingly seek work abroad, shortages of highly educated and skilled labor are negatively affecting growth in certain regions and industries.  In addition, declining OECD Program of International Student Assessment (PISA) scores may signal that the workforce is losing its ability to learn new skills and adapt to changing market conditions. The government is attempting to address labor shortage by increasing the minimum wage, offering retraining programs, incentivizing employment of young mothers and pensioners by lowering employer-paid welfare contributions, and reforming the education and vocational training system.  Shortages of skilled workers, particularly in the IT, financial, and manufacturing sectors, are more acute in the northwest and central regions of the country. In the eastern half of the country, unemployment levels are above average, even though the cost of labor is lower. Wages in Hungary are still significantly lower than those in Western Europe, despite the recent increase in minimum wage. Average Hungarian labor productivity is lower than the EU average but exceeds that of other Central and Eastern European economies.

In 2016, the government, trade unions, and employer representatives signed a three-year agreement to increase the minimum wage for unskilled and skilled workers. The deal also included a more than 50-percent cut in the business tax for large companies from 19 percent to 9 percent as of 2017, as well as gradually lowering the payroll tax from 21.5 percent in 2016 by 2 percent each year, down to 15.5 percent as of July 2020, to offset increasing labor costs. In subsequent years the parties signed annual minimum wage agreements which increased the minimum wage by 8 percent in 2020, by 3.6 percent in 2021, and as of January 2022, by 20 percent. The GOH also facilitates the employment of workers from neighboring countries, primarily ethnic Hungarian minority communities in those countries. The GOH requires hiring of nationals in certain strategic sectors and some areas of public administration.

Labor law stipulates a severance payment in case of lay-off, as well as under certain conditions for an employee terminating a work contract.  The government pays unemployment benefits for three months and offers the services of local employment offices. The GOH did not extend this benefit beyond the normal three months during the pandemic. Labor laws are uniform and there are no waivers available to attract or retain investment.  Collective bargaining is increasingly common in large companies, education, public transport, retail, and medical services.

The 2012 changes to the Labor Law transferred some collective bargaining rights from trade unions to work councils (Although work councils have a similar mission to those of labor unions, each firm has its own work council, and thus lacks the collective reach of an industry-wide trade union).  Hungary’s trade union membership rate is below 10 percent, while the EU average is 25 percent. About 20 percent of businesses have a collective bargaining agreement on labor conditions and benefits, well below the EU average of about 80 percent. During the COVID-19 pandemic the government passed regulations that allow businesses to unilaterally terminate collective bargaining agreements, which led to a few strikes, which have been resolved by negotiations. Beginning in 2021, the GOH decreased state support to trade unions and implemented budget changes to allow discretional funding to each trade union, which replaced the previously uniform system. Hungary has ratified all eight International Labor Organization (ILO) core conventions.

Labor dispute resolution includes mediation as well as court procedures.  Employees, however, typically agree with employers outside court or mediation procedures. In 2019, a six-day strike at Audi Hungary was resolved with an agreement between employers and employees for a 15- to 20-percent wage increase.  The success of this high-profile strike has led to a series of short-term strikes, or threats of strikes, at other companies. Most of these strikes have been resolved quickly with wage increase concessions from management and changes in overtime payment and conditions.  All recent strikes have been peaceful and complied with Hungarian labor laws.

Hungary has been a member of the ILO since 1955.  Hungary’s labor law and practice are in line with international labor standards.  Discussions between the ILO and the GOH are ongoing on certain provisions of the 2012 modification of Hungary’s labor law, including the freedom of expression, registration of trade unions, and minimum level of public service in case of strike.

Hungary passed amendments to its Labor Code in December 2018 that increased the amount of overtime an employer can request and gives employers up to three years to reconcile and pay for overtime.  These highly unpopular changes led to a series of large protests throughout Hungary and currently are being reviewed by the European Commission. As a part of its COVID-19 economic response plan, the government decreed in 2020 that employers can implement flexible working hours and a 24-month working time frame to calculate overtime without prior agreement from the employee or union. Local labor organizations complained that the move rolled back hard-won concessions from the 2018 labor reform and that certain businesses abuse overtime possibilities to compensate for shutdowns during the COVID-19 pandemic.

The constitution and laws prohibit discrimination based on race, sex, gender, disability, language, sexual orientation and gender identity, infection with HIV or other communicable diseases, or social status. The labor code provides for the principles of equal treatment. The government failed to enforce these regulations effectively. Penalties were not commensurate with those under laws related to civil rights.

Observers asserted that discrimination in employment and occupation occurred with respect to Roma, women, persons with disabilities, and LGBTQI+ persons. According to NGOs, there was economic discrimination against women in the workplace, particularly against job seekers older than 50 and those who were pregnant or had returned from maternity leave. The country does not mandate equal pay for equal work. A government decree requires companies with more than 25 employees to reserve 5 percent of their work positions for persons with physical or mental disabilities. While the decree provides fines for noncompliance, many employers generally paid the fines rather than employ persons with disabilities. The National Tax and Customs Authority issued “rehabilitation cards” to persons with disabilities, which granted tax benefits for employers employing such individuals.

Roma were the country’s largest ethnic minority. According to the 2011 census, approximately 315,000 persons (3 percent of the population) identified themselves as Roma. A University of Debrecen study published in 2018, however, estimated there were 876,000 Roma in the country, or approximately 9 percent of the country’s population. There were approximately 1,300 de facto segregated settlements in the country where Roma constituted the majority of the population. Romani communities are not socially integrated with broader Hungarian society and are characterized by considerably lower indicators on most socioeconomic measures than the majority population. Conditions for the community deteriorated since the collapse of communism in 1989-90 but were rooted in centuries of social exclusion. Lacking advanced education and employment skills, many Roma occupied the margins of society and experienced long-term unemployment, which bred a cycle of poverty and welfare dependence.

Kazakhstan has attracted significant FDI since independence. As of October 1, 2021, FDI totaled $170 billion, primarily in the oil and gas sector. International financial institutions consider Kazakhstan to be a relatively attractive destination for their operations, and some international firms have established regional headquarters in the country.

Kazakhstan adheres to the OECD Declaration on International Investment and Multinational Enterprises, meaning it is committed to certain investment standards.

In April 2019, the Prime Minister created the Coordination Council for Attracting Foreign Investment. The Prime Minister acts as the Chair and Investment Ombudsman. The Investment Committee at the Ministry of Foreign Affairs and its subsidiary, KazakhInvest, handle investment climate policy issues and work with potential and current investors, while the Ministry of National Economy and the Ministry of Trade and Integration work with international organizations like the OECD, WTO, and the UN Conference on Trade and Development (UNCTAD). Each regional government designates a representative to work with investors.

The GOK established the Astana International Financial Center (AIFC), modelled on the Dubai International Financial Center. It offers foreign investors an alternative jurisdiction for operations, with tax holidays, flexible labor rules, a Common Law-based legal system, and flexibility to carry out transactions in any currency.  The GOK recommends that foreign investors use AIFC for contracts with Kazakhstani businesses.

By law, foreign and domestic private firms may establish and own business enterprises. While no sectors are completely closed to foreign investors, restrictions on foreign ownership exist, including a 20 percent ceiling on foreign ownership of media outlets, a 49 percent limit on domestic and international air transportation services, and a 49 percent limit on telecom services.

Kazakhstan formally removed the limits on foreign ownership of telecom companies, except for the country’s main telecom operator, KazakhTeleCom. Still, foreign investors must obtain a government waiver to acquire more than 49 percent of shares in a telecom company. There are no constraints on the participation of foreign capital in the banking and insurance sectors. However, law limits the participation of offshore companies in banks and insurance companies and prohibits foreign ownership of pension funds and agricultural land. Foreign citizens and companies are restricted from participating in private security businesses.

Kazakhstan does not have a screening system in place and does not have legislation specifically focused on the national security implications of FDI akin to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Kazakhstan’s central bank (the National Bank of Kazakhstan) collects standard statistics on FDI and other forms of investments, but mostly for macroeconomic purposes.

Foreign companies remain concerned about the risk of preferences for domestic companies and mechanisms for government intervention in foreign companies’ operations, particularly in procurement.  The Front Office for Investors assists with investors’ challenges and brings them to the Prime Minister’s Council.

The OECD Investment Committee presented its second Investment Policy Review in June 2017, available at: https://www.oecd.org/countries/kazakhstan/oecd-investment-policy-reviews-kazakhstan-2017-9789264269606-en.htm 

The OECD review recommended Kazakhstan undertake corporate governance reforms of state-owned enterprises (SOEs), implement a more efficient tax system, further liberalize its trade policy, and introduce responsible business conduct principles and standards.

Kazakhstan has taken steps to simplify procedures for starting and operating businesses. Most procedures can now be done online. For example, online registration of any business is possible through the unified government website https://egov.kz/cms/en/services/business_registration/pass042com_mu .

Non-residents must have a business immigrant visa and submit electronic copies of their IDs, as well as any certification of their companies from their country of origin. Documents must be translated and notarized. Investors may learn more about these services here: https://invest.gov.kz/invest-guide/business-starting/ 

A foreign-owned company registered in Kazakhstan is considered a domestic company for purposes of currency regulation. Residents may open bank accounts in foreign currency in Kazakhstani banks.

In 2021, the GOK introduced a special three percent retail tax for 114 types of small and medium-sized businesses that have been affected the most by the pandemic, available for two years. The GOK also introduced an investment tax credit allowing entrepreneurs to defer taxes for up to three years. In 2020, the government approved new measures aimed to attract FDI. For example, the government introduced a new type of investment agreement (see details in Section 4). In January, Kazakhstan re-instituted visa-free travel for citizens of 54 countries, including the United States, Great Britain, Germany, and Japan.

The AIFC offers legal arrangements not normally available under Kazakhstani law, including trusts. AIFC residents have access to simplified procedures for obtaining investor visas.

Foreign investors often complain about problems with finalizing contracts and licensing. Tax errors still have not been decriminalized. The controversial taxation of dividends of non-residents came into force in January 2021.

The government neither incentivizes nor restricts outward investment.

Secured interests in property (fixed and non-fixed) are recognized under the Civil Code and the Land Code. Agricultural land and certain other natural resources may only be owned or leased by Kazakhstani citizens.

In May 2021, President Tokayev signed into law amendments which prohibit foreigners, persons without citizenship, foreign legal entities and legal entities with foreign participation, international organizations, scientific centers with foreign participation, and repatriated Kazakhs from owning or leasing agricultural lands.

The legal structure for intellectual property rights (IPR) protection is relatively strong; however, enforcement needs further improvement. Kazakhstan is not currently included in the United States Trade Representative’s (USTR) Special 301 Report. To facilitate its accession to the WTO and attract foreign investment, Kazakhstan continues to improve its legal regime for protecting IPR. The Civil Code and various laws protect U.S. IPR. Kazakhstan has ratified 18 of the 24 treaties endorsed by the World Intellectual Property Organization (WIPO): https://wipolex.wipo.int/en/treaties/ShowResults?country_id=97C 

The Criminal Code sets out punishments for violations of copyright, rights for inventions, useful models, industrial patterns, selected inventions, and integrated circuit topographies. The law authorizes the government to target internet piracy and shut down websites unlawfully sharing copyrighted material, provided that the rights holders had registered their copyrighted material with the IPR Department at the Ministry of Justice. Despite these efforts, the use of pirated software remains high.

Kazakhstan amended its legislation to comply with OECD IPR standards. The law set up a more convenient, one-tier system of IPR registration and provided rights holders the opportunity for pre-trial dispute settlement through the Appeals Council at the Ministry of Justice.

Authorities conduct nationwide campaigns called “Hi-Tech” and “Anti-Fraud” that are aimed at detecting and ceasing IPR infringements and increasing public awareness about IP issues. In 2021, these campaigns resulted in the seizing of 3,500 units of counterfeit goods and closing access to 40 foreign websites selling pirated software. In 2021, the Agency for Financial Monitoring filed 11 criminal cases for IPR violations worth more than $4.2 million.

Foreign companies complain of inadequate IPR protection. Judges, customs officials, and police officers lack IPR expertise, which exacerbates weak IPR enforcement.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=KZ .

Entrepreneurs, the government, and non-governmental organizations are aware of the expectations of responsible business conduct (RBC). Kazakhstan continues to make steady progress toward meeting the OECD Guidelines for Multinational Enterprises, and the government promotes the concept of RBC. The OECD National Contact Point is the Ministry of National Economy.

The Entrepreneurial Code has a section on social responsibility, which is defined as a voluntary contribution for the development of social, environmental, and other spheres. This creates conditions for RBC but cannot force entrepreneurs to take socially responsible actions. The code considers charitable contributions as a form of social responsibility and envisions tax preferences for entrepreneurs engaged in charitable activities. The government encourages companies to donate to the Khalkyna (To the People of Kazakhstan Fund).

The government signed on to the Extractive Industries Transparency Initiative (EITI) in 2007.  Kazakhstan produces EITI reports that disclose revenues from the extraction of its natural resources.  Companies disclose what they have paid in taxes and other payments, and the government discloses what it has received; these two sets of figures are then compared and reconciled.  In 2019, the EITI Board reported that Kazakhstan had made considerable improvements since 2017 by providing additional information on local content, social investment, and transportation of oil, gas, and minerals.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Eco Code includes a chapter on adaptation to climate change that focuses on the priority areas of agriculture, water management, forestry, and civil protection.  Kazakhstan 2050 encourages an accelerated transition to a low-carbon economy, sets a target for the share of RES in total power mix to reach 50 percent by 2050, and promotes water-saving technologies.  The Concept for Development of the Fuel and Energy Sector until 2030 aims to develop regulations and incentives to promote sustainable and renewable energy, adapt to climate change and address the challenges associated with reducing carbon dependency.  The Ministry of Ecology, Geology, and Natural Resources (MEGNR) Strategic Plan 2020-2024 stipulates a regulatory approach to enable the transition to a low-carbon economy along with a decrease in greenhouse gas (GHG) emissions.

Kazakhstan’s Nationally Determined Contribution (NDC) includes an unconditional, economy-wide target of 15 percent reduction in GHG emissions by 2030 compared to 1990 and a conditional 25 percent reduction by 2030.

GOK has pollution standards for soil, water, air, and radiation. The Eco Code introduced a ten-year exemption from environmental payments for businesses committed to implementing best available technologies (BAT), with a perpetual exemption if they reached their target emission reductions. For those who did not introduce BAT, environmental payments will double in 2025, increase four-fold in 2028, and eight-fold in 2031.

Kazakhstan’s rating in Transparency International’s 2021 Corruption Perceptions Index is 37/100, where 100 is very clean and 0 is highly corrupt. According to Transparency International, the January civil unrest underscored the dangers of ignoring corruption. The Anti-Corruption Agency has focused on sectors like agriculture and healthcare, leaving out the largest industries. President Tokayev announced in January that the government would do more to combat corruption. Within months, several investigations began against wealthy and powerful individuals, including relatives of First President Nazarbayev.

According to the State Department’s Human Rights Report, the government selectively prosecuted officials who committed abuses, especially in high-profile corruption cases. Nonetheless, corruption remained widespread, and impunity existed for many in positions of authority as well as for those connected to law enforcement entities. The law provides criminal penalties for corruption by officials, but the government did not implement the law effectively. Corruption was widespread in the executive branch, law enforcement agencies, local government administrations, the education system, and the judiciary, according to human rights NGOs. Journalists and advocates for fiscal transparency report frequent harassment and administrative pressure.

The Criminal Code imposes criminal liability and punishment for corruption, forbids suspended sentences for corruption-related crimes, and provides for lifelong bans on employment in the civil service with mandatory forfeiture of title, rank, grade, and state awards for those convicted of corruption-related crimes. The Law on Public Service mandates public servants adhere to rule of law principles including anti-corruption and professionalism of civil service. However, the Law on the First President of the Republic of Kazakhstan—Leader of the Nation establishes blanket immunity for First President Nursultan Nazarbayev and members of his household from arrest, detention, search, or interrogation.

Kazakhstan’s Anti-Corruption Agency prepares an annual report on countering corruption. Kazakhstan ratified the UN Convention against Corruption. It participates in the Istanbul Anti-Corruption Action Plan of the OECD Anti-Corruption Network, the International Association of Anti-Corruption Agencies, and the International Counter-Corruption Council of CIS member-states. Kazakhstan is a member of the Group of States against Corruption (GRECO).

Corruption continues to be observed in nearly all sectors, including extractive industries, infrastructure projects, state procurements, and banking. The International Finance Corporation’s Enterprise Survey for Kazakhstan, conducted in 2019 with over 1,400 small, medium, and large enterprises, found that 12 percent of respondents had experienced at least one bribe payment request across six different transactions including paying taxes, obtaining permits or licenses, and obtaining utility connections.

Contact at the government agency responsible for combating corruption:

Olzhas Bektenov
Chairman
Anti-Corruption Agency of the Republic of Kazakhstan
37 Seyfullin Street, Nur-Sultan
+7 (7172) 909002
kense@antikor.gov.kz 

Contact at a “watchdog” organization:

Aidar Yegeubayev
Chairman of the Board of Governors
Transparency Kazakhstan Foundation
Rahat Palace Business Centre,
Satbayev koshesy 29/6,
10th Floor, Office 105,
A15P5A0, Almaty, Kazakhstan
+7(707) 711 4949
transparencykazakhstan@gmail.com 

During violent civil unrest in January, at least 237 individuals were killed and there were many instances of theft, looting, and arson. More than 1,000 government and commercial buildings were damaged in Almaty and several other cities and rioters briefly seized Almaty International Airport. President Tokayev stated that the initial economic damages were estimated at $2-3 billion. After restoring order, President Tokayev assured foreign investors that the GOK would ensure a stable investment climate.

The OECD Skills Strategy project showed in 2021 that the country is improving rapidly in the use of skills at work, particularly digital skills.  However, the skills of youth remain substantially below the OECD average. Adults also possess comparatively weak foundational and problem-solving skills, as the culture of adult learning is under-developed.

The State Program of Education and Science Development 2020-2025 seeks to reduce the gap in educational achievement between urban and rural schools and to improve lifelong learning.

Many large investors rely on foreign workers to fill the void.  The government regulates foreign labor; foreign workers must obtain work permits.

The GOK has made it a priority to ensure that Kazakhstani citizens are well represented in foreign enterprise workforces.  The government is particularly keen to see Kazakhstanis hired into the managerial and executive ranks of foreign enterprises.

Kazakhstan joined the International Labor Organization (ILO) in 1993 and has ratified 24 out of 189 ILO conventions.

The Constitution and Labor Code guarantee basic workers’ rights, including occupational safety and health, the right to organize, and the right to strike.  On May 4, 2020, the government enacted amendments to labor-related laws, including the trade union law, to bring them closer to compliance with ILO standards. The three independent labor unions – the Federation of Trade Unions of the Republic of Kazakhstan (FTUK), Commonwealth of Trade Unions of Kazakhstan Amanat, and Kazakhstan Confederation of Labor (KCL) – had over three million members, or 40 percent of the workforce, as of March 1, 2020. According to the FTUK, as of January 2021, 1.5 million workers, or 90.2 percent of FTUK members, labored with collective bargaining agreements in 2020. The number of collective agreements countrywide increased 19.1 percent from 120,200 in 2019 to 143,571 in 2020, the latest data available.

The Labor Code describes a mechanism for resolution of individual labor disputes via direct negotiations with an employer, mediation commission, and court.  It identifies a mechanism for resolution of collective labor disputes via direct negotiations with an employer, mediation commission, labor arbitration, and the court. Workers’ right to strike are limited. Courts have the power to declare a strike illegal at the request of an employer or the Prosecutor General’s Office.  Employers may fire striking workers after a court declares a strike illegal.  Please see additional details at the Human Rights Report at:  https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/kazakhstan/.

Complaints about low wages, poor social benefits, and substandard working conditions resulted in over 363 strikes and labor disputes in 2021 and dozens in the first three months of 2020. Workers typically ended strikes after the companies’ management agreed to a partial increase of wages and bonuses.

The average salary for men was 21.7 percent higher than that for women in 2021. The official unemployment rate is 4.9 percent, or around 450,000 unemployed people out of 9.2 million working-age Kazakhstanis.  In March, KPMG estimated that the real unemployment rate was 10 percent in 2019, 12 percent in 2020, and may increase to 20 percent in 2022.

The GOK reported in 2020 that 1.22 million citizens (or about 13.5 percent) of the country’s workforce worked in the informal economy. Informal workers were concentrated in the retail trade, transport services, agriculture, real estate, beauty and hair dressing salons, and laundry and dry-cleaning businesses. Small entrepreneurs and their employees for the most part worked without health, social, or pension benefits, and did not pay into the social security system.

The Latvian government actively encourages foreign direct investment (FDI) and works with investors to improve the country’s business climate. Latvia has a dedicated investment promotion agency – Latvian Investment and Development Agency – to provide a full scope of investment services to prospective investors: https://www.liaa.gov.lv/en . As of April 2022, the agency has two dedicated representatives based in the United States (San Francisco, CA and Boston, MA). The Latvian government meets annually with the Foreign Investors Council in Latvia (FICIL), which represents large foreign companies and chambers of commerce, to improve the business environment and encourage foreign investment. The Prime Minister chairs the Coordination Council for Large and Strategically Important Investment Projects. In January 2021, FICIL published its Sentiment Index 2020 – a survey of current foreign investors’ assessments about the investment climate in Latvia. It is available at: https://www.ficil.lv/sentiment-index/  .

Latvian legislation, on the basis of national security concerns, requires governmental approval prior to transfers of significant ownership interests in the energy, telecommunications, and media sectors. The government is considering expanding this list of sectors. Detailed information is available here: https://investmentpolicy.unctad.org/country-navigator/118/latvia. 

With these limited exceptions, physical and legal persons who are citizens of Latvia or of other EU countries may freely purchase real property. In general, physical and legal persons who are citizens of non-EU countries (third-country nationals) may also freely purchase developed real property. However, third-country nationals may not directly purchase certain types of agricultural, forest, and undeveloped land. Such persons may acquire ownership interest in such land through a company registered in the Register of Enterprises of the Republic of Latvia, provided that more than 50 percent of the company is owned by: (a) Latvian citizens and/or Latvian governmental entities; and/or (b) physical or legal persons from countries with which Latvia signed and ratified an international agreement on the promotion and protection of investments on or before December 31, 1996; or for agreements concluded after this date, so long as such agreements provide for reciprocal rights to land acquisition. The United States and Latvia have such an agreement (a bilateral investment treaty in force since 1996). In addition, foreign investors can lease land without restriction for up to 99 years. The Law on Land Privatization in Rural Areas allows EU citizens to purchase Latvia’s agricultural land and forests. Other restrictions apply (to both Latvian citizens and foreigners) regarding the acquisition of land in Latvia’s border areas, Baltic Sea and Gulf of Riga dune areas, and other protected areas.

In May 2017, the President of Latvia promulgated amendments to the Law on Land Privatization in Rural Areas to simplify and clarify the process for local farmers to purchase land. The law, however, also prohibits foreigners who do not have a working knowledge of the Latvian language from purchasing agricultural land. On June 11, 2020 the Court of Justice of the EU found that the law violated European law, but the Latvian government has yet to amend the law.

The Latvian constitution guarantees the right to private ownership. Both domestic and foreign private entities have the right to establish and own business enterprises and engage in all forms of commercial activity, except those expressly prohibited by law.

The Organization for Economic Cooperation and Development (OECD) published the latest Latvia Economic Snapshot in March 2022 ( http://www.oecd.org/economy/latvia-economic-snapshot/ ). Although there have been no trade policy reviews specifically involving Latvia, the WTO completed its latest review of the European Union in February 2020. ( https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm ). Additionally, in October 2017, the World Bank published a review of Latvia’s tax system ( http://documents.worldbank.org/curated/en/587291508511990249/Latvia-tax-review ).

A new business can be registered in Latvia in one day. The Latvian Investment and Development Agency has prepared a guide on starting a business in Latvia: https://www.liaa.gov.lv/en/invest-latvia/business-guide/operating-environment. 

The official website of the Latvian Commercial Register provides detailed information in English on business registration process in Latvia: https://www.ur.gov.lv/en/ .

Latvia has implemented special legislation to encourage startup ventures through favorable tax treatment. For more information, please see here: http://www.liaa.gov.lv/en/invest-latvia/start-up-ecosystem  and here: https://labsoflatvia.com/en/resources .

Using the European Commission definitions of micro, small, and medium enterprises (MSMEs), Latvia has established a special tax regime for microenterprises. This special tax regime is available to foreign nationals. Changes introduced as of January 2022, including an increased microenterprise tax rate, now make the tax regime less attractive for most small companies. For additional details on the microenterprise tax regime, see: https://www.fm.gov.lv/en/micro-enterprise-tax 

Latvia joined other OECD countries in July 2021 in agreeing to a new framework for global tax reform and a global minimum corporate tax rate of 15 percent for multinational enterprises with annual revenue exceeding $868 million. Further detailed technical guidance can be found here: https://www.oecd.org/tax/beps/oecd-releases-detailed-technical-guidance-on-the-pillar-two-model-rules-for-15-percent-global-minimum-tax.htm 

The Latvian government does not incentivize outward investment nor restrict Latvians from investing overseas.

Latvia recognizes the full spectrum of property rights, including mortgages and liens. Latvia does not have significant problems with unclear legal titles. More information: http://www.globalpropertyguide.com/Europe/Latvia/Buying-Guide .

To harmonize its legislation with EU and WTO requirements, Latvia has established a legal framework for the protection of intellectual property rights (IPR), including legislation to protect copyrights, trademarks, and patents. The Law on Copyrights strengthens the protection of software copyrights and neighboring rights. Foreign owners may seek redress for violation of their IPR through the appellation council at the Latvian Patent Office, as well as through private litigation. In copyright violation cases, aggrieved parties can request that the use of the pirated works be prohibited, pirated copies be destroyed, and that violators compensate them for losses (including lost profits). The criminal law stipulates penalties for copyright violations.

The United States has signed a Trade and Intellectual Property Rights Agreement with Latvia. Latvia is a member of the World Intellectual Property Organization (WIPO) and party to the Paris Convention, the Berne Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Geneva Phonograms Convention. In addition, the Latvian government has amended all relevant laws and regulations to comply with the requirements of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to which Latvia acceded by joining the WTO.

The business community has occasionally raised concerns regarding the enforcement of IPR in Latvia. Digital piracy is still a concern in Latvia, as it is in much of Eastern and Central Europe. Latvian law enforcement authorities have the authority to investigate IPR infringement cases. The Government of Latvia is working to tackle online/digital piracy, and has drafted respective policy guidelines: https://www.iem.gov.lv/en/article/tackle-copyright-infringements-digital-environment-more-effectively . 

Every year, the European Commission publishes a report describing the customs detentions of articles suspected of infringing IPR. These statistics are available here: https://ec.europa.eu/taxation_customs/business/customs-controls/counterfeit-piracy-other-ipr-violations/ipr-infringements-facts-figures_en  .

Latvia is not listed in USTR’s Special 301 Report or included in the Notorious Market List.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Clare Zimmerman
Economic Officer, U.S. Embassy Riga, Latvia
+371 67107000
ZimmermanCN@state.gov

List of Attorneys in Latvia, compiled by the Consular Section of the U.S. Embassy in Riga: https://lv.usembassy.gov/u-s-citizen-services/attorneys/

American Chamber of Commerce of Latvia: http://www.amcham.lv/en/home 

Contact at Copyright Offices
Ms. Ilona Petersone
Director of Copyright Division, Ministry of Culture of the Republic of Latvia
+371 6733-0240
Ilona.Petersone@km.gov.lv 

Contact at Industrial Property Offices
Mr. Agris Batalauskis
Director of the Patent Office of the Republic of Latvia
+371 670 99 600
valde@lrpv.lv 

Awareness of and implementation of due diligence principles of corporate social responsibility (CSR)/Responsible Business Conduct is developing among producers and consumers. Two of the most active promoters of CSR are the American Chamber of Commerce in Latvia and the Employers’ Confederation of Latvia. The Latvian Ministry of Welfare also promotes CSR. Several other initiatives promote CSR, such as the Institute for Corporate Sustainability and Responsibility (https://www.incsr.eu/ ), the Corporate Social Responsibility Platform ( http://www.ksalatvija.lv/en ), and the Human Development Award (http://www.cilvekaizaugsme.lv/home/ ).

Latvia adheres to the OECD Guidelines for Multinational Enterprises. Latvia’s national point of contact for the guidelines can be found here: https://www.mfa.gov.lv/en/policy/economic-affairs/oecd/latvian-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises . Latvia also promotes the United Nations Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.

Latvia has adopted a strategy achieving climate neutrality by 2050, which is available here: https://unfccc.int/documents/267179 . In addition, Latvia’s National Climate and Energy Action Plan 2021-2030 is available here: https://www.em.gov.lv/en/national-energy-and-climate-plan-2021-2030  .

Latvian law enforcement institutions, foreign business representatives, and non-governmental organizations have identified corruption and the perception of corruption as persistent problems in Latvia. According to the 2021 Corruption Perception Index by Transparency International, Latvia ranks 36th out of 180 countries (in order from the lowest perceived level of public sector corruption to the highest).

To strengthen its anti-corruption programs, the Latvian government has adopted several laws and regulations, including the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing and the Law on Prevention of Conflicts of Interest in the Work of Public Officials. The Conflicts of Interest Law imposes restrictions and requirements on public officials and their relatives. Several provisions of the law deal with the previously widespread practice of holding several positions simultaneously, often in both the public and private sector. The law includes a comprehensive list of state and municipal jobs that cannot be combined with additional employment. Moreover, the law expanded the scope of the term state official to include members of boards and councils of companies with state or municipal capital exceeding 50 percent. Additionally, Latvia is a member of the OECD Anti-Bribery Convention and the Council of Europe’s Group of States Against Corruption (FRECO). In line with OECD and GRECO recommendations, the government is working to strengthen anti-corruption policy and enforcement while improving the functioning of the independent Corruption Prevention and Combatting Bureau (KNAB).

Under Latvian law, it is a crime to offer, accept, or facilitate a bribe. Although the law stipulates heavy penalties for bribery, a limited number of government officials have been prosecuted and convicted of corruption to date. The law also provides the possibility of withdrawing charges against a person giving a bribe in cases where the bribe has been extorted or in cases where the person voluntarily reports these incidents and actively assists the investigation. In addition, the Latvian government has adopted a whistleblower law that requires all government agencies and large companies to establish protocols to accept whistleblower disclosures and protect whistleblowers from reprisals.

KNAB is the institution with primary responsibility for preventing and combating corruption and carrying out enforcement activities in response to suspected or alleged corruption. It is subordinated to the Cabinet of Ministers and supervised by the Prime Minister.

KNAB has also established a Public Consultative Council to help increase public participation in implementing its anti-corruption policies, increasing public awareness, and strengthening connections between the agency and the public. More information is available at: https://www.knab.gov.lv/en/knab/consultative/public/ . The Prosecutor General’s Office also plays an important role in fighting corruption.

There is a perceived lack of fairness and transparency in the public procurement process in Latvia. Several companies, including foreign companies, have complained that bidding requirements are sometimes written with the assistance of potential contractors or couched in terms that exclude all but preferred contractors.

A Cabinet of Ministers regulation provides for public access to government information, and the government generally provided citizens such access. There have been no reports the government has denied noncitizens or foreign media access to government information.

Contact at government agency responsible for combating corruption:
Corruption Prevention and Combating Bureau
Citadeles iela 1, Riga, LV 1010, Latvia
+371 67356161
knab@knab.gov.lv 

Contact at “watchdog” organization:
Delna (Latvian affiliate of Transparency International)
Citadeles iela 8, Riga, LV-1010
+371 67285585
ti@delna.lv 

There have been no reports of political violence or politically motivated damage to foreign investors’ projects or installations. The likelihood of widespread civil disturbances is very low. While Latvia has experienced peaceful demonstrations related to political issues, there have been few incidents when these have devolved into crimes against property, such as breaking shop windows or damaging parked cars. U.S. citizens are cautioned to avoid any large public demonstrations since even peaceful demonstrations can turn confrontational. The Embassy provides periodic notices to U.S. citizens in Latvia, which can be found on the Embassy’s web site: https://lv.usembassy.gov/.

The official rate of registered unemployment in January 2022, according to Eurostat, was 7.3 percent (https://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics ). The Latvian State Employment Agency reported 6.9 percent unemployment at the end of January 2022. Unemployment is significantly higher in rural areas. A high percentage of the workforce has completed at least secondary or vocational education. Foreign managers praise the high degree of language skills, especially Russian and English, among Latvian workers. However, foreign managers have reported a shortage of mid- and senior-level managers with “Western” management skills.

Companies must keep wages above the legally specified minimum of EUR 500 per month, as of January 2021. Union influence on the wage setting process is limited. Trade unions do not have significant influence on the labor market. Additional information on trade unions in Latvia is available here: http://www.worker-participation.eu/National-Industrial-Relations/Countries/Latvia .

One challenge employers have faced since Latvia joined the EU is that many skilled employees can find better employment opportunities in other EU countries. Unofficial statistics suggest that more than 240,000 people have moved from Latvia to other EU countries since May 1, 2004. Despite the fact that the macroeconomic situation has stabilized, skilled and unskilled workers continue to emigrate. The government is implementing a strategy to entice people who have left Latvia to return.

According to several reports, there is a significant shortage of workers in manufacturing, wholesale and retail, transport and storage, and ICT sectors. The largest share of registered unemployment is comprised of persons with only primary or secondary education who do not possess specialized skills. To address this problem, the Latvian government has approved a list of highly skilled professions that employers may use to recruit professionals abroad to work in Latvia: https://www.em.gov.lv/en/news/18513-the-government-supports-the-application-of-simplified-conditions-for-the-attraction-of-highly-qualified-foreign-professionals .

The Labor Law addresses discrimination issues, provides detailed provisions on the rights and obligations of employees’ representatives, and created the Conciliation Commission, a mechanism that can be used in the workplace to resolve labor disputes before going to arbitration. Victims of sexual harassment in the workplace can also submit a complaint to the Office of the Ombudsman and the State Labor Inspectorate.

Full-time employees in Latvia work 40 hours a week. Normally, there are five working days per week, but employers may schedule a sixth workday without offering premium pay. Employees are entitled to four calendar weeks of annual paid vacation per year. Employers are prohibited from entering into an employment contract with a foreign individual who does not have a valid work permit.

Latvia is a member of the International Labor Organization (ILO) and has ratified all eight ILO Core Conventions.

Latvia’s shadow economy – largely driven by undeclared wages and business earnings – continues to be a major challenge. The annual Stockholm School of Economics Riga “Shadow Economy Index” shows that in 2020 the shadow economy grew by 1.6 percentage points and reached 25.5 percent of GDP. The detailed report is available here: https://www.sseriga.edu/shadow-economy-index-baltic-countries .

Lithuania’s laws ensure equal protection for both foreign and domestic investors. No special permit is required from government authorities to invest foreign capital in Lithuania. State institutions have no right to interfere with the legal possession of foreign investors’ property. In the event of justified expropriation, investors are entitled to compensation equivalent to the market value of the property expropriated. The law obligates state institutions and officials to keep commercial secrets confidential and requires compensation for any loss or damage caused by illegal disclosure. As a member of European Union, Lithuania is subject to WTO investment requirements. Invest Lithuania is the government’s principal institution dedicated to attracting foreign investment. It serves as a one-stop-shop to: provide information on business costs, labor, tax and legal considerations, and other business concerns; facilitate the set up and launch of a company; provide help in accessing government financial support; and advocate on behalf of investors for more business friendly laws. In addition to its offices in Vilnius and major Lithuanian cities, Invest Lithuania has representative offices in Germany and the United Kingdom. The government is also expanding its network of commercial representatives, with an attaché appointed to serve at the Consulate General in Los Angeles in 2021 and new postings planned for in Japan, South Korea, and Taiwan. Every year the government holds a conference with foreign investors to discuss their concerns and ways to improve investment climate in Lithuania.

Foreign investors have the right to repatriate profits, income, or dividends, in cash or otherwise, or to reinvest the same without any limitation, after paying taxes. The law establishes no limits on foreign ownership or control. Foreign investors have free access to all sectors of the economy with some limited exceptions:

The Law on Investment prohibits investment of foreign capital in sectors related to the security and defense of the State.

The Law on Investment also requires government permission and licensing for commercial activities that may pose risks to human life, health, or the environment, including the manufacturing of, or trade in, weapons.

As of 2014, foreign citizens are allowed to buy agricultural or forest land.

The Law on Investment specifically permits the following forms of investment in Lithuania:

• establishment of an enterprise or acquisition of a part, or the whole, of the authorized capital of an operating enterprise registered in Lithuania;

• acquisition of securities of any type;

• creation, acquisition, and increase in the value of long-term assets;

• lending of funds or other assets to business entities in which the investor owns a stake, allowing control or considerable influence over the company; and

• performance of concession or leasing agreements.

Foreign entities are allowed to establish branches or representative offices. There are no limits on foreign ownership or control. Foreign investors can contribute capital in the form of money, assets, or intellectual or industrial property rights. The State Property Bank screens the performance record and size of companies bidding on state or municipal property and has halted privatizations when it determined that the bidders were not suitable, i.e., for criminal or other reasons.

The Lithuanian parliament most recently updated its 2002 law on the Protection of Objects Important to National Security in 2018. The law is aimed at enforcing additional safeguards to avoid threats related to investments into companies of strategic national importance, thus requiring a special government commission to screen investments in identified strategic sectors.

http://www.oecd.org/countries/lithuania/economic-survey-lithuania.htm 

The process of company registration in Lithuania involves the following steps that can be accomplished online at http://www.registrucentras.lt/en/ :

1. Check and reserve the name of the company (limited liability company). It takes about one day and costs approximately $18.
2. Register at the Company Register, including registration with State Tax Inspectorate (the Lithuanian Revenue Authority) for corporate tax, VAT, and State Social Insurance Fund Board (SODRA). It takes one day and costs approximately $64.
3. Complete VAT registration. It takes three days to complete at no charge.

The Lithuanian government neither incentivizes nor restricts outward investment.

Lithuanian law protects foreign investments and the rights of investors in several ways:

• The Constitution and the Law on Foreign Capital Investment protect all forms of private

• International agreements, such as the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards, offer protection.

• Bilateral agreements with the United States and other western countries on the mutual

• The Law on Capital Investment in Lithuania and other acts regulate customs duties, taxes, and relationships with financial and inspection authorities. This law also establishes dispute settlement procedures.

• In the event of justified expropriation, applicable law entitles investors to compensation

• Foreign investors may defend their rights under the Washington Convention of 1965 by

• State institutions and officials are obligated to keep commercial secrets confidential and must pay compensation for any loss or damage caused by illegal disclosure. Lithuania legalized the possibility of hiring private bailiffs to enforce court judgments in 2003.

Lithuania’s commercial laws conform to EU requirements, and include the principles of the free establishment of companies, protection of shareholders’ and creditors’ rights, free access to information, and registration procedures. Relevant laws include: the Company Law and Law on Partnerships (2004), the Law on Personal Enterprises (2004), the Law on Investments (1999), the Law on Bankruptcy of Enterprises (2001), and the Law on Restructuring of Enterprises (2001). The Civil Code of 2000 governs commercial guarantees and security instruments. It provides for the following types of guarantee and security instruments to secure fulfillment of contractual obligations: forfeiture, surety, guarantee, earnest money, pledge, and mortgage.

Lithuania has significantly improved its intellectual property rights (IPR) protection in recent years, and members of the innovation community report that IPR infringement and theft is infrequent. Lithuania joined the World Intellectual Property Organization (WIPO) in 2002 and is party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. Lithuania joined the World Trade Organization in 2001 and so is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Following EU accession, Lithuania extended protection to member states’ trademarks and designs. Lithuania brought its national law protecting biological inventions into compliance with EU Directive 98/44 in June 2005.

In 2008, Lithuania was removed from USTR’s Special 301 Watch List and is not currently included in the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

The State Patent Bureau provides a list of patent attorneys at the following link: https://vpb.lrv.lt/en/ 

Although Lithuania has a strong private sector, the concept of Corporate Social Responsibility (CSR) is still relatively new in Lithuania. However, over the past few years many companies, especially those in Vilnius, have developed more robust CSR programs. There are an increasing number of private-public partnerships and social projects where the private sector is involved in supporting volunteerism, environmental restoration, and scholarships. Furthermore, successful participation in the European Union market requires higher standards of CSR. Foreign investors in Lithuania have played a very important role in promoting CSR. In 2009, the government developed and approved a National Corporate Social Responsibility Development Program aimed at promoting CSR. Also, in the past few years there has been growing interest from both government and NGOs in promoting CSR values by organizing competitions and awards ceremonies such as the Social and Labor Ministry’s annual Socially Responsible Business Awards Ceremony, Confederation of Industrialists’ Awards, and others. Also, after Lithuania acceded to the OECD Anti-Bribery Convention in 2017, more business organizations and the legal community have started to promote the importance of companies adopting anti-bribery compliance programs.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Implementation of Lithuania’s National Energy and Climate Plan (NECP) for 2021-2030 will require approximately EUR 14 billion. Most of the funds, around EUR 10.8 billion, will be used to implement the national energy independence objectives and Lithuania’s EU commitments on mitigating the impact on climate change. The NECP provides for the construction of resilient road surfaces, more resilient electricity infrastructure, and rainwater management. It subsidizes agricultural insurance and organic and climate-resilient farming. The NECP also includes measures on public health, management of extreme weather events, forestry, ecosystems, and biodiversity. Most of these funds will come from the EU and the national budget.

Lithuania together with Denmark, Estonia, Spain, and Portugal, is among the five countries in the EU with the most ambitious renewable energy targets for 2030. By building interconnections with the Western European electricity system, converting district heating systems to the use of biofuels, approving additional auctions for the production of solar and wind electricity, and by promoting prosumer (consumers who both produce and consume electricity) policies, Lithuania projects that 45% of its electricity will come from renewable energy sources by 2030.

Conservation is also an element of Lithuania’s efforts to reduce emissions. Lithuania aims to reduce its energy consumption by one-fifth by 2030 through a combination of renovating public and residential buildings, promoting energy efficiency in industry and services, and promoting sustainable mobility. These efforts will also contribute to Lithuania’s national security objective of reducing dependence on imported fossil fuels.

By 2030, the government projects that 70% of rail freight will be transported by electric trains and 14% of passenger cars will be electric. This will lead to a drop in Lithuania’s total fuel consumption by 24% and reduce the country’s dependency on imported fuel. The government also projects that the use of cleaner technologies by Lithuanian industry and reductions in the use of mineral fertilizers will lead to an 8 hectare per year increase in forest growth. The government also plans to improve efficiency in agricultural production and hopes to bring down the use of energy and production resources in agriculture by 20% by 2030.

According to the NECP, the implementation of all the planned measures by 2030 will reduce GHG emissions by: 8.1% in the transport sector, 9.1% in agriculture, 9.8% in industry, and 52.4% in the waste sector.

A 2019 Eurobarometer study on Businesses’ attitudes towards corruption in the EU shows that corruption is becoming less of an obstacle for business in Lithuania. Only 15 percent of business executives identified corruption as a problem in Lithuania, twice fewer than in 2015. Out of 27 EU countries, Lithuania was ranked seventh for corruption being the least pressing issue in business. Additionally, the Lithuanian Map of Corruption 2019 survey initiated by the Special Investigations Service (STT) – Lithuania’s anti-corruption law enforcement agency – also showed the positive anti-corruption trends in business environment over the past decades. However, nepotism and cronyism – hiring relatives and friends – are still the most prevalent forms of corruption that hinder business development.

More than 50 governmental institutions regulate commerce in one way or another, creating opportunities for corrupt practices. Large foreign investors report few problems with corruption. On the contrary, most large investors report that high-level officials are often very helpful in solving problems fairly. In general, foreign investors say that corruption is not a significant obstacle to doing business in Lithuania and describe most of the bureaucrats they deal with in Lithuania as reasonable and fair. Small and medium enterprises (SMEs) perceive themselves as more vulnerable to petty bureaucrats and commonly complain about extortion. SMEs often complain that excessive red tape virtually requires the payment of “grease money” to obtain permits promptly. Business owners maintain that some government officials, on the other hand, view SMEs as likely tax-cheats and smugglers, and treat the owners and managers accordingly.

Paying or accepting a bribe is a criminal act. Lithuania established in 1997 the Special Investigation Service (Specialiujų Tyrimų Tarnyba) specifically to fight public sector corruption. The agency investigates approximately 100 cases of alleged corruption every year. The STT has a strong track record in investigating and prosecuting corruption cases, but has identified corruption prevention as an area for improvement, which Lithuania’s new anti-corruption law that entered into effect in 2022 aims to address. The law codifies the responsibilities of public institutions to enforce stricter standards of openness and transparency. The law also establishes a network of trained anti-corruption officials throughout all levels and areas of government, implements stricter personnel screening procedures, and standardizes metrics to measure anti-corruption performance.

Transparency International (TI)has a national chapter in Lithuania. TI ranked Lithuania 34th out of 180 in its 2021 Perceptions of Corruption Index with a score of 61 out of 100 (TI considers countries with a score below 50 to have serious problems with corruption.). Medical personnel and local government officials, among others, were cited by TI as prone to corruption.

Lithuania ratified the UN Anticorruption Convention in 2006 and acceded to the OECD Anti-Bribery Convention in 2017.

Resources to Report Corruption

Special Investigation Service
Jakšto g. 6, 01105 Vilnius, Lithuania
Tel: 370-5266333
Fax: 370-70663307
Email: pranesk@stt.lt 

Sergejus Muravjovas, Executive Director
Transparency International
Didžioji st. 5, LT–01128, Vilnius, Lithuania
Tel: 370 5 212 69 51
info@transparency.lt  | skype: ti_lithuania

Since its independence in 1991, Lithuania has not witnessed any incidents involving politically motivated damage to projects and/or installations.

Lithuanian labor is relatively inexpensive compared to Western Europe. However, employment regulations are often stricter than those in other EU countries, according to some foreign investors. By law, white-collar workers have a 40-hour workweek. Blue-collar workers have a 48-hour workweek with premium pay for overtime. Maternity leave in Lithuania is granted for up to 126 days, and the government compensates 100 percent of the mother’s salary. A father is also allowed to take paternity leave for one month. His salary is compensated 100 percent as well. Sick leave in Lithuania is granted up to 14 days at any one time and no more than 90 days a year. For the first two days, the salary compensation is 80 – 100 percent, paid by the employer, with the rest of the days being compensated by SODRA (Lithuanian Social Security body) at 80 percent of salary. Lithuania is a member of International Labor Organization (ILO) and has ratified its core conventions.

The government adjusts the monthly minimum wage periodically. Since January 2022, Lithuania’s minimum monthly wage is $817. The average monthly wage is $1,880.

The ability of Lithuanians to work legally in EU countries generated a sizable outflow of labor, causing a domestic shortage of skilled construction workers, truck drivers, shop assistants, medical nurses, and medical specialists. In March, 2021 unemployment rate stood at 6.7 percent.

Lithuania’s management-labor relations are good. Labor unions are not considered overly influential in Lithuania, according to some foreign investors. More than half of workers at Lithuanian fertilizer firm Achema went on strike in February 2022 in the first major strike since 1991. The primary dispute was over the signing of a collective bargaining agreement with management on wages and other conditions. .

Lithuania has one of the best-educated workforces in Central and Eastern Europe. Lithuania ranks fourth among the EU states in terms of population with higher education and first in the Baltic States. Lithuania is one of the five EU members with the highest percentage of people speaking at least one foreign language. Ninety percent of Lithuanians can speak at least one other language – usually English, Polish, and/or Russian – apart from their mother tongue.

Major Lithuanian companies specializing in IT, biotechnology, and laser technology cooperate closely with the leading Lithuanian technological universities, which provide companies with R&D services and offer students specialized on-the-job training programs. This way companies are able to attract a large number of qualified specialists for both local and international projects. Some technology companies, however, have noted challenges in finding highly- skilled workers with advanced technical degrees.

In 2017, the parliament passed a new Labor Code. These changes aim to encourage foreign investment and job creation by simplifying some employment conditions and clarifying other requirements. The new law decreases the advanced notice required when employers terminate an employment contract, and adds new contract options for employers, such as project-based contracts and job-sharing contracts. The law also clarifies previous informal practices by requiring non-union employers to form works councils to represent employee interests and requiring employers to establish and publicize standard company compensation policies.

Romania actively seeks foreign direct investment and offers a market of around 19.2 million consumers, a relatively well-educated workforce at competitive wages, a strategic location, and abundant natural resources. To date, favored areas for U.S. investment include IT and telecommunications, energy, services, manufacturing – especially in the automotive sector, healthcare, consumer products, insurance, and banking. InvestRomania, within the Ministry of Entrepreneurship and Tourism, is the government’s lead agency for promoting and facilitating foreign investment in Romania.

Romania’s accession to the EU on January 1, 2007, helped solidify institutional reform. However, the lack of legislative and regulatory predictability and impact assessments, as well as low institutional capacity, continue to negatively affect the investment climate. As in any foreign country, prospective U.S. investors should exercise careful due diligence, including consultation with competent legal counsel, when considering an investment in Romania. Governments in Romania have repeatedly allowed political interests or budgetary imperatives to supersede accepted business practices in ways harmful to investor interests.

The energy sector has suffered from unanticipated changes. In 2018, offshore natural gas companies benefited from a streamlined permitting process but were hit with a windfall profit tax that previously applied only to onshore gas production. Additionally, in February 2018, legislation changed the reference price for natural gas royalties from the Romanian market price to the Vienna Central European Gas Hub (CEGH) price, significantly increasing royalties. The Government of Romania (GOR) liberalized the natural gas market on July 1, 2020, and the electricity market as of January 1, 2021, for both household and non-household consumers. As energy prices surged during the winter of 2021-2022, the GOR capped energy prices for households and subsidized remaining balances. To reduce the effect on the state budget, the GOR levied a windfall tax on natural gas and electricity producers’ 2021 profits.

In March 2021, the Romanian Parliament passed a bill reinforcing the government’s authority to vet transfers of petroleum agreements to companies from non-EU countries, and to determine if a transfer poses a threat to Romania’s national security. Transfer of a petroleum agreement must be approved through a government decision.

Investments involving public authorities can be more complicated than investments or joint ventures with private Romanian companies. Large deals involving the government, particularly public-private partnerships, can be stymied by vested political and economic interests or bogged down due to a lack of coordination between government ministries.

Designed to recoup drug reimbursement costs that exceeded state-budgeted amounts, Romania’s claw back tax was 27.65 percent in 2019. In May 2020, the GOR approved a revised and differentiated claw back tax, capped at 25 percent for innovative medicines, 20 percent for generic medicines, and 15 percent for locally produced medicines. While the 2020 legislation provided some relief to pharmaceutical companies, the claw back tax continued to negatively affect the availability of drugs in the Romanian marketplace. In February 2022, the Romanian Competition Council fined five plasma therapies producers for allegedly colluding to limit immunoglobulin supplies in the Romanian market between 2015 – 2018.

Foreign and domestic private entities are free to establish and own business enterprises, and to engage in all forms of remunerative activity. Romanian legislation and regulation provide national treatment for foreign investors, guarantee free access to domestic markets, and allow foreign investors to participate in privatizations. There is no limit on foreign participation in commercial enterprises. Foreign investors are entitled to establish wholly foreign-owned enterprises in Romania (although joint ventures are more typical), and to convert and repatriate 100 percent of after-tax profits.

Romania has established legal parameters to resolve contract disputes expeditiously. Mergers and acquisitions are subject to review by the Competition Council. Under the Competition Law, the Competition Council must notify Romania’s Supreme Defense Council of mergers or acquisitions of stocks or assets that could affect national security. The Supreme Council of National Defense (CSAT) then reviews the referred mergers and acquisitions for potential threats to national security. The Romanian capital account was fully liberalized in 2006, prior to joining the EU in 2007. Foreign firms are allowed to manage and administer their investments, and to assign their contractual obligations and rights to other Romanian or foreign investors.

Romania has not undergone any third-party investment policy reviews through multilateral organizations in over ten years.

In January 2022, the Organization for Economic Cooperation and Development (OECD) opened accession discussions with Romania. Over a multi-year period, OECD technical commissions will assess Romania’s candidacy against OECD standards and policies in areas such as the investment climate, governance, and environmental protection. In January 2022, the OECD published an economic survey with initial recommendations on how Romania can further its socioeconomic development. Among other findings, the report recommended that Romania continue to digitalize and modernize its tax administration to raise tax collection and improve tax compliance; to strengthen its administrative capacity to absorb EU funds; and to address gaps in transportation infrastructure.

The National Trade Registry has an online service available in Romanian at https://portal.onrc.ro/ONRCPortalWeb/ONRCPortal.portal . InvestRomania offers free assistance and advisory services to foreign investors and international companies for business activities, such as project implementation and opening new offices or manufacturing facilities. More information is available at http://www.investromania.gov.ro/web/ .

According to the World Bank, it takes six procedures and 20 days to establish a foreign-owned limited liability company (LLC) in Romania compared to the regional average for Europe and Central Asia of 5.2 procedures and 11.9 days. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Romania must authenticate and translate its documents. As of March 2022, foreign companies did not need to seek investment approval. A Trade Registry judge must hold a public hearing on the company’s application for registration within five days of submission of the required documentation. Applicants can submit and monitor the status of their registration documents online.

Companies in Romania are free to open and maintain bank accounts in any foreign currency, although, in practice, Romanian banks offer services only in Romanian lei (RON) and certain hard currencies (Euros and U.S. dollars). The minimum capital requirement for domestic and foreign LLCs is RON 200 (USD 45). Areas for improvement include making all registration documents available to download online in English.

Romania defines microenterprises as having less than nine employees, small enterprises as having less than 50 employees, and medium-sized enterprises as having less than 250 employees. Regardless of ownership, microenterprises and SMEs enjoy “de minimis” and other state aid schemes from EU funds or from the state budget. Business facilitation mechanisms provide for equitable treatment of women in the economy.

There are no restrictions or incentives on outward investment.

The Romanian Constitution, adopted in December 1991 and revised in 2003, guarantees the right to ownership of private property. Mineral and airspace rights, and similar rights, are excluded from private ownership. Under the revised Constitution, foreign citizens can gain land ownership through inheritance. With EU accession, citizens of EU member states can own land in Romania, subject to reciprocity in their home country.

Companies owning foreign capital may acquire land or property needed to fulfill or develop company goals. If the company is dissolved or liquidated, the land must be sold within one year of closure and may only be sold to a buyer(s) with the legal right to purchase such assets. Investors can purchase shares in agricultural companies that lease land in the public domain from the State Land Agency. However, legislation passed in Fall 2020 imposed additional restrictions and limitations on the purchase of agricultural land by foreign investors.

The 2006 legislation that regulates the establishment of specialized mortgage banks also makes possible a secondary mortgage market by regulating mortgage bond issuance mechanisms. Commercial banks, specialized mortgage banks, and non-bank mortgage credit institutions offer mortgage loans. Romania’s mortgage market is now almost entirely private; the state-owned savings bank (CEC Bank) also offers mortgage loans. Since 2000, the Electronic Archives of Security Interests in Movable Property (AEGRM) has overseen the filing of transactions regarding mortgages, assimilated operations, or other collateral provided by the law as well as their advertising. Most urban land has clear title, and the National Cadaster Agency (NCA) is slowly working to identify property owners and register land titles. According to the National Cadaster Plan, 2023 is the deadline for full registration of lands and buildings in the registry. According to NCA data, the cadaster registry contained 1.9 million hectares of land and 37.7 percent of the estimated real estate assets (buildings) as of March 2020.

Romania has marginally improved implementing digital records of real estate assets, including land. However, the cadaster property registry is far from complete; inaccurate and incomplete information for land ownership continues to challenge private investors ‎and SOEs alike.

Romania was removed from the Watch List of the U.S. Trade Representative’s Special 301 Report in 2022 due to taking significant actions to improve IP protection and enforcement. In January 2022, Romania appointed its first-ever national IP enforcement coordinator, who has been charged with developing a national IP strategy and coordinating interagency efforts. Romania has also taken other actions to improve efforts to investigate and prosecute IP crime. For example, last year, the economic police established a new department dedicated to online piracy cases and also dedicated a minimum of two additional officers per county to IP investigations. Moreover, the General Prosecutor Office’s Intellectual Property Coordination Department resumed coordination of IP working group sessions, holding meetings last year with representatives of different ministries involved in IP as well as private sector representatives. The United States will continue to monitor Romania’s efforts to finalize a national IP strategy, to implement that strategy, and to take specific actions to prioritize IP protection and enforcement.

Romania is a signatory to international IPR-related conventions, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and has enacted legislation protecting patents, trademarks, and copyrights. Romania passed broad IPR protection enforcement provisions as required by the WTO, yet gaps remain in enforcement. Romania signed the Internet Convention to protect online authorship. In January 2020, Romania passed a law to enhance the transparency of collective rights management of copyrights. In July 2020, Romania passed legislation implementing the EU Trademark Directive, and in October 2021, approved draft legislation to implement the EU Copyright Directive. The new legislation introduced a series of changes, including removal of requirements for graphic representation of trademarks and allowing for registration of sound marks, multimedia marks, and holograms. To increase transparency, the law included provisions to clarify dates of completed trademark registration and their entry into force.

Romania is both a transit and destination country for counterfeit goods. The People’s Republic of China is the top country of origin for counterfeit goods. Customs officers can seize counterfeit products ex-officio and destroy them upon inspection and declaration by the rights holder. The government is responsible for paying for the storage and destruction of the counterfeit goods. The National Customs Directorate reported the seizure of 3.79 million items of counterfeited goods in 2021, compared to 0.74 million items in 2020. The value of seized goods decreased from USD 6.84 million in 2019 to USD 3.59 million in 2020, but jumped to USD 12.09 million in 2021. Customs authorities closely coordinate their efforts with the European Commission’s Anti-Fraud Office (OLAF), the European Observatory on Infringements of Intellectual Property Rights, and other stakeholders to increase transborder cooperation in line with the EU’s IPR action plan.

Romania is a party to the World Intellectual Property Organization (WIPO) Patent Cooperation Treaty and the Paris Convention. Romanian patent legislation generally meets international standards with foreign investors accorded equal treatment with Romanian citizens under the law. Patents are valid for 20 years. Romania has been party to the European Patent Convention since 2002. Patent applications can be filed online. Since 2014, Romania has also enforced a distinct law regulating employee inventions. The right to file a patent belongs to the employer for up to two years following the departure of the employee.

Romania is party to the Madrid Agreement, the Singapore Treaty, and the Trademark Law Treaty. Romania’s trademark and geographical indications law was amended in 2010 to make it fully consistent with equivalent EU legislation at that time. The EU has since adopted the Trademark and Geographic Indications Directive (EU Directive 2436/2015). Romania implemented the law under Law 84/1998, which entered force in July 2020.

Romania is a member of the Berne Convention, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. The Romanian Copyright Office (ORDA) promotes and monitors copyright legislation. The General Prosecutor’s Office (GPO) provides national coordination of IPR enforcement. Many magistrates still tend to view copyright piracy as a victimless crime, and this attitude has resulted in weak enforcement of copyright law.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Romania adhered to the OECD Declaration on International Investment and Multinational Enterprise in 2004. The government regularly sends representatives to the working sessions of the OECD Investment Committee and its Working Party on Responsible Business Conduct. Romania established an OECD National Contact Point in 2005 to promote the OECD Guidelines for Multinational Enterprises. Romania’s investment promotion agency, InvestRomania, currently serves as the contact point.

Several NGOs in Romania monitor, advocate, and raise concerns on RBC issues. No high-profile cases of private sector impact on human rights were recorded in 2020. However, the National Council for Combating Discrimination (CNCD), the government agency responsible for applying domestic and EU anti-discrimination laws, imposed several fines on companies for discrimination against their own staff or prospective employees. The cases involved discrimination based on gender, disability, HIV status, or ethnicity and harassment over labor union membership and childcare leave. The government has not fully implemented a law which prohibits discrimination against persons with physical, sensory, intellectual, and mental disabilities in employment, education, transportation, and access to health care. Romania does not participate in the Extractive Industries Transparency Initiative (EITI) but has adhered to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas since 2012.

Organized crime investigators conducted inquiries related to lack of due diligence and non-transparent supply chains for timber and other wood products. In 2021, prosecutors investigated non-compliant wood shipments transitioning the port of Constanta. Violence against environmentalists and journalists monitoring the forestry sector has been well-documented. On September 16, 2021, a group attacked two journalists and an environmental activist while they were documenting illegal logging in Romania. Forestry worker unions claimed that more than 650 rangers and technical workers were attacked, threatened, or had their property destroyed between 2017-2019, and that six died during the same period.

As an EU member state, Romania’s climate objectives align with EU strategies, including the 2030 Agenda and the European Green Deal. In 2019, Romania had the third lowest greenhouse gas emissions (GHG) in the EU (4.3 tons per capita compared to an EU average of 7.8 tons). However, when calculating the carbon intensity rate as emissions per GDP, Romania’s emissions were the fifth highest in the EU. Romania’s draft Integrated National Energy and Climate Change Plan for 2021-2030 targeted a 43.9 percent reduction in European Trading System (ETS) emissions and a two percent reduction in non-ETS emissions for 2030 compared to 2005. In December 2020, the European Commission submitted updated and enhanced Nationally Determined Contributions (NDC) targeting emissions reductions of at least 55 percent by 2030 from 1990 levels. The new NDCs significantly updated the previous 40 percent target included under the 2030 Climate and Energy Framework.

Romania is currently updating its biodiversity strategy for 2020-2030, which should reflect objectives identified by the EU’s biodiversity strategy for 2030. Romania boasts a diverse geography and has many protected areas in biologically diverse areas such as mountains, plains, and coastal wetlands. Romania has more than 300 square miles of old-growth forests, the most in the EU. Romanian forests and woodlands represent a substantial carbon sink and cover six percent of the total forest and woodland carbon dioxide uptake at the EU level.

However, Romania struggles with an extensive list of legacy environmental challenges, such as poor air quality, inadequate waste management practices, and insufficient protective measures for natural areas. These legacies may hamper Romania’s ability to achieve policy outcomes that preserve biodiversity and clean air.

Recurrent and underreported illegal logging remains a concern despite progress by the government to improve wood traceability. In 2018, the Romanian government excluded non-governmental organizations from the management of protected natural areas, which diminished the quality of management of affected sites. Unpredictability remains a concern as environmental legislation can be amended with insufficient consultation, and sometimes leads to a lack of alignment and compliance with EU biodiversity provisions and goals. In 2022, parliament considered legislation to replace existing national hunting quotas per species with individual daily quotas per hunter, potentially affecting migratory and protected song-bird populations.

Overall environmental taxes remain low, representing 1.92 percent of GDP and 5.57 percent of Romanian tax revenue in 2020, down from 2.12 percent and 5.89 percent in 2019. Sectoral regulatory incentives are in place to limit carbon emissions and promote more sustainable business and consumer practices. Romanian legislation upholds the EU principle of extended producer responsibility, applicable to all waste generated via the purchases of electric and electrical appliances as well as for plastic, glass, metal, and paper packaging. Producers and municipalities need to uphold recycling quotas and targets. On October 4, 2021, the GOR adopted a legislative framework to create a Deposit Return System (DRS) for beverage packaging. The DRS, which is expected to become fully operational by 2025, requires consumers to pay a guarantee as part of the purchase price which they recover when they return the packaging to retailers.

Romania aims to replace 250,000 cars older than 15 years by 2026. Companies or individuals that trade in older vehicles are eligible to receive vouchers up to RON 15,000 (USD 3,454) to purchase a hybrid vehicle or up to RON 57,000 (USD 13,126) to purchase an electric vehicle. Romania has used EU-funded programs to improve energy efficiency in buildings, both privately and publicly owned. It also has run programs to incentivize replacement of low-efficiency household appliances with new energy-efficient ones.

In 2022, the EC Complementary Delegated Act defined technical screening criteria for specific nuclear and gas activities covered by EU taxonomy. Inclusion of these activities, under strict conditions, created opportunities for Romania to further adopt advanced technologies, construct and operate new nuclear power plants (NPPs), and upgrade existing NPPs. The Delegated Act recognized nuclear energy to play a role in the green energy transition beyond 2050, though limited permits to 2045 for new NPPs and 2040 for NPP upgrades. It stipulated that gas-fired power generation should transition to renewable gas or low carbon emissions by 2035. Covered natural gas activities included gas-fired power generation, high efficiency cogeneration, and centralized heating and cooling. The Delegated Act affirmed the right of the EU member states to develop energy programs based on national priorities and available energy resources.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World
• Comply Chain

Romania’s fight against high- and medium-level corruption, a model in Southeastern Europe over the past decade, suffered significant setbacks between 2017 and late 2019 due to a concerted campaign under a previous Social Democratic Party (PSD)-led government that aimed to weaken anti-corruption efforts, the criminal and judicial legislative framework, and judicial independence. Professional associations, NGOs, the EU, and NATO-allied governments raised concerns about legislative initiatives that furthered this trend during that period. In Transparency International’s 2021 Corruption Perceptions Index, Romania placed 45 out of 100, up one spot since 2020, placing Romania among the lowest ranked of the EU member states. The current governing coalition lists justice reform and the fight against corruption among its official priorities, but it remains to be seen whether it will achieve tangible results.

Domestic and international rule-of-law experts and law enforcement observe that many of the amendments to the criminal code introduced by the former PSD-led government between 2017-2019 remain in place today and continue to weaken the investigative tool kit in the fight against corruption. The current governing coalition (PSD-PNL-UDMR) has said it hopes to bring the new “Justice Laws” to parliament for debate in 2022 with the aim of reversing most of these provisions of the 2017-2019 Justice Laws.

The European Commission under the Cooperation and Verification Mechanism (CVM), and the Council of Europe’s (COE) Group of States Against Corruption (GRECO) prepared 2021 reports that leave some room for optimism. The June 2021 CVM report, which covered activities from October 2019, noted the GOR committed to reaching all CVM objectives in 2020, but progress has been limited. A May 18, 2021, ruling by the EU’s Court of Justice confirmed that the recommendations of the CVM are mandatory for Romania. GRECO’s 2021 report, while acknowledging some progress, assessed Romania’s compliance with its recommendations for fighting corruption as “very low.” The OECD 2022 economic survey also warned that corruption remained a major problem in Romania, arguing that past modifications of Justice Laws and the pressures targeting DNA prosecutors have weakened anticorruption efforts.

A major issue signaled by the CVM, GRECO, and the Venice Commission remains the controversial Section to Investigate Offenses in the Judiciary (SIIJ). The DNA’s 2020 performance report for the National Anti-Corruption Directorate (DNA) showed that the failure to incorporate Constitutional Court decisions in the legislative framework has negatively affected the agency’s efficiency. The existence of the SIIJ continued to be a source of discontent for DNA and civil society. In March 2022, President Iohannis signed into law a bill passed by Parliament that aimed to dismantle the structure. The Venice Commission published a subsequent opinion criticizing the GOR’s hasty adoption of the bill. Against international recommendations, the law dismantled the SIIJ and created a new structure to handle the cases, rather than returning the corruption and organized crime files to DNA and DIICOT. Civil society representatives and the main opposition party, Save Romania Union (USR), warned that the new structure envisioned to take the place of SIIJ could be even more damaging to judicial independence. The Romania chapter of the EC’s 2020 report on rule of law within the EU, mentioned in the 2021 CVM, noted that in 2020 the government continued to affirm its commitment to judicial reform after the reversals between 2017 and 2019.

In December 2021, the Government adopted an Anticorruption Strategy for 2021-2025. The document represents a political commitment to support all relevant institutions fighting corruption and was also a milestone in Romania’s National Recovery and Resilience Plan. The strategy focuses on asset recovery and strengthening the National Agency for Managing Seized Assets (ANABI). Conflicts of interest, respect for standards of ethical conduct, and integrity in public office remained concerns for all three branches of government. Individual executive agencies enforced sanctions slowly, and agencies’ inspection bodies were generally inactive.

Romania implemented the revised EU Public Procurement Directives in 2016 by passing new laws to improve and make public procurements more transparent. The National Agency for Public Procurement (ANAP) has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities. State entities as well as public and private beneficiaries of EU funds are required by law to follow public procurement legislation and use the e-procurement system. Sectoral procurements, including private companies in energy and transportation, must follow the public procurement laws and tender via the e-procurement website. The April 2021 EU Country Report for Romania, which included data on the public procurement system in Romania for the period between 2018-2020, noted that the practical application of innovation-driven public procurement solutions remained a challenge.

In October 2016, the “Prevent” IT system, an initiative sponsored by the National Integrity Agency (ANI) for ex-ante checks of conflicts of interests in public procurement, was signed into law. The mechanism aims to avoid conflicts of interest by automatically detecting conflicts of interest in public procurement before the selection and contract award procedure. According to ANI, between January-December 2021, the system checked over 7,800 public procurement procedures to prevent conflicts of interest.

National laws prohibit bribery and other acts of corruption, both domestically and for Romanian companies doing business abroad. The judiciary remains mostly paper-based and inefficient although digitization progressed some during the pandemic. Romania loses several cases each year in the European Court of Human Rights (ECHR) due to excessive trial length. The National Agency for Fiscal Administration (ANAF) has a mandate to ensure that all taxes are collected and prevent fiscal and customs frauds. Asset forfeiture laws exist, but a functioning regime remains under development.

While private joint stock companies use internal controls, ethics, and compliance programs to detect and prevent bribery, since 2017 the government has rolled back corporate governance rules for state-owned enterprises and has repeatedly resorted to profit and reserves distribution in dividends to bolster the budget. U.S. investors have complained of both government and business corruption in Romania, most frequently naming the customs service, municipal officials, and local financial authorities. According to the EC’s February 2020 European Semester Country Report for Romania, corruption continued to be a major problem for the business environment in Romania. A 2019 business Eurobarometer survey showed that 88 percent of businesses consider corruption to be a serious problem for their company when doing business in Romania. Since 2013, the share of companies that perceived corruption as a problem increased in Romania by 23 percentage points, the largest increase in the EU and in stark contrast with the EU average which continued to decrease (to 37 percent). Overall, 97 percent of businesses thought that corruption was widespread in Romania and 87 percent said it was widespread in public procurement managed by national authorities.

Romania is a member of the Southeast European Law Enforcement Center (SELEC). NGOs enjoy the same legal protections as any other organizations, but NGOs involved in investigating corruption receive no additional protections. The United States welcomes participation from private and public sector entities on anti-corruption programs and trainings.

Romania is a member of the UN Anticorruption Convention and the Council of Europe’s Group of States Against Corruption (GRECO). Romania is not a member of the OECD Anti-Bribery Convention.

As of March 2002, Romania was implementing 12 commitments from their 2020-2022 action plan. This action plan featured commitments related to civic space, participation, consultation, social services, anti-corruption, fiscal transparency, justice and integrity, health and social accountability, de-bureaucratization, and open data.

Contact at government agency responsible for combating corruption:

National Anticorruption Directorate (DNA)
Str. Stirbei Voda nr. 79-81, Bucuresti
+40 21 312 73 99
anticoruptie@pna.ro 
http://www.pna.ro/sesizare.xhtml?jftfdi=&jffi=sesizare 

Contacts at “watchdog” organizations:

Laura Stefan
Executive Director
Expert Forum
Strada Semilunei, apt 1, Sector 2, Bucuresti
+40 21 211 7400
laura.stefan@expertforum.ro 
office@expertforum.ro 

Cristina Guseth
Director
Freedom House Romania
Bd. Ferdinand 125, Bucuresti
+40 21 253 2838 guseth@freedomhouse.ro 

Elena Calistru
President
Funky Citizens
Colivia, Pache Protopopescu 9
+40 723 627 448
elena@funkycitizens.org 

Romania does not have a history of politically motivated damage to foreign investors’ projects or installations. Major civil disturbances are rare, though some have occurred in past years. In 2021, the extreme-right party Alliance for the Unity of Romanians (AUR) capitalized on widespread discontent with the government’s response to the pandemic, a sluggish economy, and surging energy prices to organize a series of protests. The current coalition, one in a series of coalitions over the past two years, supports economic reform and a business-friendly environment, but it is uncertain how much progress the coalition will make on its goals.

Romania has traditionally boasted a large, skilled labor force at comparatively low wage rates in most sectors. The labor pool has tightened in highly skilled professions, in particular the information technology and health sectors, due to emigration and a deteriorating primary and secondary education system that fails to adequately prepare many graduates, particularly in rural areas, for university. The university system is generally regarded as good, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market. Payroll taxes remain steep. As a result, an estimated 25 to 30 percent of the labor force works in the underground economy as “independent contractors” where their salaries are neither recorded, nor taxed. Even for registered workers, underreporting of actual salaries is common.

The total unemployment rate in Romania increased during the COVID-19 pandemic from 4.9 percent in 2019 to 6.1 percent in 2020, and was 5.3 percent as of Q3 2021. The registered unemployment rate, which covers jobless individuals registered with the labor offices, stood at 2.8 percent in October 2021, down from 3.3 the previous year. At 69.2 percent in 2020, the labor force participation rate – the portion of the working age population (15-64 years) who are employed or actively seeking employment – remained among the lowest in the EU. Romanian employers in the engineering, machinery, IT services, and healthcare sectors reported difficulties in hiring and retaining employees as Romania faces a shortage of medium- to high-skill workers. As Romania’s emigration crisis deepens, other industries, including food service and construction, also face worker shortages. According to the EC, Romanians were the largest working age group of EU citizens residing in other member states in 2020 (18.6 percent of the working age resident population, up from 11.5 in 2010). Many emigrants are young and well- qualified, constraining the supply of skilled labor remaining in Romania. The World Bank estimated that between 2000 and 2018, Romania’s population fell from 22.5 million to 19.5 million with emigration accounting for more than 75 percent of the decline. Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated not only by the higher salaries, but also by the country’s antiquated medical system.  According to the Ministry of Health, roughly 10,000 doctors left Romania between 2017 and 2018.

The government lacks a comprehensive strategy to remedy labor shortages despite taking steps in recent years to attract and retain talent. Employees in some sectors benefit from fiscal incentives. For example, IT professionals are eligible for certain income tax exemptions. In 2018, the GOR introduced an additional income tax and social contributions exemption for a period of ten years for construction sector employees. The provision also introduced a specific minimum wage of RON 3,000 (USD 728) for construction workers. In 2017, the GOR adopted a unitary wage law to establish a more consistent framework for wages across the public sector. The law provided for a salary increase of at least 25 percent for most public sector employees; wages for some workers in the healthcare sector doubled in nominal terms as of March 2018. Unions and businesses continue to debate specific applications of the Unitary Wage Law.

The Labor Code regulates the labor market in Romania, controlling contracting, jurisdiction, and the application of regulations. It applies to both national and foreign citizens working in Romania or abroad for Romanian companies. As an EU member state, Romania has no government policy that requires the hiring of nationals, but it has annual work permit quotas for other non-EU nationals. As of 2020, employers are exempt from obtaining General Immigration Inspectorate (IGI) approval for nationals from Moldova, Ukraine, and Serbia for full-time labor contracts of up to nine months per year. For 2022, the government increased the annual work permits to 100,000, up from 50,000 permits approved for 2021. Work permits are valid for one year and are renewable with an individual work contract. Employers pay a EUR 100 tax for most foreign workers, except for seasonal workers and those present in Romania on student visas, for whom the tax is EUR 25. The government also reduced the cost of employing non-EU citizens in 2018, no longer requiring employers to pay a minimum wage equivalent to the gross average wage. Normal minimum wage law applies with the exception that highly skilled non-EU workers must receive at least twice the gross minimum wage. Foreign companies still resort to expensive staff rotations, special consulting contracts, and non-cash benefits.

Since the 1989 revolution, labor-management relations have occasionally been tense, the result of economic restructuring and personnel layoffs. Trade unions, much better organized than employers’ associations, are vocal defenders of their rights and benefits. Employers are required to make severance payments for layoffs according to the individual labor contracts, company terms and conditions, and the applicable collective bargaining agreements. The Labor Code discerns between layoffs and firing; severance payments are due only in case of layoffs. There is no treatment of labor specific to special economic zones, foreign trade zones, or free ports.

Romanian law allows workers to form and join independent labor unions without prior authorization, and workers freely exercise this right. Labor unions are independent of the government. Unions and employee representatives must typically notify the employer before striking and must take specific steps provided by law before launching a general strike, including holding discussions and attempting reconciliation with management representatives. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor dispute mechanisms are in place to mediate any conflicts between employers and employees regarding economic, social, and professional interests. Unresolved conflicts are adjudicated in court according to the civil code. An employee, employer, or labor union may initiate proceedings. In 2021, employees from auto manufacturing, transportation, and the medical sectors went on strike or protested publicly. They sought higher pay, better working conditions, and sufficient staffing.

Union representatives allege that few incidents of anti-union discrimination are officially reported because it is difficult to prove that employers laid-off employees in retaliation for union activities. The government has generally respected the right of association, and union officials state that registration requirements stipulated by law are complicated, but generally reasonable. The current law permits, but it does not impose, collective labor agreements for groups of employers or sectors of activity. Companies with more than 21 employees may use collective bargaining, which provides for written agreements between employees and the employer or employers’ association. According to the Ministry of Labor, companies and employees had finalized 3,829 collective labor agreements as of Q3 2021 compared to 5,742 in 2020. Since 2014, parliament has periodically considered reintroducing collective bargaining nationwide, a practice that previously established minimum pay and working conditions for the entire economy, but which the Social Dialogue Act eliminated in 2011.

As an EU and International Labor Organization (ILO) member state, Romania observes international labor rights. National law prohibits all forms of forced or compulsory labor, but enforcement is not uniform or effective. As penalties are insufficient to deter violations, reports indicated that such practices continued to occur, often involving Roma, disabled persons, and children. The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15, provided the tasks correlate with their abilities. Employment in harmful or dangerous jobs is forbidden for those under the age of 18; the government maintains a list of dangerous jobs in which the employment of minors is restricted.

Romania does not waive or derogate labor laws and regulations to attract or retain investments. Since 2011, employers have had more flexibility to evaluate employees based on performance, and hiring and firing procedures have been significantly relaxed. Romania aims to ensure that its labor market is dynamic, sustainable, resilient, pro-active, and based on social innovation by 2027 with a 75 percent employment rate for of people aged 20-64. As of March 2022, Romania had yet to finalize its National Labor Strategy for 2021-2027.

The minimum wage has more than tripled in nominal terms since 2012, rising from RON 700 (USD 170) to RON 2,550 (USD 583) per month in 2022. Romania no longer requires a differentiated minimum wage for employees with a university degree. Starting in 2022, employers can only pay the minimum wage for the first two years of an employment contract. The measure has a transition period of two years, and employees currently paid the minimum wage will be eligible for wage growth in 2024. Despite these measures, Romania had the highest rate of employed persons at risk of poverty among EU member states: 14.9 percent in 2020.

Wage increases have outpaced productivity growth since 2016. This led to a marked growth in hourly labor costs, which posted a 6.39 percent nominal increase in Q3 2021 as compared with the same period in 2020. On January 31, the Romanian Competition Council opened an investigation into unlawful wage setting practices by the automotive industry. The Council investigated informal “no-poach” agreements that decreased competition among companies and created artificial labor market access barriers, particularly for automotive engineers.

In December 2017, the GOR shifted the burden of mandatory payroll deductions for pensions, healthcare, and income taxes from employers to employees. To avoid reductions in employee net pay and retain labor in a tight market, many companies increased salaries to offset employee losses. Other companies, wary of further possible changes, offered monthly bonuses rather than formally amending employee contracts.

Separately, in December 2019, parliament reduced payroll taxes for part-time workers. The bill reversed 2017 provisions when, in an effort to curtail underreporting of work, the government increased the minimum payroll taxes that employers must pay for their part-time employees to equal those for a full-time employee earning minimum wage. Coupled with the change in the legal tax incidence of social contributions described above, the law had the unintended consequence that some employees owed more in social contributions than their monthly earnings. In February 2018, the GOR issued an ordinance allowing part-time workers to pay social contributions for their actual gross income only, mandating that the employer make up the difference. Effective January 1, 2020, part-time employees are taxed based on their actual earnings, and employers do not cover additional charges. In 2018, the GOR passed new legislation specifying how the labor code applies to companies employing teleworkers and defining the distinction between teleworkers and employees who work full-time from home.

In response to COVID-19 restrictions, the GOR extended the categories of employees eligible for unemployment benefits to independently registered businesspeople, lawyers, and individuals with income deriving from copyright and sports activities. In August 2020, the GOR adopted a flexible work scheme model that required employers to cover half of full-time wages. In turn, the GOR paid 75 percent of the difference between the gross wage and the basic wage paid to the employee based on actual working hours. The law also allows for one caretaker of school-age children to receive paid days off during school closures. As of 2022, the GOR had extended furlough provisions for businesses affected by COVID-19 restrictions. The GOR has announced plans to ensure that additional medical staff hired on temporary contracts since the onset of the pandemic can remain in the medical system in the long run to cover staff gaps. On March 9, 2022, Romania lifted all COVID-19 pandemic restrictions.

* Host Country Data Sources:

BNR: https://www.bnr.ro/  ONRC: https://www.onrc.ro/ 

** The BNR calculated 2020 U.S. FDI in Romania at USD 1.26 billion when using the immediate investor origin principle, and at USD 7.52 billion when using the final investor origin principle. Separately, the Romanian National Trade Register Office (ONRC) calculated 2021 U.S. FDI in Romania at USD 1.22 billion when using only registered capital.

Attracting FDI is a priority for the Serbian government. The Law on Investments extends national treatment to foreign investors and prohibits discriminatory practices against them. The Law also allows the repatriation of profits and dividends, provides guarantees against expropriation, allows waivers of customs duty for equipment imported as capital in-kind, and enables foreign investors to qualify for government incentives.

The government’s investment-promotion authority is the Development Agency of Serbia (Razvojna agencija Srbije – RAS: http://ras.gov.rs/ ). RAS offers a wide range of services, including support of direct investments, export promotion, and coordinating the implementation of investment projects. RAS serves as a one-stop-shop for both domestic and international companies. The government maintains a dialogue with businesses through associations such as the Serbian Chamber of Commerce, American Chamber of Commerce in Serbia, Foreign Investors’ Council (FIC), and Serbian Association of Managers (SAM). Serbia has attracted over $39 billion of foreign direct investment since 2007, according to RAS. Serbia’s strong FDI track-record is substantiated by international awards. The country was ranked at the top of the Financial Times’ FDI 2019 Europe list, based on the criteria of Greenfield investments relative to the size of economy (Financial Times, fDi Report 2020). Serbia was ranked first globally for the fourth consecutive year for creating the most FDI-related jobs per million inhabitants, according to “IBM Global Location Trends 2020”.

The government prompted concerns about its commitment to the protection of foreign investors’ rights in 2022 when it halted a lithium-borate mining project which promised to become the country’s largest-ever foreign direct investment. In July 2021, multinational mining firm Rio Tinto committed $2.4 billion to developing a mine and processing plant at the Jadar deposit in western Serbia, which could potentially supply up to 10% of global lithium demand. However, the project became a lightning rod for criticism by environmental activists, resulting in months of public protests targeting Rio Tinto in period prior to Serbia’s national elections in April 2022. The government reacted by first delaying additional permits and then, in January 2022, withdrawing the spatial plan and revoking existing licenses for the project’s development.

Foreign and domestic private entities have the right to establish and own businesses and to engage in all forms of remunerative activity. Serbia has no investment screening or approval mechanisms for inbound foreign investment. U.S. investors are not disadvantaged or singled out by any rules or regulations.

For some business activities, licenses are required (e.g., financial institutions must be licensed by the National Bank of Serbia prior to registration). Licensing limitations apply to both domestic and foreign companies active in finance, energy, mining, pharmaceuticals, medical devices, tobacco, arms and military equipment, road transportation, customs processing, land development, electronic communications, auditing, waste management, and production and trade of hazardous chemicals.

Serbian citizens and foreign investors enjoy full private-property ownership rights. Private entities can freely establish, acquire, and dispose of interests in business enterprises. By law, private companies compete equally with public enterprises in the market and for access to credit, supplies, licenses, and other aspects of doing business.

Food and Agriculture: Foreign citizens and foreign companies are prohibited from owning agricultural land in Serbia. However, foreign ownership restrictions on farmland do not apply to companies registered in Serbia, even if the company is foreign-owned. Unofficial estimates suggest that Serbian subsidiaries of foreign companies own some 20,000 hectares of farmland in the country. EU citizens are exempt from this ban, although they may buy up to two hectares of agricultural land under certain conditions: they must permanently reside in the municipality where the land is located for at least 10 years, practice farming on the land in question for at least three years, and own adequate agriculture machinery and equipment.

Defense: The Law on Investments adopted in 2015 ended discriminatory practices that prevented foreign companies from establishing companies in the production and trade of arms (for example, the defense industry) or in specific areas of the country. Further liberalization of investment in the defense industry continued via a new Law on the Production and Trade of Arms and Ammunition, adopted in May 2018. The law enables total foreign ownership of up to 49% in seven SOEs, collectively referred to as the “Defense Industry of Serbia,” so long as no single foreign shareholder exceeds 15% ownership. The law also cancels limitations on foreign ownership for arms and ammunition manufacturers.

Serbia has not undergone any third-party investment policy reviews in the past five years.

The following is a sample of articles that have appeared in 2021 and early 2022 providing reviews of concerns related to investment policy.

https://www.business-humanrights.org/en/latest-news/serbians-are-protesting-against-lithium-mine-and-new-draft-laws-which-allegedly-benefit-business/

https://www.business-humanrights.org/en/latest-news/serbia-chinese-project-raises-concern-over-tender-procedure-transparency-corruption-ngos-warn/ 

In addition, the Environmental Justice Atlas ( https://ejatlas.org/ ) listed several investments that resulted or could result in environmental degradation in Serbia, including investments in the city of Pancevo, relocation of Vreoci village in the Kolubara coal basin, the highway that killed a 600-year-old oak tree, pollution of Veliki Backi channel, municipal waste in the city of Kraljevo, the potential impact of the planned Buk Bjela hydropower plant on Tara River canyon, and remediation of Palic lake.

According to the World Bank’s 2020 Doing Business report, seven procedures and seven days are required to establish a foreign-owned limited liability company in Serbia. This is fewer days but more procedures than the average for Europe and Central Asia. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Serbia must translate its corporate documents into Serbian.

Under the Business Registration Law, the Serbian Business Registers Agency (SBRA) oversees company registration. SBRA’s website (in Serbian) is www.apr.gov.rs/home.1435.html . All entities applying for incorporation with SBRA can use a single application form and are not required to have signatures notarized.

Companies in Serbia can open and maintain bank accounts in foreign currency, although they must also have an account in Serbian dinars (RSD). The minimum capital requirement is symbolic at RSD 100 (less than $1) for limited liability companies, rising to RSD 3 million (approximately $29,900) for a joint stock company. Some foreign companies have difficulties opening bank accounts due to a provision in the Law on Prevention of Money Laundering and Terrorist Financing that requires companies to disclose their ultimate owner. A single-window registration process enables companies that register with SBRA to obtain a tax-registration number (poreski identifikacioni broj – PIB) and health-insurance number with registration. In addition, companies must register employees with the Pension Fund at the Fund’s premises. Since December 2017, the Labor Law requires employers to register new employees before their first day at work; previously, the deadline was registration within 15 days of employment. These amendments represent an attempt by the government to decrease the gray labor market by empowering labor inspectors to penalize employers if they find unregistered workers.

Pursuant to the Law on Accounting, companies in Serbia are classified as micro, small, medium, and large, depending on the number of employees, operating revenues, and value of assets.

The Development Agency of Serbia supports direct investment and promotes exports. It also implements projects aimed at improving competitiveness, supporting economic development, and supporting small-and medium-sized enterprises (SMEs) and entrepreneurs. More information is available at http://ras.gov.rs .

Serbia’s business-facilitation mechanisms provide for equitable treatment of both men and women when a registering company, according to the World Bank’s 2020 Doing Business Index. The government declared 2017-2027 a “Decade of Entrepreneurship” with special programs to support women’s entrepreneurship. Since 2017, the government has provided approximately $1 million annually in grants to support women’s innovative entrepreneurship.

The Serbian government neither promotes nor restricts outward direct investment. Restrictions on short-term capital transactions (i.e., portfolio investments) were lifted in April 2018 through amendments to the Law on Foreign Exchange Operations for short-term securities issued or purchased by EU countries and international financial institutions. Prior to this, residents of Serbia were not allowed to purchase foreign short-term securities, and foreigners were not allowed to purchase short-term securities in Serbia. There are no restrictions on payments related to long-term securities.

Capital markets are not fully liberalized for individuals. Citizens of Serbia are not allowed to keep accounts abroad except in exceptional situations (such as work or study abroad) listed in the Law on Foreign Exchange Operations.

Serbia has an adequate body of laws for the protection of property rights, but enforcement through the judicial system can be very slow. A multitude of factors can complicate property titles: restitution claims, unlicensed and illegal construction, limitation of property rights to rights of use, outright title fraud, and other issues. Investors are cautioned to investigate all property title issues on land intended for investment projects.

During the country’s socialist years, owners of nationalized land became users of the land and acquired rights of use that, until 2003, could not be freely sold or transferred. In 2015, the government adopted a law that allows for property usage rights to be converted into ownership rights with payment of a market-based fee. In 2015, the government implemented new amendments to the Law on Planning and Construction that separated the issuance of permits from conversion issues. These amendments cut the administrative deadline for issuing construction permits for a potential investor to 30 days and introduced a one-stop shop for electronic construction permits.

Serbia’s real-property registration system is based on a municipal cadaster and land books. Serbia has the basis for an organized real-estate cadaster and property-title system. However, legalizing tens of thousands of structures built over the past twenty years without proper licenses is an enormous challenge, as an estimated two million buildings in the country are not registered in the cadaster, of which almost half are residential properties. According to some estimates, one-third of buildings were not built in accordance with legal requirements. In 2015, the government adopted a new Law on Legalization, which simplified the registration process. Since then, however, only slightly more than 230,000 decisions on legalization have been issued. The deadline set by the law for legalization of all buildings constructed without proper permits is November 2023.

Serbia is a member of the World Intellectual Property Organization (WIPO) and party to all major WIPO treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. While Serbia is not a member of the WTO, the Serbian government has taken steps to adhere to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Serbia’s IPR laws include TRIPS-compliant provisions and are enforced by courts and administrative authorities.

Serbia’s IPR legislation is modern and compliant with both EU and international standards. According to the EU’s 2021 Progress Report, Serbia has a good level of preparation in the area of IPR to align with the EU acquis.

Procedures for registration of industrial property rights and deposit of works and authorship with the Serbian Intellectual Property Office are straightforward and similar to procedures in most European countries. Relevant information is available at: http://www.zis.gov.rs/home.59.html .

Enforcement of IPR remains haphazard but is roughly consistent with levels in neighboring countries. The government has a Permanent Coordination Body for IPR enforcement activities with participation from the tax administration, police, customs, and several state inspection services. Cooperation with the Special Department for High-Technology Crime has resulted in court decisions to impose penalties in test cases against online traders and counterfeits. The Public Procurement Law requires bidders to affirm that they have ownership of any IPR utilized in fulfilling a public procurement contract. Although trade in counterfeit goods – particularly athletic footwear and other clothing – declined in recent years as the government increased enforcement efforts, the overall amount of seized counterfeit and pirated goods increased in 2020. Upon seizure, authorities cannot destroy the goods without formal instructions from the rightsholders, who are billed for the storage and destruction of the counterfeit goods. Rightsholders are encouraged to register their IPR with the Customs Office by filling out an application for surveillance measures.

Inspectorates and customs authorities’ actions against IPR violations are relatively fast. However, enforcement of IPR in the court system often lasts up to two years in the first instance. Proceedings improved after the creation of semi-specialized IPR courts in 2015, according to the Serbia’s non-governmental Foreign Investors’ Council. The Serbian Intellectual Property Office continues to train judges on IPR to enable more timely court decisions.

Digital IPR theft is not common, but many digital brands are not properly protected, and there is a risk of trademark-squatting.

Responsible Business Conduct (RBC) and Corporate Social Responsibility are relatively new concepts in Serbia, and until recently many Serbian companies viewed them mainly as public-relations tools. The Serbian government has no formal mechanism in place to encourage companies to follow a due-diligence approach to RBC. The Council for Philanthropy held its first session in September 2018. The Council, chaired by the Prime Minister and founded with grant support from USAID, aims to use public policy to create a more encouraging environment for corporate giving in Serbia. Members of the Council include ten government ministers, the Belgrade Mayor, the Director of the Tax Administration, several NGOs, and 29 member companies as of April 2020. Donors have pointed to issues that have a negative impact on philanthropy, including a lack of tax incentives for donors, no available VAT exemptions for in-kind donations, the lack of a system for monitoring donations from companies, and the absence of official data on charities.

The USAID project “Framework for Giving Activity,” which recently ended, strengthened philanthropy and charitable giving in Serbia. The activity focused on improving the legal and policy framework related to charitable giving to make giving easier and more transparent.

According to the 2019 World Giving Index published by the Charities Aid Foundation, Serbia was ranked 123rd out of 126 countries listed in a 10-year aggregate survey of number of people who donate to charity or participate in volunteer work: HYPERLINK “https://www.cafonline.org/docs/default-source/about-us-publications/caf_wgi_10th_edition_report_2712a_web_101019.pdf” https://www.cafonline.org/docs/default-source/about-us-publications/caf_wgi_10th_edition_report_2712a_web_101019.pdf

The Law on Public Procurement allows the government to ask bidders to fulfill additional conditions, especially those related to social and environmental issues, and allows the government to consider criteria such as environmental protection and social impact when evaluating bids.

The UN Development Program’s Global Compact initiative has 118 participants in Serbia and has organized a number of educational events intended to strengthen RBC capacity in Serbia. The list of members is available at: http://www.ungc.rs/srb/clanovi .

Several local organizations, such as the American Chamber of Commerce (AmCham), the Foreign Investors’ Council, and the Serbian Chamber of Commerce (PKS) promote the concept of RBC among the Serbian business community and the public. PKS presents a national award to Socially Responsible Businesses. The Trag Foundation supports the Serbian Philanthropy Forum, a networking body for donors (including numerous corporate actors). The NGO Smart Kolektiv provides consulting services in RBC and established in 2016, with USAID support, an RBC Index which is the first national platform for assessing responsible business conduct in Serbia.

The Responsible Business Forum Serbia is a network of socially responsible companies that contribute to the development of the community, stimulating the development of corporate social responsibility and the establishment of firm and lasting socially responsible practices in the business sector. It was established in 2008 by 14 leading companies in Serbia. More information about the Forum is available at: https://odgovornoposlovanje.rs/vesti .

Multinational companies often bring international best practices in RBC, with U.S. companies among the most active. During the COVID-19 pandemic, many large companies donated money and goods to help government combat the crisis; more info is available at: https://odgovornoposlovanje.rs/vesti .

Allegations of labor-rights violations are uncommon in Serbia. However, in December 2021, the European Parliament adopted a resolution calling for an investigation into forced labor at the construction site for the Chinese-owned LingLong tire-manufacturing plant in Zrenjanin, in northern Serbia. Media and anti-trafficking NGOs reported that approximately 500 Vietnamese workers were living in poor accommodations and lacked access to sufficient food and water, their passports having been confiscated upon arrival.

According to a 2016 OECD study on small and medium enterprises, Serbia has no national strategy that targets environmental policy toward small and medium-size enterprises. See http://www.oecd.org/education/sme-policy-index-western-balkans-and-turkey-2016-9789264254473-en.htm . Serbia’s 2011 Corporate Law introduced contemporary corporate standards, but business associations indicate that implementation is inconsistent.

The government does not maintain a national point of contact for OECD’s Guidelines for Multinational Enterprises, including OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. The government does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.

Serbia has a private sector security industry but is not a signatory of the Montreux Document on Private Military and Security Companies. Serbia is also not a supporter of the International Code of Conduct for Private Security Service Providers and is not a participant in the International Code of Conduct Association.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Serbia is a signatory to the UN Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the Paris Agreement. In June 2015, Serbia submitted its intended Nationally Determined Contribution (NDC) to the UNFCCC, committing to reduce its greenhouse gas emissions 9.8% by 2030 compared to 1990. Serbia has developed a national Low-Carbon Development Strategy as part of a larger Climate Strategy and Action Plan. Although the plan has gone through the public review process, it has never been formally adopted, and the NDCs have not been ratified. The Ministry of Mining and Energy is developing a separate National Energy and Climate Plan that will define Serbia’s 2030 goals for energy efficiency, energy security, and decarbonization, along with implementation plans. At the COP-26 climate conference in Glasgow in November 2021, Serbia joined three international agreements targeting specific high-emitting sectors: those related to clean power, road transport, and hydrogen. Serbia also joined the Declaration on Forests and Land Use, which addresses the role of forest ecosystems in mitigating and adapting to climate change, as well as the Global Methane Pledge.

Serbia adopted its first Law on Climate Change in March 2021, with the aim to establish a monitoring, reporting and verification framework, a system to inventory greenhouse gas emissions, climate policies that insert low carbon strategies into the relevant institutional and legal framework, and procedures for setting up a national system for policies, measures, and projections. The climate-change law will set up the framework for the EU’s cap-and-trade emissions-trading system. In December 2021, Serbia opened so-called Cluster 4 in the EU accession negotiations, which includes environment and climate change.

Serbia also prepared the National Air Quality Strategy, currently pending government approval, that will address regulating greenhouse gas emissions, including from coal-fired thermal power plants. The action plan for the air quality strategy requires aggressive mitigation based on the most conservative modeling scenario in the next 15 years to meet Serbia’s emissions-reduction goals.

Serbia has adopted a National Strategy on Forest Development, under which it is planning to increase the national forest coverage from its current 30% of total area to 42% by 2050. Serbia has also adopted a National Strategy of Water Management for water conservation reform, which sets out long-term directions for water management at the national, regional, and local levels through 2034. The Ministry of Agriculture, Forestry and Water Management has an early-warning system for extreme weather events and provides rehabilitation after weather emergencies.

According to BloombergNEF’s Climatescope, which evaluates and ranks conditions for energy transition investment, Serbia ranks number 37 among emerging markets and number 66 of 107 countries globally ( https://global-climatescope.org/markets/rs/ ).

Surveys consistently show that corruption remains an issue of concern in many areas. Serbia’s global ranking in Transparency International’s Corruption Perceptions Index declined to 96 in 2021 from 91 in 2020. In Serbia’s EU accession process, the European Commission has repeatedly noted that Serbia must do more to fight corruption. Arrests and investigations on corruption charges generally focus on low or mid-level technocrats, and corruption-related trials are typically drawn out and subject to a lengthy appeal process.

Serbia is a signatory to the Council of Europe’s Civil Law Convention on Corruption, and it has ratified the Council’s Criminal Law Convention on Corruption, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Serbia also is a member of the Group of States against Corruption (GRECO), a peer-monitoring organization that provides peer-based assessments of members’ anti-corruption efforts. Twenty-five local governments in Serbia participated in USAID’s anti-corruption program, which ended in 2022, and introduced and increased transparency measures in their processes.

The government has worked to bring its legal framework for preventing and combating corruption in line with EU norms. A dedicated state body, the Agency for the Prevention of Corruption, plays a preventative role in fighting corruption, while dedicated Anticorruption Police and prosecutors investigate and prosecute cases of corruption. The Criminal Code specifies numerous bases for prosecution of corruption and economic offenses, including but not limited to giving or accepting a bribe, abuse of office, abuse of a monopoly, malfeasance in public procurement, abuse of economic authority, fraud in service, and embezzlement. However, a new National Strategy for Fighting Corruption to replace the expired 2013-2018 version has yet to be drafted – a concern frequently raised by the European Commission and Serbia’s Anti-Corruption Council, an advisory body to the government.

In 2018, Serbia’s Parliament strengthened anti-corruption laws through three pieces of legislation: The Law on Organization and Jurisdiction of State Organs in Suppressing Organized Crime, Terrorism, and Corruption for the first time established specialized anti-corruption prosecution units and police and judicial departments, mandated the use of task forces, and introduced liaison officers and financial forensic experts. The Law on Asset Forfeiture was amended to expand coverage to new criminal offenses, and amendments to the Criminal Code made corruption offenses easier to prosecute. Following these legal changes, specialized anti-corruption departments started operations in March 2018 in Novi Sad, Belgrade, Kraljevo, and Niš to prosecute offenders who have committed crimes of corruption valued at less than RSD 200 million ($2 million). Cases valued above this level are handled by the Organized Crime Prosecutor’s Office.

Serbia’s Law on the Prevention of Corruption, which went into effect in 2020, requires income and asset disclosure by appointed or elected officials, and it regulates conflicts of interest for public officials. Disclosures cover assets of officials, spouses, and dependent children. Declarations should be publicly available on the website of the Agency for the Prevention of Corruption, and failures to file or to fully disclose income and assets are subject to administrative and/or criminal sanctions. Significant changes to assets or income must be reported annually, upon departure from office, and for a period of two years after separation. Independent media reported cases where high-level officials allegedly did not comply with asset disclosure laws by failing to report assets.

The Law on Public Procurement, adopted in 2020, introduced mandatory use of an online public-procurement portal. While the portal noticeably improved transparency and procedures, independent watchdogs reported that more than half of completed public procurement tenders since the implementation of the new law have resulted in only one offer, which indicated continued issues with transparency of public procurement procedures or the establishment of non-competitive procurement processes that favor certain vendors.

Serbian authorities do not require private companies to establish internal codes of conduct related to corruption or other matters, but some professional associations (e.g., for attorneys, engineers, and doctors) enforce codes of conduct for their members. Private companies often have internal controls, ethics codes, or compliance programs designed to detect and prevent bribery of government officials. Large companies often have internal programs, especially in industries such as tobacco, pharmaceuticals, medical devices, and industries regularly involved in public procurement.

In 2020, the Parliament adopted a Parliamentary Code of Conduct, aimed at addressing GRECO recommendations regarding conflict of interest and other issues of ethics among parliamentarians. However, the code lacks meaningful independent enforcement mechanisms.

Serbian law does not provide protection for non-governmental organizations involved in investigating corruption. However, the criminal procedure code provides witness protection measures, and Serbia enacted a Whistleblower Protection Law in June 2015, under which individuals can report corruption in companies and government agencies and receive court protection from retaliation by their employers. Whistleblowers in high profile cases against state-owned enterprises have claimed they do not receive adequate protections under the existing law.

U.S. firms interested in doing business or investing in Serbia are advised to perform due diligence before concluding business deals. Legal audits generally are consistent with international standards, using information gathered from public books, the register of fixed assets, the court register, the statistical register, as well as from the firm itself, chambers, and other sources. The U.S. Commercial Service in Belgrade can provide U.S. companies with background information on companies and individuals via the International Company Profile (ICP) service. An ICP provides information about a local company or entity, its financial standing, and reputation in the business community, and includes a site visit to the local company and a confidential interview with the company management. For more information, contact the local office at belgrade@trade.gov  and visit www.export.gov/serbia . The U.S. Commercial Service also maintains lists of international consulting firms in Belgrade, local consulting firms, experienced professionals, and corporate/commercial law offices, in addition to its export promotion and advocacy services for U.S. business.

Some U.S. firms have identified corruption as an obstacle to foreign direct investment in Serbia. Corruption appears most pervasive in cases involving public procurement, natural resource extraction, government-owned property, and political influence/pressure on the judiciary and prosecutors.

The Regional Anti-Corruption Initiative maintains a website with updates about anti-corruption efforts in Serbia and the region: http://rai-see.org/ .

Corruption may be reported to officers at any police station. If dedicated anti-corruption law-enforcement personnel are not available, the officer in charge is to contact Anti-Corruption Police personnel to report to the location so that a complaint may be filed.

Serbian Corruption Prevention Agency
Carice Milice 1, 11000 Belgrade, Serbia
+381 (0) 11 4149 100
office@acas.rs 

Transparency International Serbia
Transparentnost Srbija
Palmoticeva 27, 11000 Belgrade, Serbia
+381 (0) 11 303 38 27
ts@transparentnost.org.rs 

Since October 2000, Serbia has had democratically elected governments that have committed publicly to supporting regional stability and security. Governments, however, frequently call early elections at the local and national level, which often leave politicians and elected officials focused on the next campaign. Serbia held parliamentary elections in June 2020. President Aleksandar Vucic’s Serbian Progressive Party (SNS) won an overwhelming majority, with more than 60 percent of the vote and obtained 188 of 250 parliamentary seats. Vucic and his party benefitted from prolific media access unavailable to other parties, the effectively blurred distinction between campaign and official activities, and the inability of other parties to campaign during the COVID-19 state of emergency. The Organization for Security and Cooperation in Europe’s Office for Democratic Institutions and Human Rights (ODIHR) concluded that, aside from state-of-emergency restrictions, candidates were able to campaign, and fundamental freedoms of expression and assembly were respected. However, the advantage enjoyed by the governing party, the decision of some opposition parties to boycott the elections, and limited policy debate narrowed the choice and information available to voters, according to ODIHR.

The government has made EU membership a primary goal. Serbia has opened 22 of 35 chapters in the EU accession acquis and provisionally closed two. After a long delay in Serbia’s accession process the European Commission in 2021 recommended opening a new “cluster” of accession chapters, pointing to some progress in judicial and rule-of-law reform.

Protests are not uncommon, particularly in urban areas, and most protests are peaceful. In late 2021 and in early 2022, environmental activists staged regular nationwide protests that occasionally blocked highways or resulted in a few minor incidents of violence, although police response to these protests was restrained. Past protests, particularly in Belgrade, were at times violent, with protestors attempting to enter the parliament building during protests against COVID lockdown measures in 2020. Press noted that in addition to concerns regarding COVID, many of the demonstrators during these protests were also protesting political corruption.

Although previous years had seen some assaults against participants in LGBTQI events in Serbia, following its seventh successive incident-free Pride Parade, Serbia was selected to host EuroPride in 2022. Although this indicates some confidence that a recurrence of wide-scale violence against Serbia’s LGBTQI community is unlikely, discrimination and physical attacks continue.

Criminal activity linked to transnational organized crime groups is a regular phenomenon in Serbia. Sport hooliganism is often associated with organized crime, and violent hooliganism remains a concern at matches of rival soccer teams within Serbia. A significant police operation in January 2021 against a major organized crime group linked to Belgrade’s Partizan football club resulted in the arrest of the group’s leader, who was suspected of multiple crimes. Several ultra-nationalist organizations in Serbia have harassed Serbian political leaders, local NGOs, minority groups, migrants, and media outlets considered to be pro-Western, but these incidents are infrequent.

In the last quarter of 2021, according to Serbia’s Statistics Office, the country had a total active labor force of approximately 3.23 million people, of which approximately 2.9 million were employed (55.6% men and 44.4% women) and 316,700 were unemployed. The formal employment rate was 50%, and the informal employment rate was 13.7%, with most of the total informally employed in services and agriculture. Unemployment in the last quarter of 2021 stood at 9.8%. Youth unemployment remained relatively high at 28.7%. Emigration of younger high-skilled working-age citizens is a serious concern, and the share of youth in the total population drops from year to year. The leading sector for employment is manufacturing, followed by government and public administration, agriculture and forestry, fishery, trade, transport, construction, and hospitality services.

The socioeconomic status of women is significantly worse than that of men. The largest number of discrimination complaints relate to disability, age, and gender. According to the Statistics Office, the wage gap between women and men is 8.8% in favor of men. Other reports showed women’s career advancement was slower, and that women were underrepresented in most professions and faced discrimination related to parental leave.

The presence of foreign workers is increasing, especially in construction. After the initial success of the 2018 Law on Simplified Work Engagement on Seasonal Jobs in Selected Areas, in the field of Agriculture, the government is considering expanding the scope of law from agriculture to other areas, including forestry and fisheries, construction, tourism and hospitality, and domestic work. NGOs and the International Labor Organization (ILO) have raised concerns that the proposed amendments could result in stripping migrant and seasonal workers of labor rights, including the right to form unions and mechanisms for redress of abuse.

Demand for IT experts (web developers, programmers, designers) is significantly higher than supply. The National Employment Service (NES) administers various employment support schemes, including new employment, apprenticeship, and re-training programs. For more details see http://www.ras.gov.rs/en/invest-in-serbia/why-serbia/financial-benefits-and-incentives/  and http://rav.org.rs/business-environment/incentives .

Serbia’s labor costs are relatively low compared to European averages. In December 2021, the average net take-home salary was approximately $693 per month, while the minimum wage was approximately $324 per month. Investors routinely cite low labor costs, as well as a highly educated, multilingual workforce, as advantages to doing business in Serbia, while availability of skilled labor is limited by large-scale emigration. Approximately 57% of the workforce has completed secondary education, while some 26% have completed higher education.

Amendments to the Labor Law in 2014 simplified procedures for hiring and dismissing workers and changed rules for collective bargaining and the extension of collective agreements to non-negotiating parties. The law also changed severance payment requirements, so that the employer pays severance based on the years of service with that specific employer, rather than on the employee’s total years of employment, as was the case previously. Employees may be hired for up to 24 months on a provisional basis before it is required to engage them permanently.

The official mechanism for tripartite labor dialogue is the Social and Economic Council, an independent body with representatives of the government, the Serbian Association of Employers, and trade unions. The Council is authorized to conclude an umbrella collective agreement at the national level covering basic employment conditions for all companies in Serbia. Additional information about the Council is available at http://www.socijalnoekonomskisavet.rs/ .

Serbia has ratified all eight ILO core conventions, including Forced Labor (No. 29), Freedom of Association and Protection of the Right to Organize (No. 87), Right to Organize and Collective Bargaining (No. 98), Equal Remuneration (No. 100), Abolition of Forced Labor (No. 105), Discrimination (No. 111), Minimum Age (No. 138), and Worst Forms of Child Labor (No. 182).

The Department of Labor’s report on the World Forms of Child Labor in Serbia can be found online at https://www.dol.gov/agencies/ilab/resources/reports/child-labor/serbia .

The Staff Leasing Law, which came into force in 2020, regulates leased employees’ status, the staffing agencies, and recipient employers. Under the law, employers may hire up to 10% of their workforce with fixed-term contracts through an agency, with no limit on those with indefinite-term employment contracts.

Although Slovenia has no formal business roundtable or foreign investment ombudsman, the Slovenian Public Agency for the Promotion of Entrepreneurship, Innovation, Development, Investment and Tourism (SPIRIT) promotes FDI and advocates for foreign investors in Slovenia, often in collaboration with diplomatic missions and business associations based in Slovenia.  Its mission is to enhance Slovenia’s economic competitiveness through technical and financial assistance to entrepreneurs, businesses, and investors.

Foreign companies conducting business in Slovenia have the same rights, obligations, and responsibilities as domestic companies. The principles of commercial enterprise, including national treatment, apply to the operations of foreign companies as well. The Law on Commercial Companies and the Law on Foreign Transactions guarantee their basic rights.

According to SPIRIT’s annual survey on foreign investors’ perceptions of Slovenia’s business environment, investors cite the high quality of Slovenia’s labor force as the deciding factor in choosing the country as an investment destination, followed by widespread knowledge of foreign languages, employees’ technical expertise, innovation potential, and strategic geographic position offering easy access to EU and Balkan markets.

While generally welcoming greenfield investments, Slovenia presents a number of informal barriers that may prove challenging to foreign investors.  According to SPIRIT’s survey, the most significant disincentives to FDI are high taxes, high labor costs, lack of payment discipline, an inefficient judicial system, difficulties in firing employees, and excessive bureaucracy.  There are no formal limits on foreign investors’ ability to establish an investment or operate in the market.

Foreign companies doing business in Slovenia and the local American Chamber of Commerce have also cited additional factors that adversely affect the local investment climate, including the lack of a high-level FDI promotion strategy, a sizable judicial backlog, difficulties in obtaining building permits, labor market rigidity, and disproportionately high social contributions and personal income taxes coupled with excessive administrative tax burdens.  Businesses have also reported a lack of transparency in public procurement, unnecessarily complex and time-consuming bureaucracy, frequent changes in regulation, relatively high real estate prices in some parts of the country, and confusion over lead responsibility or jurisdiction regarding foreign investment among government agencies.

The government recognizes some of these constraints and is taking steps to address them. It adopted a De-bureacratization Act in 2021 that simplified administrative procedures, improved communication with government offices, and broadened the authority for signing ministry decisions to state secretaries. The newly-established Government Office for Digital Transformation implemented several measures to advance digitalization and reduce red tape, including plans to introduce new digital services in healthcare, education, and public administration by 2023. This new office also committed to improving the business environment for technology companies, including through offering tax incentives for IT experts and opening a new government center to cater to and reduce red tape for foreigners and Slovenians returning from overseas.  The government also succeeded in reducing the income tax rate in the highest tax bracket from 50 percent to 45 percent, but failed to take further action on tax policies that are an impediment to foreign investment and lead to brain drain.

Both foreign and domestic private entities have the right to establish and own business enterprises and engage in different forms of remunerative activity. Slovenia has relatively few formal limits on foreign ownership or control. In May 2020, Slovenia enacted a screening mechanism for foreign investments that will remain in force until June 2023. The investment screening mechanism was enacted as part of the COVID-19 stimulus package and will need to be made permanent before the legislation sunsets. The investment screening mechanism stipulates that foreign investments acquiring at least 10 percent of share capital or voting rights in Slovenian companies with activities involving critical infrastructure, critical technologies and dual use items, supply of critical inputs, access to sensitive information, the freedom and pluralism of the media, and certain projects and programs in the interest of the EU must seek approval from the Ministry of Economic Development and Technology. The ministry was also authorized to retroactively screen foreign direct investment transactions within the past five years. The application for such approval must be submitted to the ministry within 15 days from the date of the execution of the agreement. The Slovenian government envisages that the review process can take up to two months. Failure to comply to this new legislation may result in a fine ranging between EUR 50,000 and EUR 500,000 for companies based on their size and a fine of EUR 10,000 for individuals.

Sector-specific restrictions:

Professional services: There are limits on banking and investment services, private pensions, insurance services, asset management services, and settlement, clearing, custodial, and depository services provided in Slovenia by companies headquartered in non-EU countries. Companies from non-EU countries can operate freely only through an affiliate with a license granted by an appropriate Slovenian or EU institution.

Gaming: There is a 20 percent cap on private ownership of individual companies.

Air transport: Aircraft registration is only possible for aircraft owned by Slovenian or EU nationals or companies controlled by such entities. Companies controlled by Slovenian nationals or carriers complying with EU regulations on ownership and control are the only entities eligible for Air Operator’s Certificates (AOC) for performing airline services.

Maritime transport: The law forbids majority ownership by non-EU residents of a Slovenian-flagged maritime vessel unless the operator is a Slovenian or other EU national.

Slovenia underwent an OECD Investment Policy Review  and a WTO Trade Policy Review in 2002. The Economist Intelligence Unit and World Bank’s “Doing Business 2020” provide current economic profiles of Slovenia.

Individuals or businesses may adopt a variety of different legal and organizational forms to conduct economic activities. Businesses most commonly incorporate legally as limited liability companies (LLC or d.o.o.) and public limited companies (PLC or d.d.). Non-residents of the Republic of Slovenia must obtain a Slovenian tax number  before beginning the process of establishing a business. Slovenia’s Companies Act, which is fully harmonized with EU legislation, regulates the establishment, management, and organization of companies.

Generally, bureaucratic procedures and practices for foreign investors wishing to start a business in Slovenia are sufficiently streamlined and transparent. Start-up costs for businesses are among the lowest in the EU. To establish a business in Slovenia, a foreign investor must produce capital of at least EUR 7,500 (USD 8,835) for a limited liability company and EUR 25,000 (USD 29,450) for a stock company. The investor must also establish a business address and file appropriate documentation with the courts. The entire process usually takes three weeks to one month, but may take longer in Ljubljana due to court backlogs.

Individuals or legal entities may establish businesses through a notary, one of several VEM (Vse na Enem Mestu or “all in one place”) point offices designated by the Slovenian government, or online. A list of VEM points is available at http://www.podjetniski-portal.si/ustanavljam-podjetje/vem-tocke/seznam-vstopnih-tock-vem.

More information on how to invest and register a business in Slovenia is available at http://www.investslovenia.org/business-environment/establishing-a-company/  and http://www.eugo.gov.si/en/starting/business-registration/.

Slovenia does not restrict domestic investors from investing abroad, nor are there any incentives for outward investments. The majority of Slovenia’s outward investments are in the Western Balkans. Croatia is the most popular destination for Slovenian outward investment, constituting 32.9 percent of Slovenia’s investments abroad, followed by Serbia (17.9 percent), Bosnia and Herzegovina (7.9 percent), Russia (6.1 percent), and North Macedonia (6 percent).

According to the World Bank’s Doing Business 2020 index, registering property in Slovenia requires an average of seven procedures, takes 50.5 days, and costs 2.2 percent of the property’s value. Globally, the World Bank ranks Slovenia 54th out of 190 economies on the ease of registering property.

Administrative reforms implemented in 2011 and 2012 simplified property registration, while increased automation in Slovenia’s land registry reduced property registration delays by 75 percent. Slovenia has also made transferring property easier by introducing online procedures and reducing fees. Virtually all land has a clear title.

The land registry court (local court) initiates the registration process for the entry of a title in the land registry. Amendments to the Land Registry Act adopted in 2009 and implemented in 2011 require submission to the court of proposals with appendices in electronic form. Submissions are tendered via a notary public or attorneys and real estate agencies acting on the applicant’s behalf. In some cases, applicants may submit registrations directly. Other amendments to the Land Registry Act have transferred responsibility from the courts to the notary for depositing original documents (e.g. contracts) attached to submissions, whereby the notary’s confirmation of authenticity renders the evidence value of the electronic version equal to that of the original. The amendments also enable free access via a web portal to the land registry records, including pending notations and land register extracts, neither of which were free prior to the reform.

Land registry proposals are automatically assigned to the least-burdened local court. Once the proposal is filed with the land registry court, the registration process is initiated ex officio and the priority of entry is ensured with a land registry seal. The priority order takes effect the day the proposal has been filed. The buyer may theoretically dispose of the property as soon as the purchase agreement is signed and the buyer obtains (direct or indirect) possession of the property. Buyers whose title is not yet entered into the land registry but who have already taken possession of the property are recognized as proprietary possessor in good faith – the presumed owner. The presumed owner has the right to claim the return of a property in the event of its dispossession from a proprietary possessor in good faith who has the property with a weaker legal title. The buyer may claim the return of the purchase price, but has no claims under the law of property until the title is entered into the land registry. Since May 2011, the law requires submission of proposals in electronic format.

Slovenia has enacted advanced and comprehensive legislation for the protection of intellectual property rights (IPR) that fully reflects various EU directives. Slovenia negotiated its commitments under the World Trade Organization’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) as a developing country and implemented the policy as of January 1996. Slovenia is a full member of the TRIPS Council and the World Intellectual Property Organization (WIPO). Slovenia has ratified the WIPO Copyright Treaty and the Cyber Crime Convention.

Slovenia’s Intellectual Protection Office actively participates in the Council of Europe’s Intellectual Property Working Group, the Trademark Committee, and other EU bodies engaged in the formulation of new EU IPR legislation. The Copyright and Related Rights Act, as amended in 2015, 2016, and 2019, deals with all aspects of modern copyright and related laws, including traditional works and their authors, computer programs, audiovisual works, and rental and lending rights. The act also takes into account new technologies such as storage and electronic memory, original databases, satellite broadcasting, and cable re-transmission. Slovenia’s 2004 harmonization with EU legislation introduced a new system of collective management of IPR compliant with the latest directives.

The 1994 Law on Courts gives the District Court of Ljubljana exclusive subject matter jurisdiction over IPR disputes. The aim of the law is to ensure specialization of judges and efficiency of relevant proceedings. For enforcement of TRIPS provisions, the law provides a number of civil legal sanctions, including injunctive relief and the removal of the infringement, seizure, and destruction of illegal copies and devices, publication of the judgment in the media, compensatory and punitive damages, border and customs measures, and the securing of evidence and other provisional measures without the prior notification and hearing of the other party. These infringements also constitute a misdemeanor charge, with fines ranging from EUR 400 (USD 470) to EUR 45,000 (USD 53,000) for legal persons and from EUR 40 (USD 47) to EUR 2,000 (USD 2,400) for supervisors of individual offenders, provided that the reported offenses are not criminal in nature. In criminal cases, Slovenia’s Criminal Code applies, which may result in fines or imprisonment. While laws regarding IPR are clearly defined, foreign investors have complained that the court system is too slow.

Since the enactment of the Law on Copyright and Related Rights Act, there have been relatively few reported prosecutions regarding copyright infringements and violations. The most notable cases usually involve computer software piracy. In 2004, a long-running software piracy court case ended with a prison sentence and monetary fine. Slovenia has dedicated resources to training prosecutors and public authorities. Slovenia also continues to address the preservation of evidence in infringement procedures and border measures through amendments to existing legislation. The Ministry of Culture has established the Intellectual Property Fund, the Slovenian Copyright Agency, and the Anti-Piracy Association of Software Dealers to combat the problem of piracy in a collective manner.

Slovenia is not included in USTR’s Special 301 Report or Notorious Markets List.

The Law on Industrial Property grants and protects patents, model and design rights, trademark and service marks, and appellations of origin. The holder of a patent, model, or design right is entitled to exclusively profit from the protected invention, shape, picture, or drawing; exclusively market any products manufactured in accordance with the protected invention, shape, picture, or drawing; dispose of the patent, model, or design right; and prohibit the use of a protected invention, model, or design by any person without consent.

The holder of a trademark has the exclusive right to use the trademark to designate products or services in the course of trade. The authorized user of a protected appellation of origin has the right to use the appellation in the course of trade for labeling products to which the appellation refers.

The patent and trademark rights granted by the Law on Industrial Property take effect from the date of filing the appropriate applications. Patents are granted for 20 years from the date of filing, and model and design rights are granted for 10 years. Trademarks are granted for 10 years but may be renewed an unlimited number of times. The term of an appellation of origin is unlimited. All patents and trademarks are registered through the Intellectual Property Office, and all registers are open to the public. Patent and trademark applications filed in member countries of the International Union for the Protection of Industrial Property are afforded priority rights in Slovenia. The priority period is 12 months for patents and six months for model and design rights.

Any person who infringes upon a patent or trademark right may be held liable for damages and prohibited from carrying on the infringing acts.

The Ministry of Finance, through the Customs Authority, tracks and reports on seizures of counterfeit goods in accordance with the European Parliament decree 608/2013. All data on seized goods are stored on a central database at the European Commission. The Commission publishes an annual report on seized goods from all countries, available at https://ec.europa.eu/taxation_customs/business/customs-controls/counterfeit-piracy-other-ipr-violations/ipr-infringements-facts-figures_en.

The Law on Industrial Property also provides for the contractual licensing of patents, model and design rights, and marks. All license agreements must be in writing and specify the duration of the license, the scope of the license, whether the license is exclusive or non-exclusive, and the amount of remuneration for use of the patent, model and design rights, and marks.

Compulsory licenses may be granted to another person when the invention is in the public interest or the patentee misuses rights granted under the patent. A misuse of a patent occurs when the patentee does not use or insufficiently uses a patented invention and refuses to license other persons to develop or make use of the protected invention, or imposes unjustified conditions on the licensee. If a compulsory license is granted, the patentee is entitled to compensation. Slovenian industrial property legislation fully complies with EU standards.

For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at  http://www.wipo.int/directory/en/.

The concept of Responsible Business Conduct (RBC) has become increasingly popular among Slovenia’s business community, but the due-diligence approach is not yet commonly recognized. However, to raise their public profiles and improve their images among the public, larger international companies have increasingly undertaken activities such as sponsoring sports teams and community events in the name of corporate social responsibility. Larger Slovenian companies have also focused on developing environmentally-friendly images by implementing green technologies and adhering to high environmental standards.

As an OECD member, Slovenia adheres to the OECD Guidelines for Multinational Enterprises and encourages foreign and local enterprises to follow generally accepted RBC principles, including the United Nations Guiding Principles on Business and Human Rights. Slovenia’s Ministry of Economic Development and Technology is the National Contact Point for the OECD Guidelines.

Slovenia effectively and fairly enforces domestic laws pertaining to human rights, labor rights, consumer protection, environmental protections, and other laws and regulations to protect individuals from adverse business impacts. Independent NGOs, labor unions, and business associations promote and monitor RBC and are able to conduct their work freely. The government adopted a National Action Plan on Business and Human Rights in November 2018 to strengthen activities to ensure that human rights are respected in business activities throughout the value chain and encourage cooperation between government, businesses, unions, NGOs, and other stakeholders. Slovenia is not a signatory to the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights, but adheres to the OECD Due Diligence Guidance for Responsible Mineral Supply Chains.

Slovenia is a signatory of The Montreux Document on Private Military and Security Companies since 2012.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

According to the Slovenia’s Institute for Nature Protection, 41.44 percent of Slovenian territory falls under a protected area or under Natura 2000 – a European network of core breeding and resting sites for rare and threatened species. Natura 2000 covers 37 percent of Slovenia’s territory, among the largest within the European Union (EU). In Slovenia, 71 plant species, 15 genera and one family and 389 animal species, 34 orders and 17 genera are protected. 58 percent of the country’s territory is covered by forests, one of the largest shares in Europe, behind only Sweden and Finland.

Slovenia, in line with the EU, is committed to reducing greenhouse gas emissions by at least 55 percent by 2030 (compared to 1990 levels) and achieving climate neutrality by 2050.  In July 2021, Parliament approved Slovenia’s long-term climate strategy, which envisions cutting greenhouse gas emissions by 80-90 percent by 2050, compared to 2005 levels, focusing on transport, energy, industry, agriculture, waste, land use, and forestry to reach targets.  Slovenia’s current National Climate and Energy Plan (adopted in February 2020), which details Slovenia’s plan to reach its climate goals, focuses on reducing emissions, improving energy efficiency, reducing energy consumption, and focusing on scientific advances.  Slovenia will update the National Climate and Energy Plan by 2023.

In general, climate issues garner broad support across both political and public spectrums in Slovenia.  With the EU approving Slovenia’s national recovery and resilience plan in July 2021, the country began drawing EUR 2.5 billion from the EU Recovery and Resilience Facility to develop and implement green transition projects.  The Slovenian government plans to begin implementation of the national plan in the second half of 2022 and must complete projects by the 2026 deadline.   

Slovenia has no bribery statute comparable to the U.S. Foreign Corrupt Practices Act. However, Chapter 24 of the Slovenian Criminal Code (SCC) provides statutory provisions for criminal offenses in the economic sector. Corruption in the economy may take many forms, including collusion among private firms or public officials using influence to appoint patrons to the boards of SOEs.

The SCC calls for criminal sanctions against officials of private firms for forgery or destruction of business documents, unauthorized use or disclosure of business secrets, insider trading, embezzlement, acceptance of gifts under certain circumstances, money laundering, and tax evasion.

Articles 241 and 242 of the SCC make it illegal for a person performing a commercial activity to demand or accept undue rewards, gifts, or other material benefits that will ultimately result in harm or neglect to a business organization.

Under Article 261 of the SCC, public officials cannot request or accept a gift to perform or omit an official act within the scope of their official duties. The acceptance of a bribe by a public official may result in a fine or imprisonment of no less than one year, with a maximum sentence of five years. The law also stipulates the seizure of the accepted gift or bribe.

Article 262 holds the gift’s donor accountable, making it illegal for natural persons or legal entities to bribe public officials with gifts. Violation of this article carries a sentence of up to three years. In cases in which the gift giver discloses the attempted bribery before it is detected or discovered, punishment may be reduced.

The State Prosecutor’s Office is responsible for the enforcement of anti-bribery laws. The number of cases of actual bribery is small and generally limited to instances involving inspection and tax collection. The Prosecutor’s Office has reported that obtaining evidence is difficult in bribery cases, making it equally difficult to prosecute. In 2010, the government established the Commission for the Prevention of Corruption (CPC), an independent state body with a broad mandate to investigate corruption, prevent breaches of ethics, and ensure the integrity of public officials. The CPC is not part of Slovenia’s law enforcement or prosecution system, and its employees do not have traditional police powers. However, the CPC has broad legal powers to access and subpoena financial and other documents, question public servants and officials, conduct administrative investigations, and direct law enforcement bodies to gather additional information and evidence within the limits of their authority. The CPC may also issue fines for violations.

In 2011, to combat Slovenia’s ongoing problems with corruption and non-transparent procedures in public procurement, authorities established a new government-wide Public Procurement Agency under the Ministry of Justice to carry out all public procurements over established EU thresholds, including goods and services above EUR 40,000 (USD 47,000) and projects above EUR 80,000 (USD 93,000). In June 2012, the Ministry of Finance took over the agency’s duties and employees. In 2016, the Directorate for Public Procurement was established under the Ministry of Public Administration to oversee public procurements. By law, the National Review Commission provides non-judicial review of all public procurements.

Corruption remains an ongoing problem, although its prevalence is relatively limited and there is no evidence that corruption has been an obstacle to FDI. However, U.S. companies continue to report challenges in some sectors, such as a strong preference for incumbent vendors and tenders written in a way to favor a predetermined winner. Such practices prevent U.S. companies from competing on a level playing field in the public procurement process. The small size of Slovenia’s political and economic elite contributes to a lack of transparency in government procurement and widespread cronyism in the business sector. Several prominent national and local political figures have been charged or tried for corruption in public procurements. Slovenia convicted its first senior public official for accepting a bribe in 2001 and its first member of parliament in 2010. In 2008, investigators accused several public officials, including the prime minister, of accepting bribes from the Finnish defense contractor Patria related to an armored personnel carrier procurement. Although three defendants, including the current prime minister, were convicted in 2013, the convictions were annulled on appeal. In February 2021, four orthopedic surgeons and a salesperson were convicted and sentenced to prison in one of the largest healthcare corruption trials in Slovenia.  The court found that the doctors received a bribe in exchange for continuing to use medical supplies made by a particular producer. The court decision is currently under appeal, but the case marks one of the first convictions for corruption in the national healthcare system.

The CPC has instituted a new system for tracking corruption in public procurement at the municipal level and has uncovered numerous violations since implementation. The CPC also operates with a broad mandate to prevent and investigate breaches of ethics and integrity involving holders of public office. The president of Slovenia appoints the leadership of CPC, which reports to the National Assembly.

Slovenia ratified the UN Anticorruption Convention in 2008.

Slovenia is a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Except for its brief, 10-day war of independence from Yugoslavia in 1991, there have been no significant incidents of political violence in Slovenia since independence.

Prior to the COVID-19 pandemic and ensuing economic upheaval, Slovenia’s unemployment rate had fallen steadily since 2014 and reached a ten-year low of 4.5 percent at the end of 2019. Although inflation prior to the crisis remained low at about two percent, private sector contacts reported increasing difficulties in finding qualified staff, which might be expected to put upward pressure on wages and salaries. The government’s COVID-19 stimulus measures focused on preserving jobs, mitigating the brunt of the impact of the pandemic on the labor market. In 2020, the unemployment rate rose slightly to 4.97 percent.

Slovenia fully harmonized its labor legislation with the EU in 2004. In line with this legislation, Slovenia maintains strict rules on issuing work permits to non-EU applicants. The 2001 Employment of Aliens Act introduced a quota system for work permits and simplified the procedure for obtaining such permits for foreigners who have worked and lived in Slovenia for an extended period.

Slovenia’s wage-setting practice follows the “social partners” model, designed to contain upward pressure by centralizing wage decisions. In practice, however, high wage expectations have pushed Slovenia’s wage levels above those of its neighbors in the Western Balkans. Despite these pressures, Slovenia’s well-educated labor force and position as a productive transition economy allows it to remain competitive in niche markets.

In 2003, Slovenia adopted an Employment Relationship Act that defines a full-time workweek as 36 to 40 hours (made up of six to eight-hour days, including a 30-minute lunch break). The act increases protections for critical working groups (including women and children) and eases the conditions under which an employer may terminate employees. Amendments to the act adopted in 2013 further eased the conditions for termination of employment. In December 2020, a provision allowing employers to unilaterally terminate workers once formal conditions for retirement were met was included in the government’s COVID-19 stimulus package and passed in the National Assembly, but is currently being reviewed by the courts. Slovenia’s labor force performs well in higher value-added activities that utilize its skilled technicians and engineers at a competitive cost. Despite the introduction of policies offering greater labor market flexibility, however, labor market rules and regulations remain quite rigid, and investors find that laying off workers is more difficult than in the United States.

Low unemployment and demands from public sector unions have placed upward pressure on wages. In November 2015, the National Assembly endorsed a motion sponsored by trade unions to exempt bonuses for night, weekend, and holiday work from the minimum wage and force employers to pay these wages separately. The National Assembly approved legislation in December 2018 to phase in a ten percent minimum wage increase over two years, from its previous after-tax level of EUR 638 per month (USD 691) to EUR 667 (USD 723) in 2019 and EUR 700 (USD 759) in 2020. In addition, the National Assembly agreed to exempt some salary bonuses from taxation. Given such rapid increases in the minimum wage, Slovenia has lost its cost competitiveness in many sectors.

In December 2018, the government initialed an agreement with public sector unions to increase salaries, pensions, and bonuses for most public employees, averting fears of public sector strikes while increasing public expenditures by EUR 308 million in 2019-20. Several public sector unions rejected the agreement as insufficient however, including those representing judicial workers, accountants, municipal traffic wardens, soldiers, and some healthcare workers. In November 2019, the National Assembly adopted changes to the retirement law to remove differential treatment for men and women and encourage older workers to remain in the job market.

*Bank of Slovenia; published in October 2021

N.B.: The Bank of Slovenia (BoS), in its official data, lists U.S. FDI at approximately EUR 66 million in 2020, or 0.4 percent of total inward FDI. However, this amount does not reflect significant investments by U.S. firms not listed as U.S. in origin by the BoS, as U.S. funds are often routed through third-country subsidiaries. In 2017, the BoS began reporting FDI according to the ultimate investing country or originating country of capital. It estimated that USD 1.71 billion (EUR 1.55 billion euros) or 9.4 percent of Slovenia’s total FDI originated in the United States in 2020, putting the United States behind Austria andGermany as a source of foreign investment in Slovenia.

Source: IMF’s Coordinated Direct Investment Survey (2020) https://data.imf.org/regular.aspx?key=61227424 

Comment: IMF data are consistent with Bank of Slovenia data.

Note: The Bank of Slovenia has made an additional breakdown of inward FDI according to the ultimate source of capital. It shows that Germany, the United States, Japan, the Russian Federation, and Mexico are all much more important investor countries in Slovenia than is suggested by the breakdown by the immediate partner country. The U.S. ranks third with 1.48 billion euros (USD 1.71 billion) in 2020.