In the world of innovations, innovative entities are not just players, but drivers of change. Their ability to rapidly grow and develop new ideas makes them crucial for economic development, especially in Serbia, where innovations are becoming an increasingly important factor for competitiveness.
The Registry of subjects in the national innovation system (referred to as the “Register“) is a vital database that allows you to gain visibility and present your innovative projects to a broader audience. As a central tool for monitoring and supporting innovation, the Register offers you the opportunity to more easily qualify for tax incentives and gain visibility with potential business angels and partners.
Various innovative entities can be registered in the Register, such as startups, spin-offs, spin-off research organizations, development and production centers, and other innovation-related entities, like business angels. If you were previously registered in the Innovation Activities Register, you will have been or will be automatically included in the Registry of subjects in the national innovation system.
In this blog post, we will explore the significance of registration for both newly established companies (startups) and established companies with a history of operations (spin-offs).
What Makes a Startup Eligible for Registration in the Register?
A startup is a specific type of innovative entity – a newly established company or entrepreneur, whose mission is not only profit but also the creation of innovative products or services. If you are not yet established and are planning to engage in innovative activities, you might find our next blog useful: Startups: Essential Legal Structuring Tips to maximize your chances for success
The regulation not only defines what constitutes a startup, but also establishes clear rules – conditions for registration and removal from the Register, as well as the obligations startups must fulfill. These conditions ensure that only serious and innovative entities can benefit from the privileges and support that come with registration in the national system. For instance, startups are required to provide information about their business operations center, developed products, and intellectual property, which fosters transparency and creates a favorable environment for investors.
To qualify as a startup, an entity must meet several general criteria, including:
- it is not older than 10 years, or more than 5 years have not passed since the first business revenue was achieved;
- it has its registered seat address in Serbia;
- no bankruptcy or liquidation proceedings have been initiated against it.
In addition to these general conditions, a startup must demonstrate that research and development costs account for at least 10% of total expenses in each of the previous years relative to the year in which the application for registration in the Fund is submitted.
If the startup was established in the year the application was submitted and has no prior financial history, this condition does not apply.
Additionally, if the applicant has no financial history, the Commission established by the Innovation Fund will decide on the application based on an assessment of whether the entity is developing an innovative product, service, or technology, and whether there is potential for rapid and significant growth.
Spin-off: The Ideal Option for Established Companies
A spin-off is a specific type of startup that arises as a product of an existing legal entity or company, innovations. +intending to develop and commercialize innovations.
This is a way for established companies to expand and leverage their resources to develop new products, services, or technologies, while simultaneously creating a new company focused exclusively on innovative activities.
Spin-off companies play a crucial role in the innovation ecosystem as they allow large companies to experiment with new ideas and technologies without jeopardizing their core operations. Moreover, establishing a spin-off can be appealing to investors because it is built upon the existing resources, expertise, and network of the founding company.
Like startups, spin-offs must meet certain conditions to be registered in the Register. This includes general conditions that ensure the company is registered and active, as well as meeting minimum requirements related to innovation and its development:
- the spin-off must be registered as a company, with the founder being either a company and/or an individual;
- it is not older than 10 years;
- no bankruptcy or liquidation proceedings have been initiated against it.
In addition to the general conditions, there is also a specific requirement that the spin-off must meet, where the spin-off must choose one of the available ways to fulfill this specific requirement.
These conditions are designed to ensure that the spin-off is actively engaged in innovations and has the potential for development and scalability.
The first method to fulfill the special condition is that research and development expenses must constitute at least 10% of the total expenses in the previous year relative to the year in which the application is submitted.
The second method to fulfill the condition is that the spin-off must possess some form of intellectual property related to its innovative activities. This can include patents, industrial designs, trademarks, or other intellectual assets.
The third method to fulfill the condition is through a Commission that evaluates whether the spin-off is developing an innovative product or service and if it has the potential for scalability. The Commission uses defined criteria to make this assessment, which allows even companies without a strong financial history or intellectual property to have the opportunity to be recognized as innovative entities.
Developing your own product, rather than relying on outsourcing, has a significant impact on the long-term success of a company, especially when it comes to clients who already have an existing business and are developing a new product alongside their core operations. In this context, establishing a startup or spin-off represents a strategic move that allows the company to focus on innovations without disrupting its existing operations.
Now that we have introduced you to the basic concepts and registration requirements, let’s move on to the key topic of this blog post: why should you register in the Register?
Below, we explain three key reasons for registration.
A. TAX INCENTIVES
Registration in the Register serves as proof that the company is engaged in innovative activities, which is a prerequisite for accessing various tax incentives.
For example, the Corporate Income Tax Law states that a company that is not a startup (i.e., the founding company, investor) may, in the case of investing in the equity capital of a startup or a company engaged in innovative activities, achieve a 30% reduction in its corporate income tax obligation based on the amount invested.
The fact that a startup is registered in the Register with the Innovation Fund can be significant for tax authorities when assessing eligibility for tax incentives.
B. BENEFITS OF THE STARTUP ECOSYSTEM
The Fund offers a variety of support opportunities designed to help make your business successful and competitive in the market.
Through various financial instruments, technical and advisory support, and numerous programs, the Fund provides access to the resources needed to implement your innovative projects. Whether you are an early-stage startup or a more developed company, the Fund can offer solutions that may meet your needs. Financial support may include grants, loans, or subsidies that help you overcome initial challenges and achieve your goals. The Fund delivers this support through its programs, such as Katapult, Smart Start, and many others.
C. CONNECTING WITH INVESTORS
Registration provides you with the opportunity to connect with potential investors and partners who can further support your growth, as business angels are also registered in the Register. This allows you to stand out to key market players by organizing various events and networks that help you establish connections with investors and business partners, thereby opening doors to new business partnerships and opportunities. Regardless of these methods of raising investments, potential options for financing your startup can also be found in our next blog: What Are the Types of Startup Investment and What is a Term Sheet?
The Fund organizes annual investment conferences where you can present your projects to a large audience of investors, potential partners, and media, helping you attract the necessary attention and resources for the further development of your company.
The fact that you are registered in the Register proves that you are working on your own innovative product, which is important for market success and reduces the need to explain to tax or other government authorities what exactly your innovative activity is since you have undergone a detailed review and examination process by the Commission during registration in the Register.
Register now and seize your key to entering the world of innovations and business success. Join us on this exciting journey towards innovations and achievement!
