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Government approves proposal for an act governing reconstruction and development following the August floods

SLOVENIA, November 23 - As was explained in the Government discussion of the draft proposal for the Act, the envisaged measures addressing the key challenges of comprehensive support for the affected areas apply to several facets of society. The measures were designed in cooperation with the competent ministries and were considered by the working group led by the State Secretary at the Office of the Prime Minister, Boštjan Štefic. The proposed solutions were also coordinated with various stakeholders.

The proposed Act envisages a comprehensive approach to development and reconstruction in many areas. This, among other things, includes the acceleration of construction, spatial planning and other administrative procedures related to the reconstruction and development in the affected areas, the regulation of replacement construction, and the provision of assistance to people, businesses and the agricultural sector.

In areas that are not at risk, the option of replacement construction at the same location is provided. If a building must be moved only slightly, a derogation from the Spatial Planning Act is envisaged. If the original building is set for demolition pursuant to the Act Determining Intervention Measures for Flood and Landslide Recovery of August 2023, a replacement building will be built at a new location. The proposal also envisages exemption from the payment of community infrastructure contribution for new and existing infrastructure for replacement construction at the same location and replacement buildings at another location, to the extent applying to the replaced building. The costs of connecting replacement buildings to the public infrastructure, which include the planning and construction of connections, will be financed from the funds allocated to the natural disaster recovery.

Businesses will be helped with a loan guarantee scheme with subsidised contractual interest rate. Such a financial product that combines guarantees and interest rate subsidies is attractive for both banks and borrowers. The proposed solution is more convenient for users of the guarantee scheme, i.e. companies, sole traders and agricultural holders, since commercial banks have networks covering the entire country. The State will cover part of the business risk for the banks and subsidize 30% of interest for borrowers. A quota of EUR 500 million was earmarked for such guarantees.

The Act also envisages incentives for investments in the business sector. The eligible entities are businesses that suffered direct damage in the floods and landslides. They will be able to submit applications for co-financing by 31 December 2024. The funds will be granted based on direct applications and in accordance with the procedure provided in the Investment Promotion Act. These incentives are intended for investments that are extremely important for developing the Slovenian economy. The Act also allows incentive recipients to carry out part of their activities in an additional facility they build (investment) without having to exchange the land in the municipality.

The guarantee scheme will also be available to natural persons for restoring damaged buildings and constructing replacement buildings. A quota of EUR 200 million was earmarked for such guarantees. The guarantee will cover 100% of the loan principal, which is limited to EUR 100,000. Interest will be subsidised in full.

The proposed Act also addresses the transfer of ownership of municipal real estate to the Housing Fund of the Republic of Slovenia free of charge. The aim of this measure is to provide additional real estate to the Housing Fund for the construction and renovation of non-profit rental housing.

For agriculture, environmental protection and water infrastructure, the Act envisages the reconstruction of damaged forest roads, the construction of containment ponds for irrigation, the construction of replacement agricultural facilities and farms, the reconstruction and construction of water infrastructure, the priority consideration of applications submitted to the Eco Fund by people affected by floods and landslides, and access to the information in the AJDA system for determining and deciding on the amount of damage. With regard to agriculture, it also provides for the State guarantee for prepayments under the Rural Development Programme 2014–2020.

Investors will be able to submit applications to extend building permits for investments in the affected areas for up to two years, while municipalities will have more time to adopt detailed municipal spatial plans for reconstruction.

The proposed Act also envisages additional co-financing of mental health and psychosocial support programmes. A centre to manage polluted soil will also be set up.

The proposed Act provides several exemptions, such as the exemption from the deregistration fee for vehicles that were swept away in the floods or buried under landslides.

In public procurement, the limit value for the application of the Public Procurement Act is raised to EUR 1,000,000 for the excluded public contract lots for construction intended for the reconstruction and development of the affected areas. The Act also provides that in considering requests for a review, the National Review Commission must give priority to public contracts related to the reconstruction and development of the affected areas.

A budget fund will be established to finance projects and measures related to the floods and landslides, for which funds will be collected in a special account, separate from other budget funds. The sources of revenue for the budget fund for reconstruction will include a 0.2% tax on total assets of banks and savings banks, an increase in corporation tax by 3 percentage points, and the net and available profit of the Slovenian Sovereign Holding. It must be reiterated that these are only temporary sources.

In order to provide additional resources to finance reconstruction, the proposed Act also changes the tax on natural persons' investments in securities issued by the Republic of Slovenia in 2024, 2025 or 2026. In personal income tax, they will be treated the same as interest on deposits with banks and savings banks.

The proposed Act also includes measures related to development. The northern part of the third development axis is designated as a development and priority road infrastructure project. Funds will be provided for co-financing the construction of public communication networks and the associated infrastructure, and the construction of high-performance 5G mobile networks.