Archive for year: 2020

At the session of the National Assembly held on 17.12.2020, a set of tax and financial laws was adopted, which were published in the “Official Gazette of RS”, No. 153/2020 on 21.12.2020, of which we single out:

1) Law on Amendments to the Law on Personal Income Tax

2) Law on Amendments to the Law on Contributions for Compulsory Social Insurance

3) Law on Amendments to the Law on Corporate Income Tax

The laws will be applied from 1.1.2021, except for the provisions related to digital property, which will be applied from the day of the beginning of the application of the law which regulates digital property.

MOST IMPORTANT AMENDMENTS TO THE LAW ON PERSONAL INCOME TAX AND THE LAW ON COMPULSORY SOCIAL SECURITY CONTRIBUTIONS

• Increases non-taxable amount of salary from 16,300 to 18,300 dinars per month
• Modifies period which is a condition for acquiring the status of a newly settled taxpayer – a qualified employer is any resident employer of the Republic, who establishes an employment relationship with a newly settled taxpayer who has met the conditions from Article 7, paragraph 2, item 1 for at least three years since 1990 of this law to be considered a resident of the Republic
• Extends period of application of existing incentives for employment of new persons until 31.12.2021.
• Clarifies provisions regarding benefits based on employment of a qualified new employee – Extended notion of employer for the purpose of exercising the right to relief for qualified new employees
• The notification on the determination for the payment of personal salary will be submitted in electronic form
• Taxation of capital gains on the transfer of digital assets is introduced
• Introduces the obligation of a domestic legal entity to calculate and pay withholding tax when making payments to an employer from another country on the basis of reimbursement of labor costs of a person referred to a domestic legal entity
• Extends exemption from taxation of winnings from games of chance

THE MOST IMPORTANT AMENDMENTS TO THE LAW ON CORPORATE INCOME TAX

All changes apply to the determination, calculation and payment of tax liability starting for 2021, ie for the tax period beginning in 2021, except for the provisions related to digital assets, which will apply from the date of application of the law governing digital assets:

• The obligation to tax capital gains and sales of investment units of closed-end investment funds is introduced
• Prescribes obligation to determine capital gains based on the sale of digital assets
• The determination of the purchase value of real estate acquired before 1.1.2004 is specified
• It is prescribed that the remaining net value of the assets of an open-end investment fund that is distributed to members is considered a capital gain
• Specifies that the income that a non-resident legal entity realizes on the basis of membership in an alternative investment fund that does not have the status of a legal entity, is considered a dividend
• Specifies manner of determining newly employed persons for exercising the right to tax incentive from Article 50a

Detailed explanations of the amendments to the above laws can be found in the Tax Alert

At its session held on November 26, 2020, the National Assembly of the Republic of Serbia adopted the Law on Amendments to the Law on Property Taxes, published in the “Official Gazette of the Republic of Serbia” No. 144/2020. Amendments to the Law on Property Taxes in the area of ​​property taxes will be applicable from January 1, 2021.

Most significant changes:

• It is prescribed that property tax payers are also open-end investment funds, ie alternative investment funds, which do not have the status of a legal entity, which are entered in the appropriate register in accordance with the law – when on real estate in the Republic of Serbia are rights holders, users or holders on which property tax is paid
• Clarification was made when the subject of taxation is the right of ownership on land and the right to use construction land with an area of ​​over 10 acres by specifying that the property taxpayer is each holder of that right in proportion to its share in relation to the total land area, even when the proportional area of ​​the share of an individual taxpayer is less than ten acres
• It is prescribed that the depreciation rate for which the value of real estate can be reduced, which is the basis of the taxpayer who does not keep business books, is equal for all real estate on the territory of the local self-government unit, ie depreciation rates on the territory of a local self-government unit cannot be different depending on the type of real estate, zone, etc.
• From January 1, 2021, the average prices of 1m2 of appropriate real estate in zones will be determined on the basis of prices realized in the turnover of appropriate real estate by zones in the period from October 1 of the year preceding the current year to September 30 of the current year – instead of 9 month, 12 month period of time is introduced
• For the purpose of determining the property tax base, ancillary facilities are classified in the same group with garages
• The subject of taxation with inheritance and gift tax has been extended to inheritance and gift of digital property
• From January 1, 2022, the competence for determining, controlling and collecting inheritance and gift taxes and taxes on the transfer of absolute rights is transferred from the Tax Administration to local self-government units.

New official translation of IFRS – International Financial Reporting Standards was published in the “Official Gazette of RS”, number 123/2020.

Application of these translated IFRS is mandatory for regular annual financial statements prepared as of December 31, 2021. Earlier application of the above IFRS is also permitted, with the disclosure of relevant information in the Notes to the financial statements.

The Rulebook on the form and content of the request for the issuance of a license for the provision of accounting services, as well as the fee for the issuance of a license, has been published on the website of the Chamber of Certified Auditors.

Along with the request for the issuance of a license for the provision of accounting services, the accompanying documentation should be submitted, as well as proof of paid fee (RSD 24,000.00 for legal entities and RSD 17,000.00 for entrepreneurs).

The register of accounting service providers should start operating on 1.1.2021, and the deadline for entry in the Register expires 1.1.2023.
Along with the application for a license to provide accounting services, the applicant shall submit the following:

1. proof (decision, excerpt, etc. of the Business Registers Agency) that it has a registered predominant activity for the provision of accounting services;
2. proof that the founder, ie the beneficial owner, as well as a member of the management body of the legal entity that has a registered predominant activity for providing accounting services, has not been convicted of a criminal offense in terms of the law governing the liability of legal entities for criminal offenses. the founder, ie the owner, as well as a member of the governing body of the legal entity, a natural person, has not been convicted of criminal offenses under Article 18, paragraph 6, item 2) of the Law on Accounting “Official Gazette of RS”, No. 73/19, hereinafter: Law):
   1. for a legal entity – Excerpt from the criminal records of the competent court;
   2. for a natural person – Excerpt from the criminal records of the Ministry of the Interior;
3. Proof that he has at least one full-time employee with a professional title in the field of accounting or auditing, acquired by a professional organization that is a member of the International Federation of Accountants (IFAC):
   1. confirmation of the applicant for the issuance of a license for the provision of accounting services, which contains information on the name and surname of that person and the date of conclusion of the employment contract for an indefinite period;
   2. a copy of the act (certificate, diploma, certificate, certificate, license, etc.) proving that the employee has acquired a professional title in the field of accounting or auditing, which was acquired by a professional organization member of the International Federation of Accountants (IFAC) .
4. data on beneficial owners listed in Form 1;
5. data on associates in the sense of Article 18 of the Law, which are listed in Form 1.

 

Exceptionally, an audit company that has a license to conduct an audit issued in accordance with the law governing the audit, submits an application for a license to provide accounting services on Form 1, without providing the above evidence.

The program “My first salary” envisages the employment of 10,000 unemployed people who are less than 30 years old, have no work experience and are on the National unemployment registry. For nine months, the state will finance a part of their salaries through a monthly cash benefit of 20,000 RSD for those with secondary education, and 24,000 RSD for the unemployed with higher education.

Employers should apply through the website www.mojaprvaplata.gov.rs in the period from August 17 to September 25, where they should enter a description of job positions and conditions that the candidate must meet. On the other hand, the unemployed who want to apply for a job through this program, will be able to do so from 1-15 October

From 16-31 October, employers will select candidates, and from 1-7 November the final lists will be published.

The trilateral contract can be signed from November 8 to December 7. The first cash benefits are therefore expected in December at the earliest.

The Law on Fees for the Use of Public Goods stipulates that the entity liable for fees for protection and improvement of the environment referred to in Article 134, paragraph 1, item 1) of the Law must submit an application with data relevant for determining the fee to the local public administration unit by July 31 each year, for which a fee is determined.

Criteria for determining the negative impact of activities that affect the environment of legal entities and entrepreneurs are determined within the predominant activity performed by the taxpayer. According to the degree of negative impact on the environment, the activities of legal entities and entrepreneurs are divided according to the activity into those that have a large, medium and small impact on the environment. If the taxpayer performs the activity on the territory of several local self-government units, he submits the application to the competent authority on the territory of all local public administration units on which he performs the activity.

From July 18, 2020, it is possible to submit an electronic application on the LPA portal.

We would like to emphasize that the Ministry of Finance published the opinion number 011-00-1089 / 2019-16 on December 17, 2019, which indicates and reminds that it is prescribed that the statutory audit is mandatory for regular annual financial statements of large and medium-sized legal entities classified in accordance with the law governing accounting, public companies in accordance with the law governing the capital market, regardless of their size, as well as all legal entities or entrepreneurs whose total income generated in the previous business year exceeds 4.400.000 EUR.
However, as the current Rulebook on the content and form of financial reports for companies, cooperatives and entrepreneurs (“Official Gazette of RS”, No. 95/14 and 144/14), or the Rulebook on the content and form of financial reports for other legal persons (“Official Gazette of RS”, No. 95/14), in the Income Statement, do not contain the appropriate AOP which shows the total income, and for the purpose of determining the auditor based on the criteria – total income, we believe that in this case , in order to determine the total revenue in terms of Article 26, paragraph 1 of the Law, the following revenues (AOP positions) from the mentioned regulations should be taken into account:

-Operating income;

-Financial income;

-Income from adjusting the value of other assets at fair value through profit or loss (for companies, cooperatives and entrepreneurs), ie income from adjusting the value of short-term and long-term financial placements and receivables (for other legal entities);

-Other income.

The unprecedented circumstances of COVID-19 have seen many businesses faced with challenges the likes of which they have never faced before. For many small businesses, having a trusted advisor that they can turn to for help and guidance through this crisis is incredibly important.

Small- and medium-sized practices (SMPs) have a deep knowledge of their clients’ business and many of the specialist skills necessary to help them navigate through these most challenging of times.

A professional accountant can help effectively manage and reduce risk, explain how to take appropriate actions and fortify the business for the medium to long-term.

The Small Business Continuity Checklist is a diagnostic tool to navigate times of disruption, covering two key areas of Financial Management Tasks and Strategic Management Tasks. It is not intended to be an exhaustive checklist of requirements, but rather a tool to help identify priority actions for immediate attention.

Kreston MDM has done an official translation of this document, and the translation has been published on the Kreston MDM website as well as on the IFAC website.

Deadline for acquiring the status of a qualified new employee from Article 21ž paragraph 3 of the Personal Income Tax Law and Article 45đ paragraph 3 of the Law on Social Contributions, for a person who in the period from January 1, 2019 to December 31, 2019 did not have the status of insured employee, ie status of entrepreneur who is the founder, ie a member of the company, and is employed in that company, is moved for a period of 60 days from the day of termination of the state of emergency.

 

Amendments to the Decree on Fiscal Benefits and Direct Benefits to Private Companies and Financial Assistance to Citizens to Mitigate the Economic Consequences of COVID-19 Disease were published in the Official Gazette of the RS, no. 60 of April 24, 2020.

The changes are as follows:

• Article 9

June tranche of direct payments – the number of employees is also reduced by the number of employees who ceased working with the company from April 10, 2020 to April 30, 2020.

July tranche of direct payments – the number of employees is also reduced by the number of employees who ceased employment with the business entity from May 1, 2020 to May 31, 2020.

The economic entity referred to in this Article shall be obliged to use the received funds from direct benefits by 15 August 2020 at the latest, thus permitting the payment of wages in full from its own funds before the receipt of direct payments.

• Article 10

Number of employees for whom large legal entities have direct benefits in June – in the amount of the product 50% of the basic minimum net salary for March 2020 and the number of employees referred to in paragraph 1 of this Article increased in accordance with paragraph 2 of this Article, for whose remuneration the employer – a large legal entity submitted the PPP-PD Form for April 2020, for which the decision on termination of work applies for at least 15 working days in the month of April 2020.

Number of employees for whom large legal entities have direct benefits in July – in the amount of the product 50% of the basic minimum net wage for March 2020 and the number of employees referred to in paragraph 1 of this Article increased in accordance with paragraph 2 of this Article, for whose remuneration is the employer – large legal entity has submitted the PPP-PD Form for May 2020, for which the decision on termination of work relates to at least 15 working days in the month of May 2020.

The large legal entity referred to in this Article shall be obliged to use the funds received from direct benefits by 15 August 2020 at the latest.

• Article 12

Repayment of direct payments with accrued interest is made to a special purpose account opened for this purpose with the Ministry of Finance – Treasury Department.

• Article 16

Dividends, for the purposes of this Article, shall mean all payments made to their owners by a company on the basis of their ownership of the stocks or shares of that company.

• Article 19a

Business entities in the private sector which, in the period from the date of entry into force of the Rulebook on the list of users of public funds 26.12.2019. (Official Gazette of RS, No. 93/19), as of the date of entry into force of this Decree, deleted from the List of users of public funds from the Register of users of public funds, maintained as an electronic database with the Treasury Directorate, are entitled to opening a special purpose account referred to in Article 13, para. 2 and 3 of this Decree, as well as fiscal benefits and direct payments under the conditions laid down in this Decree.

The Government of the Republic of Serbia adopted the Rulebook on the Contents of the Form for presenting information on persons for whom a large legal entity is entitled to the payment of direct benefits, which entered into force on 15.04.2020.

The Rulebook prescribes a Form for presenting information on persons for whom a large legal entity is entitled to the payment of direct non-refundable payments referred to in Article 10 of the Decree on fiscal benefits and direct payments to companies in private sector and financial aid to citizens in order to mitigate the economic consequences caused by disease covid-19.

Government has adopted the decree on fiscal benefits and direct payments to companies in private sector and financial aid to citizens in order to mitigate the economic consequences caused by disease covid-19 in order to mitigate the economic consequences of pandemia.

You can read more in our Tax Alert on this subject which you can find on this LINK.

According to the opinion of the Ministry of Finance RS No. 430-00-44 / 2020-04 dated 12.02.2020 when, after having been employed and having acquired the status of a qualified new employee in accordance with the conditions laid down in Article 21ž of the Law, that person continues to pursue an self-employment activity as an additional activity, that circumstance does not affect his status as a qualified new employee acquired by establishing an employment relationship within the statutory period, and by changing the basis of social insurance.

The Serbian government has announced a set of measures to help the economy. An official legislation and a full implementation guide are expected in the next 10 days. Furthermore, the announced measures will help companies that have laid off less than 10% of employees The following measures are announced:

1. Postponing of payment of due tax liabilities, with subsequent repayment in installments for at least three months, for following taxes:
   – payment of taxes and contributions for at least three months (employers who choose to use this measure may use deferral of payment of taxes and contributions to earnings until January 2021, and thereafter there is a possibility of further deferral of payment of these taxes and contributions up to 24 months without obligation to pay interest, at the request of the taxpayer)
   – postponing of payment of the income tax advance (in the meantime, companies may file a periodic tax balance and tax return to reduce the monthly advance if significant changes in the taxpayer’s business have occurred in the current year)
2. Exemption from VAT for donations (exemption for donors from the obligation to pay VAT means that donors who donate their products and goods to institutions directly involved in activities aimed at preventing the spread and treatment of citizens from Covid-19 will be exempt from VAT for that turnover)
3. Payment of three minimum wages for entrepreneurs, micro, small and medium enterprises for each employee. The state will pay minimum wage support for entrepreneurs, micro, small and medium-sized enterprises in the private sector for each employee. The minimum wage is about 31,000 RSD, so a total of about 93,000 RSD per employee will be paid. Companies can expect the state to pay them the first third of the funds mid-May, the second half in June, and the third half in July. Companies will be required to pay this money to employees. Large companies whose employees are sent on forced leave will receive subsidies of 50% of minimum wage due to reduced business volume or complete shutdown.
4. Corporate bonds. It is one of the ways in which large enterprises can count on the state support. Given the complicated legislation, changes to legislation are to be made
5. Preferential loans and guarantee schemes in order to maintain liquidity during and after the state of emergency:
   – Program for granting favorable loans with 1% interest through the Development Fund of the Republic of Serbia, for maintaining liquidity and working capital for entrepreneurs, companies classified into micro, small and medium-sized legal entities, agricultural households and cooperatives
   – Guarantee schemes for business support for loans for maintaining liquidity and working capital for entrepreneurs, companies classified into micro, small and medium-sized legal entities, agricultural holdings and cooperatives. Guarantee schemes will refer to loans granted by commercial banks, and practically the state will guarantee these loans.
6. Payment of direct assistance in the amount of 100 EUR in RSD equivalent to all adult citizens of Serbia, upon termination of the state of emergency

Our Kreston MDM BusinessINFO app now has two new calculators that can make your day-to-day business easier.

The annual personal income tax calculator fully assists not only in the calculation but also in completing the PPDG-2R tax form. The deadline for filing this tax return is May 15 of the current year for the previous calendar year.

Individuals who have earned income in 2019 over RSD 2,729,304 are required to file an annual income tax return and pay tax.

Pursuant to the provisions of Article 87, paragraph 1 of the ZPDG, taxpayers of the annual personal income tax are  persons:

– residents for income earned in the Republic of Serbia and in another country

– non-residents for income earned in the Republic of Serbia

The Exemption Calculator for Newly Employed Qualified Persons relates to tax benefits for the employment of so-called qualified persons, which began with effect from 1 January 2020.

In the calculator, in addition to the calculation of earnings is given the total cost of earnings for the years 2020, 2021 and 2022, the year of release, as well as the amount of release (savings).

Each calculator has a link to our tax alert that addresses the relevant topic.

The application can be downloaded on

Our Kreston MDM BusinessINFO app now has two new calculators that can make your day-to-day business easier.

The annual personal income tax calculator fully assists not only in the calculation but also in completing the PPDG-2R tax form. The deadline for filing this tax return is May 15 of the current year for the previous calendar year.

Individuals who have earned income in 2019 over RSD 2,729,304 are required to file an annual income tax return and pay tax.

Pursuant to the provisions of Article 87, paragraph 1 of the ZPDG, taxpayers of the annual personal income tax are natural persons:

– residents for income earned in the Republic of Serbia and in another country

– non-residents for income earned in the Republic of Serbia

The Exemption Calculator for Newly Employed Qualified Persons relates to tax benefits for the employment of so-called qualified persons, which began with effect from 1 January 2020.

In the calculator itself, in addition to the calculation of earnings is given the total cost of earnings for the years 2020, 2021 and 2022, the year of release, as well as the amount of release (savings).

Each calculator has a link to our tax alert that addresses the relevant topic.

The application can be downloaded on Google Play or the App store platform.

We would like to inform you that in accordance with the recommendations of the Government of the Republic of Serbia, Kreston MDM has taken all necessary measures to prevent the spread of the COVID-19 virus.

In order to protect the health of our clients, as well as the health of our employees, all meetings and consultations with clients will be held through digital services, while most documentation is submitted electronically to minimize all contacts and the possibility of spreading the virus. All precautions will not affect the scope and quality of service, as we operate with unchanged capacity in accordance with the recommendations and the current situation.

We invite you to follow the general preventive measures for the protection of the coronary virus and to work according to the instructions of the Ministry of Health to prevent the transmission of infections and to protect your health and the health of people from your area.

OECD issued a report which contains transfer pricing guidance on financial transactions, developed as part of Actions 4, 8-10 of the BEPS Action Plan. This report is significant because it is the first time the OECD Transfer Pricing Guidelines includes guidance on the transfer pricing aspects of financial transactions, which will contribute to consistency in the interpretation of the arm’s length principle and help avoid transfer pricing disputes and double taxation. Sections A to E of this report are included in the Guidelines as Chapter X. Section F is added to Section D.1.2.1 in Chapter I of the Guidelines, immediately following paragraph 1.106. The guidance describes the transfer pricing aspects of financial transactions and includes a number of examples to illustrate the principles discussed in this report.

The report can be seen on this link.

Ministry of Finance has published on 1.2.2019 an opinion on documenting the costs of arrival and departure from work for employees. Each company has an obligation to properly document the costs, ie it is necessary to keep a record every month whether travel expenses for employees are covered and that there are documents justifying the costs of transportation.

Furthermore, the Ministry of Finance has issued opinion no. 430-00-648 / 2019-04 dated 17.1.2020 on tax treatment of compensation for costs of arrival and departure from work that have not been documented. Compensation for expenses for arrival and departure from work, to which an employee is entitled in accordance with the general act and the employment contract in accordance with the provisions of Article 118, paragraph 1, item 1) of the Labor Law (not considered as earnings under Article 105, paragraph 3) Of the Labor Law), no compulsory social security contributions are paid regardless of the tax treatment of such benefits under Article 18, paragraph 1, item 1) of the Law.

Therefore, the reimbursement of these expenses, which have not been documented, is not treated as earnings, so that the tax at the rate of 10% is paid for the reimbursement of the costs of arrival and departure from work, while at the same time no compulsory social security contributions are calculated and paid.

 

The Agency for Business Registers (APR) has issued a notice that as of 20.01.2020 access to the application for submission of reports through the Agency’s Special Information System is enabled, which provides a unique procedure for entering, controlling, signing and submitting statistical reports and financial reports with the prescribed documentation for 2019.

This year, the last day for submission of the report for statistical purposes will expire on Saturday, 29.02.2020, so that the submission of reports will be possible by 02.03.2020.