Several Laws adopted and published

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

AMENDMENTS TO THE VAT LAW

At the session of the National Assembly, held on 17.12.2020, the Law on Amendments to the VAT Law was adopted. The Law was published in the “Official Gazette of RS”, No. 153/2020 on 21.12.2020 and will apply from 1.1.2021, except for the provision concerning the tax exemption relating to virtual currencies, which will apply from the day of the beginning of the application of the law which regulates digital property and the provisions containing the authorization for the adoption of the bylaw which will be applied from the day the amendments enter into force.

The most significant amendments to the Law on VAT relate to the following:

  • the transfer of the right of disposal of movable property which is performed with the transfer of the right of disposal of a construction object or economically divisible unit within a construction object which is considered immovable property in the sense of the law governing real estate transactions is considered ancillary supply of goods (in addition to the transfer of the right of disposal on a construction object or an economically divisible whole within a construction object that is considered real estate in terms of the law governing the transfer of real estate).
  • Ancillary provision of services is not considered to be the service of renting, ie giving for use of a construction object or economically divisible unit within a construction object which is considered real estate in the sense of the law which regulates real estate transactions.
  • Precise definition of a value voucher
  • Investment funds are considered taxpayers
  • For turnover in the field of construction, it is prescribed that the tax debtor is the recipient, provided that the value of that turnover is higher than 500,000 dinars, without VAT. In the case of turnover whose value is up to 500,000 dinars without VAT, the tax debtor will be the taxpayer performing the turnover – the contractor in accordance with the general rules.
  • Precise definition of amounts that are not included in the tax base
  • Tax exemption for sales of goods that are in the process of inward processing: VAT is not paid on sales of goods that are in the process of inward processing for which the taxpayer-acquirer would have the right to deduct previous tax if he purchased those goods with calculated VAT.
  • VAT is not paid in the turnover of capital, money in the transfer of virtual currencies and the exchange of virtual currencies for cash, in accordance with the law governing digital assets.
  • Occasional transactions of shares, securities, postal securities, taxes and other valid securities at their imprinted value in the Republic, except for ownership shares referred to in Article 4 of the Law on VAT, are not included in transactions for determining the percentage of proportional tax deduction
  • Complete amendment of the rules governing the special procedure for taxation of second-hand goods, including second-hand motor vehicles, works of art, collectibles and antiques
  • Prescribes the right to choose the taxpayer (engaged in the sale of second-hand goods) to choose whether to apply special or general taxation procedure.
  • Submission of a registration application after the prescribed deadline.
  • When deleted from the VAT system, VAT is not stated as due, but as a correction of the previous tax deduction (from 1 January 2021, it will not be shown in field 3.5, but in field 8e.4 of the VAT Return Form)
  • It is prescribed that the taxpayer may issue an invoice in electronic form if there is the consent of the recipient
  • The reversal and correction of the invoice in which the VAT was erroneously stated is regulated in more detail

Detailed explanations of the amendments to the Law on VAT: link Tax Alert.

AMENDMENTS TO THE LAW ON PROPERTY TAXES

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.

AMENDMENTS TO THE LAW ON TAX PROCEDURE AND TAX ADMINISTRATION

The National Assembly adopted the Law on Amendments to the Law on Tax Procedure and Tax Administration, which was published in the Official Gazette of the RS, No. 144/20 of November 27, 2020.

The law enters into force on the eighth day from the day of its publication, on December 5, 2020, and certain provisions will be applicable later.

The most important changes relate to the following:

  • Open-end investment funds, ie alternative funds, which do not have the status of a legal entity, are considered a taxpayer who has all the rights and obligations in accordance with the provisions of the Law
  • The taxpayer may submit in electronic form through the portal of the Tax Administration a request for refund or transfer of higher or incorrectly paid tax – applicable from January 1, 2021
  • Amendments related to the allocation of PIB refer to another exception when the Tax Administration may grant PIB, and the transitional provision stipulates that the taxpayer, if he meets the conditions from the new exception, may submit a request for refund of PIB
  • The Business Registers Agency may not register the acquisition of shares or stocks in economic entities, ie the establishment of new economic entities, where a legal entity or entrepreneur is registered as the founder over whom the measure referred to in Article 29, paragraph 9 of the Law has been established. The provision stipulates a fine for the misdemeanor.
  • It is specified that the tax act can be submitted in electronic form to a natural person who submits tax returns in electronic form, through the portal of the Tax Administration, in which case no additional consent of the natural person is required.
  • The delivery of tax documents is specified by sending a registered item
  • The possibility of fulfilling the tax obligation by giving instead of paying, ie replacing the fulfillment when the tax obligation is higher than 50.000.000 dinars, in the manner and under the conditions determined by the RS Government by decision, and only in cases where there is interest of the Republic to acquire the property.
  • Deferment of payment of due tax, ie overdue tax liabilities is approved in the manner and under the conditions determined by the Government, in order to mitigate the economic consequences caused by pandemic, force majeure, or other extraordinary event occurring during the calendar year, and is applied retroactively – from January 1, 2020
  • Introduced a new tax offense – tax fraud related to value added tax
  • The Tax Administration will take over the management of the unified information system of local tax administrations by January 1, 2022 at the latest.

More details in our Tax Alert.

New official translation of IFRS has been published

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 Tax Administration issued a warning notice for not declaring income from abroad

The Tax Administration of the Republic of Serbia, based on available data on payments from abroad and comparing these data with submitted tax returns on calculated and paid tax by self-taxation and related contributions to earnings / other income by a natural person as a taxpayer, found a high rate of non-compliance and identified those individuals.

These revenues are generated through the provision of various types of services, and most often these are software development services, translation, foreign language classes, promotion, graphic design and other types of services. Non-compliance with tax regulations has also been established for natural persons who earn income on social networks (“YouTubers”, “influencers”), online betting and similar, as well as for persons who have rented out their real estate for up to 30 days (“apartment per day”).

The Tax Administration of the Republic of Serbia calls on all natural persons who failed to file tax returns to do so voluntarily before taking any action by the tax authority regarding the committed act or omission, or before starting tax control or submitting a request to initiate misdemeanor proceedings, i.e. to pay taxes and contributions with accrued interest and settles its legal obligations, in order to avoid misdemeanor liability.

The Tax Administration of the Republic of Serbia will continue the continuous implementation of tax controls of natural persons.

This notice applies only to natural persons who have received payments from abroad including payments through PayPal, Western Union, Payoneer and similar platforms.

The taxpayer/natural person is obliged to file a tax return and pay the tax 30 days after earning income from abroad. In case of not submitting the return in timely manner, the taxpayer is obliged to calculate and pay interest as well. By self-reporting, the taxpayer avoids the misdemeanor penalty.

Issuing a license to provide accounting services

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 minimum wage for 2021 is 183,93 RSD per working hour

The Government of the Republic of Serbia passed the Decision, which stipulates the net amount of the minimum wage in the amount of 183,93 RSD per working hour.

The net amount of the minimum wage in 2021 will be:

  • RSD 29,428.80 in a month with 160 working hours
  • RSD 30,900.24 in a month with 168 working hours
  • RSD 32,371.68 in a month with 176 working hours
  • RSD 33,843.12 in a month with 184 working hours

“My First Salary” Program

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.

Conclusion of the Government on new measures to support economic entities

At the Government session held on July 30, 2020, a Conclusion was passed by which the Government gives its consent for additional direct benefits to be paid to economic entities and to approve additional delays in the payment of public revenues.

DIRECT GRANTS TO BUSINESS ENTITIES

The first payment of direct benefits will be made in August, and the second in September 2020.

  • Business entities that used direct benefits in accordance with the Decree passed in April 2020 (except for large legal entities)

These economic entities are paid direct benefits in August and September 2020 in the amount of 60% of direct benefits paid to them in July 2020. Therefore, payments will be made automatically regardless of the submission of any tax return.

  • Large legal entities

These entities have the right to additional direct benefits if no later than August 15, 2020 submitt SL Forms for June and July 2020. The number of employees specified in the SL Forms is multiplied by the amount of 50% of the minimum net salary for March 2020.

  • Business entities that were entitled to measures in accordance with the Decree, but did not use them, as well as newly established business entities that have employees

These entities are entitled to direct benefits in the amount of 120% of the minimum net salary for March 2020 per employee, provided that they submit the PPP-PD Form no later than September 15,2020 for the accounting period August, where in field date of payment would be specified January 5,2021. So, only one application is submitted, and one payment in the amount of 120% (2×60%) of the minimum net salary for March will be made.

  • Newly established business entities that do not have employees

Business entities that do not submit the PPP-PD Form are entitled to direct benefits automatically, in the amount of 120% of the minimum net salary.

For economic entities that have special purpose accounts, payments of direct benefits are made to those accounts, and for those entities that do not have special purpose accounts, the accounts will be opened automatically. If the business entity has accounts with several banks, the Tax Administration will decide with which bank a dedicated account will be opened.

According to item 10 of the Conclusion, economic entities can use the received funds no later than October 31, 2020. years. Upon the expiration of the stated deadline, special purpose accounts are closed and unused funds from those accounts are transferred to a special budget account.

FISCAL BENEFITS – DELAYING THE MATURITY OF CERTAIN PUBLIC REVENUES

The conclusion does not envisage additional postponement of the advance payment of corporate income tax.

The conclusion determines the postponement of the due date for the payment of public revenues, only for one month, as follows:

  • taxes and contributions on salaries
  • taxes and contributions on personal earnings of entrepreneurs
  • taxes on income from self-employment

Fiscal benefit is achieved by submitting the form PPP-PD for the accounting period August 2020 by the end of September with the specified payment date is January 5, 2021.

LOSS OF RIGHT TO USE MEASURES

The business entity loses the right to use the measures from the Conclusion if it reduces the number of employees by more than 10%, in the period from March 15, 2020 until the expiration of three months from the last payment of new direct benefits.

Fees for protection and improvement of the environment

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.

Rulebooks for the implementation of the new Law on Accounting have been published

The Minister of Finance adopted seven rulebooks related to the implementation of the new Law on Accounting:

  • Rulebook on Chart of Accounts and contents of accounts in the Chart of Accounts for companies, cooperatives and entrepreneurs
  • Rulebook on the content and form of financial reports and the content and form of statistical report for companies, cooperatives and entrepreneurs
  • Rulebook on Chart of Accounts and contents of accounts in the Chart of Accounts for other legal entities
  • Rulebook on the content and form of financial report and content and form of statistical report for other legal entities
  • Rulebook on the manner and deadlines for conducting the inventory and reconciliating the bookkeeping balance with the actual balance
  • Rulebook on the manner of recognition, valuation, presentation and disclosure of positions in individual financial statements of micro and other legal entities
  • Rulebook on the manner of keeping and content of the Register of Accounting Service Providers.

The Ordinances are applicable for the financial statements prepared on 31.12.2021, except for the Rulebook on the manner of keeping and content of the Register of Accounting Service Providers which is to be applied from 1.1.2021.

Which entities are required to have a statutory audit

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 final decision on tax treatment of transportation costs to employees

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.

Finally, 3.6.2020, the Ministry of Finance issued another opinion number 011-00-00040 / 2019-04 which stipulates that the cost of transportation that is not documented by an appropriate credible accounting document is recognized as an expense in the tax balance pursuant to Article 9, paragraph 2 of the Corporate Tax Law.

So, the conclusion is:

  • reimbursement of these expenses that are not documented does not have the treatment of earnings, so that the reimbursement of expenses for arrival and departure from work is taxed at the rate of 10%,
  • At the same time, contributions for compulsory social insurance are not calculated and paid and
  • Transportation costs that are not documented by an appropriate credible accounting document are recognized as an expense in the tax balance.

„Small Business Continuity Checklist“ by IFAC

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.

New rules for the classification of legal entities

In accordance with the new Law on Accounting, the new rules for the classification of legal entities apply for 2020, based on data from the annual financial report for 2019.

The criteria are as follows to meet two of the three criteria:

  micro legal entities small legal entities medium legal entities large legal entities
Average number of employees <10 10- 50 51 – 250 >250
Operating income <700.000 EUR 700.001 EUR – 8.000.000 EUR 8.000.001 EUR  – 40.000.000 EUR >40.000.000 EUR
Value of total assets at the BS date <350.000 EUR 350.001 EUR – 4.000.000 EUR 4.000.001 EUR – 20.000.000 EUR >20.000.000 EUR

For the conversion of EUR amounts into RSD, the official middle exchange rate determined by the National Bank of Serbia is applied, on the balance sheet date of the regular annual financial report.

Newly established legal entities and entrepreneurs are classified on the basis of data from the financial statements for the business year in which they were established and the number of months of business. If the newly established entity has been operating for less than 12 months:

  • operating income is taken from the Income Statement form, and the threshold value is determined in proportion to the number of active months the current year
  • average number of employees (calculated as the sum of employees at the end of each month in the accounting period, divided by the number of active months),
  • to determine the value of total assets on the balance sheet date, the value on 31.12.2019 is being considered.

Extended deadline for acquiring the status of a qualified new employee

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.

 

New deadlines for financial reports and more

Government Decree of 16th April 2020 prescribes the postponement of deadlines for the submission of financial reports, tax returns for income tax and income tax from self-employment and annual general meetings.

Below are the new deadlines:

JUNE
5th June 2020 Deadline for submission of extraordinary financial reports
5th June 2020 Validity of licenses for audit of financial statements

JULY
5th July 2020 Validity of licenses for real estate appraisers
5th July Deadline for submission of annual reports of taxpayers whose reporting is regulated by the Law on Capital Market, the Law on Investment Funds or the Law on Open-End Investment Funds with Public Offering

AUGUST
4th August 2020 Deadline for submission of regular annual financial reports
4th August 2020 Deadline for holding annual general meeting
4th August 2020 Deadline for filing corporate income tax returns and self-employed income tax returns

SEPTEMBER
3rd September 2020 Deadline for submission of consolidated annual financial statements

 

Amendment of the Decree on Fiscal Benefits and Direct Payments

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.

New deadlines for submission of financial statements and tax return

Government of Republic of Serbia has adopted Decree regulating delay of deadlines for submission of annual and consolidated financial statements of companies, cooperatives, other legal entities and entrepreneurs, as well as deadlines for filing company and self-employment income tax returns.

The deadline for submission of annual financial statements with the auditor’s report for all taxpayers whose reporting is regulated by the Capital Markets Law, the Law on Investment Funds or the Law on Alternative Investment Funds with a Public Offering, is extended to 60 days from the date of termination of the state of emergency.

For reporting that is governed by the Accounting Law, the period for the regular annual financial statements is postponed for 90 days from the date of termination of the state of emergency. The deadline for the consolidated financial statements is moved to 120 days from the date of termination of the state of emergency.

The deadlines for filing corporate income tax and self-employment income tax returns are postponed for  90 days from the end of the state of emergency, for legal entities whose tax period is equal to the calendar year, that is, for 120 days for taxpayers of corporate income tax whose tax period is different from the calendar year.

Persons liable to tax on self-employed income keeping business books in accordance with Article 43, para. 2 and 3 of the Law on Personal Income Tax, file a tax return within 90 days from the date of termination of the state of emergency.

Prescribed Form for presenting information on persons for whom a large legal entity is entitled to the payment of direct benefits

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.

Decree governing the financial support program was adopted

On 10.04.2020. a Decree was adopted to mitigate the economic consequences of pandemic. The program defined in this Decree relates to the granting of credit facilities to business entities for liquidity management and working capital.

Board of Directors of Development Fund (Fond za razvoj), in accordance with this program, will determine the more detailed criteria and conditions under which loans for maintaining current liquidity will be approved. The criteria and conditions will come into force when the Government gives the consent.

Deviation from the established criteria and conditions defined by this program is possible in justified cases in which there is a special interest of the Republic of Serbia, which shoul be determined by the Government’s conclusion.

You can read more about it here.

Decree on fiscal benefits

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.

Conclusion of the Government of Serbia regarding holiday leave

The Government of Serbia has issued a Conclusion recommending employers in the territory of the Republic of Serbia to enable those who are obliged to perform regular work duties in state of emergency, to use the holiday leave for 2019 by the end of 2020.

During state of emergency, for those employees who are allowed to perform activities outside the premises of the employer (working remotely and working from home), the employer is obliged to enable the use the holiday leave for 2019 in accordance with the law, ie as of 30.06.2020.

It is recommended for employers who, in state of emergency, are unable to organize the work process, to give advantage to use of holiday leave.

Qualified newly employed status and continued self-employment

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.

Employee movement during curfew

Business entities are obliged to issue to each employee who performs his / her tasks from 5pm  to 5 am, and for which an agreement has been obtained, that it is exempted from the implementation of the Order on the Prohibition and Restriction of Movement of Persons in the Territory of the Republic of Serbia. The form of this confirmation can be downloaded from this link.

An employer who has up to 100 employees in a shift that lasts during the period of prohibition of movement issues a certificate on a daily basis, while an employer that has more than 100 employees in a shift that lasts during the period of prohibition of movement issues a certificate on a weekly basis for each employee for whom obtained consent of the Ministry of the Interior to be exempt from the application of the said order.

Starting from March 28, 2020, at 5 pm, when checking the observance of the Order on the Prohibition and Restriction of Movement of Persons in the Territory of the Republic of Serbia, the Ministry of Interior’s representatives ask for a Certificate issued by the employer, which will be valid only if the person is located in the database of the Ministry of the Interior and for which it was obtained that they were exempted from the implementation of the Order on Prohibition and Restriction of Movement of Persons in the Territory of the Republic of Serbia.

The Ministry of Interior will also accept certificates in electronic form (scanned receipt on phone, tablet, etc.).
Requests related to the issuance of movement permits between 5 pm and 5 am are submitted by economic entities through the Ministry of Economy to the email address [email protected]

Announced set of measures by the Government of Serbia to help the economy

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

Business in times of corona

The state of emergency in the Republic of Serbia was declared on March 15 due to the pandemic of the Corona virus 19. There have been many changes in the operations of the companies from day to day. In order to protect the health of employees, many companies organized work from home, the regime of work of state institutions was changed, and many business associations gave their recommendations that the state should introduce to facilitate private sector business.

In order to have all the information in one place that can greatly facilitate the day-to-day operations of your companies, the experts at Kreston MDM have prepared a Newsletter for you on the topic of “Business in times of corona”. You can read the newsletter HERE.

We want your companies to stay healthy and safe in these extraordinary circumstances!

Two new calculators within the Kreston MDM BusinessINFO application

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.

Instruction to business entities prescribing the exact manner of issuing a permit for movement of employees during curfew

The Ministry of Economy has issued an Instruction to business entities prescribing the exact manner of issuing a permit for movement of employees during curfew.

It is necessary to create a list of employees on this form https://privreda.gov.rs/wp-content/uploads/2020/03/PolijskiCas.xls
And submit it to the Ministry of Economy at [email protected]

After that, the employer issues to the employees who are on the list for issuing a work permit a working order for each individual exit during the period from 8 pm to 5 am.

An individual work order is issued on a daily basis on a memorandum of a business entity, signed by the responsible person, and must contain the following information:

– name and surname,
– Personal identification number,
– the date and time (from to) when he was hired, or when movement was necessary,
– reasons justifying the need for movement.

Notice of work due to the COVID-19 virus pandemic

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.

DTT between Serbia and Israel

The double taxation treaty between Serbia and Israel began to apply from 1.1.2020.

The taxes to which this Agreement applies are:

In Israel:

  • personal income tax and corporate income tax (including capital gains tax)
  • income tax on the alienation of property which is subject to taxation in accordance with the Law on Real Estate Taxation
  • tax that is prescribed in accordance with the Oil Profit Taxation Act.

In Serbia:

  • corporate income tax
  • personal income tax.

The maximum withholding tax rates stipulated by the Agreement are:

Dividends:

  • 5 percent of gross dividend if the beneficial owner is a company that, during the 365-day period, which includes the dividend payout date, directly owns at least 25 percent of the capital of the dividend-paying company
  • 15 percent of gross dividend in all other cases.

Interest:

  • 10 percent of gross interest
    Note: As an exception, interest accruing in Serbia to a resident of Israel shall be taxable only in Israel if the beneficial owner of the interest is the government of another Contracting State, its political subdivision, local government unit or the Central or National Bank. The reverse is also applicable.

Royalties:

  • 5 percent of the gross royalties (for the use or right of copyright in a literary, artistic or scientific work, including cinema films and films or films for television or radio) and
  • 10 percent of the gross amount of royalties (for use or for the right to use a patent, trademark, design or model, plan, secret formula or procedure, or for the use or right of use of industrial, commercial or scientific equipment or for notices relating to industrial , commercial or scientific experiences – expertise).

OECD issued a report which contains transfer pricing guidance on financial transactions

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.

Non-taxable income for individuals in 2019 – RSD 2,729,304

The non-taxable amount of complementary annual income tax in 2019 is RSD 2.729.304, so all natural persons who have earned income above this amount are required to file a tax return for the complementary annual income tax. Individuals subject to annual tax are residents of Serbia for income earned in the country and abroad, as well as non-residents of Serbia for income earned in the country.
Personal deductions are amounts that are deducted from taxable income:
 for the taxpayer – 40% of the average annual salary (for 2019 the amount is 363.907 RSD)
 for a dependent family member – 15% of the average annual salary (for 2019 the amount is 136.465 RSD).
The amount of personal deductions may not exceed 50% of taxable income. Only one taxpayer can use a deduction for each dependent family member (e.g. if both parents are taxpayers).
Taxable income represents the difference between the income earned and the non-taxable amount. The basis for annual tax is taxable income, which is the difference between taxable income and personal deductions.
Annual income tax is payable on taxable income at the rate of:
 10% for taxable income up to RSD 5,458,608 (six times average annual earnings)
 15% for the amount above RSD 5,458,608
Dividend is not subject to complementary annual income tax.

For compensation of the costs of arrival and departure from work tax rate of 10% is applicable, but no contributions are paid

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.

 

APR submits the application for compulsory social security contributions for companies electronically to CROSO

For companies, whose founder is also a registered legal representative, APR will do the registration for compulsory social security for founder/legal representative in CROSO (M form).

 

APR: application for submission of reports is active

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.

CENTRAL REGISTRY OF ULTIMATE OWNERS

Ministry of Economy has announced that misdemeanor reports will be filed against legal entities that do not register the ultimate owners in the Central Registry, and requests for instituting misdemeanor proceedings will be filed by the Agency for Business Registers (APR) after the prescribed deadline. The fine for this type of offense ranges from 500,000 to 2,000,000 dinars for legal entities, while the responsible person (legal representative) is provided with a fine of 50,000 to 150,000 dinars.

Otherwise, at the beginning of 2019, amendments to the Law on the Central Registry of Real Owners, which, among other things, prescribe misdemeanor liability for registered entities that do not register by January 31, will enter into force.

The Rulebook on the tax balance and tax return has been amended, as well as the Rulebook on transfer pricing

A new form PB 1 of tax balance sheet has been prescribed, which is replacing the old one. The new form has 69 items. Item 25 of the old PB 1 – Advertising and Propaganda Expenses was deleted and 5 new items were added:

  • Item 36 – R&D expenditure recognized in double amount in accordance with Article 22g of Corporate Tax Law
  • Item 40 – Capital gains tax paid in another country
  • Item 43 – the amount that is included in the tax base due to a decrease in the percentage of utilization of old R&D funds
  • Item 44 – the amount to be included in the taxable amount in the tax period in which the application was rejected by the competent authority
  • Item 50 – the amount of qualifying income that is not included in the tax base in accordance with Article 25b of the Corporate Tax Law

 

A new PDP form has also been prescribed, and amendments to the Rulebook on Transfer Pricing prescribes a different way of including in the tax base the established difference between the transfer purchase price of a fixed asset and its price determined by applying the “arm’s length” principle when a fixed asset subject to tax depreciation is procured from a related party.