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.