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  • Tax Highlights - April 2020 -2
Newsletter:

Tax Highlights - April 2020 -2

15 April 2020

ECONOMIC MEASURES OF THE DECREE ON FISCAL INCENTIVES AND DIRECT GRANTS TO PRIVATE SECTOR COMPANIES

 

On 10 April, the Government of the Republic of Serbia adopted a Decree on Fiscal Benefits and Direct Grants to Private-Sector Companies and Financial Assistance to Citizens in order to Mitigate the Economic Consequences of the COVID-19 Outbreak (hereinafter: the Decree), with regard to the implementation of previously presented economic measures to prevent the adverse economic consequences of the COVID-19 pandemic.

The following is the most relevant information regarding the implementation of the relevant provisions defined in this Decree:

 

CONDITION 1 – WHO HAS THE RIGHT TO USE ECONOMIC MEASURES – AND WHO DOES NOT:

The following economic entities have the right to use economic measures:

  • Legal entities (residents of the Republic of Serbia)
  • Entrepreneurs (residents of the Republic of Serbia)
  • Representative offices and branches of non-resident legal entities

The following legal entities are not entitled to use economic measures:

  • Banks
  • Insurance and reinsurance companies
  • Voluntary pension fund management companies
  • Financial leasing providers
  • Payment institutions and electronic money institutions
  • Business entities covered by the List of Public Funds Beneficiaries established in accordance with the Rulebook on the List of Public Funds Beneficiaries

 

CONDITION 2 – WHO HAS THE RIGHT TO USE ECONOMIC MEASURES – AND WHO DOES NOT:

Business entities that meet condition 1 can use economic measures if they additionally meet the following conditions:

  • Business entities, which did not reduce the number of employees by more than 10% between 15 March 2020, and 10 April 2020. The number of employees does not include employees with fixed-term contracts concluded before 15 March which expire on 10 April 2020.

 

MEASURE 1 – DEFERRING MATURITIES OF CERTAIN PUBLIC REVENUES (IN THE PERIOD FROM 1 APRIL TO 30 JUNE 2020)

In the present case, taxpayers were granted a benefit in terms of (i) deferring the maturity of the payment liability (period April - June) and thereafter (ii) the ability to defer payment of the specific liabillity starting in 2021.

The possibility of delaying payment maturity includes the following public revenues:

 

PAYROLL TAXES AND CONTRIBUTIONS

The Decree stipulates, inter alia, the possibility of paying net salaries without the attributable taxes and contributions for the taxpayer.

A THREE-MONTH DEFERREMENT OF PAYROLL TAXES AND CONTRIBUTIONS

(i) March, April and May 2020, or (ii) April, May and June, for those taxpayers who paid salaries and compensations for the month of MARCH, in part or or in full by 10 April 2020.

MATURITY DATE POSTPONED UNTIL 2021

The maturity date for payment of payroll taxes and contributions observed for the three specific months is deferred until 4 January 2021.

PROCEDURE FOR OPTING TO USE THE BENEFIT– TECHICAL ASPECT

If taxpayers choose to use this benefit, they should ENTER into field 1.4. – date of payment – 4 JANUARY 2021 in the PPP-PD Form filed for the month they intend to use the benefit for.

Business entities can benefit from fiscal benefits and direct grants:

  • for all three months if they submit the PPP-PD Form by the end of April 2020;
  • for two months if they submit the PPP-PD form for the first time until the end of May 2020 and
  • for one month if they submit the PPP-PD form for the first time until the end of June 2020.

The private-sector business entities that do not sumbit PPP-PD Forms, i.e., that do not have employees and are not entrepreneurs, i.e., entrepreneurs – farmers who have opted for personal wage payments, use fiscal benefits and direct grants in accordance with the provisions of this Decree.

PAYMENTS IN 24 MONTHLY INSTALMENTS

Upon maturity for deferred taxes and contributions, i.e., on 4 January 2021, the taxpayers will be able to settle the specific liability either at the time of maturity or in 24 monthly instalments.

The process of settling these installments is expected to be regulated more closely by the Minister of Finance.

 

INCOME TAX

DEFERRAL OF ADVANCE TAX PAYMENTS FOR APRIL, MAY AND JUNE (THREE ADVANCE PAYMENTS)

There is a possibility of delaying payment of income tax advances due on 15 April, 15 May and 15 June;

MATURITY DATE POSTPONED UNTIL 2021

Namely, the three above mentioned advance payments are due in 2021, no later than the deadline for filing the income tax return for 2020.

PAYMENTS IN 24 MONTHLY INSTALMENTS

Upon the due date for payment of advance payments, taxpayers will have the option of deferred payment in 24 monthly installments.

The process of settling these installments is expected to be regulated more closely by the Minister of Finance.

 

MEASURE 2 – DIRECT GRANTS

Measure 2 specified under the Decree is related to direct grants to business entities in the form of direct financial assistance.

According to the Decree, the amount of direct grant proceeds is primarily allocated and business entities entitled to direct grants are classified under two categories.

 

GROUP I OF BUSINESS ENTITIES

(i) Medium-sized legal entity, (ii) small-sized legal entity, (iii) micro legal entity, (iv) entrepreneur, (v) flat-rate taxpayer, (vi) farmer-entrepreneur, (vii) other entrepreneur.

 

GROUP II OF BUSINESS ENTITIES

(i) Large legal entity

The classification of group I and II of business entities – (i) is made on the basis of the financial statements for 2018, (ii) entities incorporated in 2019 and 2020 shall be deemed small-sized legal entities (the said classification procedure is only applied to benefits under this Decree).

 

AMOUNT OF DIRECT GRANTS

Group I of business entities – the amount of direct grants equals the amount obtained as the result of the number of full-time employees for a particular accounting period and the minimum net base salary for 2020.

Group II of business entities – the amount of direct grants equals the amount obtained as the result of a 50% of a minimum net base salary and the sum of the number of full-time employees, whose employment was terminated on 15 March 2020 in a manner specified under Articles 116 and 117 of the Labour Law.

 

PAYMENT PERIOD OF DIRECT GRANTS

Direct grants are planned to be paid out in May, June and July 2020.

 

PAYMENT PROCEDURE OF DIRECT GRANTS

Direct grants are paid to business entities from a special-purpose account held at the Treasury.

Namely, (i) a special-purpose account is opened for a business entity with the bank in which the entity already has a current account or (ii) if a business entity has several accounts with various banks, such an entity is obliged to indicate the bank with which the special-purpose account will be opened (by means of electronic services of the Tax Administration not later than 25 April 2020)

The business entity is obliged to transfer the funds from the special-purpose account to the current accounts of the entities that obtained direct grants.

 

LOSS OF THE RIGHT TO USE THE MEASURES

The Decree stipulates the following conditions that might result in the loss of the right to use the incentive measures.

1. DIVIDEND PAYMENTS

Such business entities that have opted to use the incentive measures shall not be entitled to dividend payments until the end of 2020.

2. DECREASE IN THE NUMBER OF EMPLOYEES

A business entity that reduces the number of its employees by more than 10% in a period from 15 March 2020 until the expiration of three months from the last payment of the direct grant proceeds shall lose its right to use the measures.

Employees that the business entity concluded employment contracts for a definite period (before 15 March 2020), which ends in the aforesaid period, are not included in the total number of employees.

The fulfilment of the conditions for losing the right to use fiscal benefits and direct grant proceeds is reviewed on the last day of each month, starting from April 2020 until 31 October 2020 inclusive, whereby the fulfilment of the conditions for losing the right to use fiscal benefits and direct grant proceeds may be reviewed after 31 October 2020 within the deadlines for the limitation of the right to determine and collect taxes and additional tax benefits stipulated under the Law on tax Procedure and Tax Administration.

 

Such business entities that have lost the right to use fiscal benefits and direct grant proceeds shall be obliged to:

  • pay all liabilities for which they have been approved a payment deferral along with the accompanying interest not later than five days from the day of the cessation of the right to use fiscal benefits and direct grant proceeds;

and

  • return the direct grant proceeds along with the interest at a rate used to calculate the interest on default in payment of tax liabilities starting from the day when individual direct grant proceeds were paid, not later than five days from the day of the cessation of the right to use fiscal benefits and direct grants proceeds.

PENAL PROVISIONS

MEASURE 1 - A business entity that (i) exercises the right to a deferral payment of public revenues even though it is not entitled to or (ii) that has lost the right to a deferral payment of public revenues failing to fully pay them along with the accompanying interest shall pay:

  • a fine in an amount of 20–50% of the deferred public revenues, but not less than RSD 250,000 for a legal entity and RSD 50,000 for an entrepreneur.
  • the responsible person in a legal entity shall be fined RSD 25,000 to RSD 50,000.

 

MEASURE 2- A business entity that (i) exercises the right to use direct grant proceeds despite not having such a right or (ii) misapplies these proceeds or (iii) loses the right to use the direct grant shall pay:

  • a fine in an amount of 30 to 70% of the received proceeds, but not less than RSD 500,000 for a legal entity and RSD 100,000 for an entrepreneur.
  • The responsible person in a legal entity shall be fined RSD 50,000 to RSD 100,000.

 

VALUE ADDED TAX

The Decree specifically stipulates that the trade in goods and services during the state of emergency (starting from 15 March 2020), which is performed without paying a fee to: (i) the Ministry of Health (ii) the Republic Health Insurance Fund (iii) a publicly owned healthcare institution, shall be exempted from paying VAT.

A VAT payer that performed the said trade shall be entitled to a deduction of the previous tax on the trade performed in such a manner.