After a marathon Parliament session, marked with heated debate between the governing and opposition parties, Serbia agreed on a budget for 2015 on 25 December 2014. The projected revenues amount to approximately RSD 924.4 billion, expenses are estimated at RSD 1,115.7 billion, resulting in an anticipated deficit of approximately RSD 191.3 billion.
At the same session, the Parliament adopted amendments to the Law on Corporate Income Tax, the Law on Excise Tax and the Law on Value Added Tax.
1. Corporate Income Tax
Amendments to the Law on Corporate Income Tax (CIT Law) have introduced the possibility to deduct expenses for humanitarian aid made to entities which are not registered as humanitarian organisations, new rules regarding administrative and notification requirements, the changed status of public enterprises within transfer pricing rules and has précised the rules for taxation of bankruptcy surplus.
Expenses for humanitarian aid
The changes have introduced the possibility to deduction expenses for humanitarian aid donated to entities which are not registered as humanitarian organisations during emergency situations. This applies to all aid given for the purpose of elimination of consequences which occurred in emergency situations on the territory of Serbia, irrespective of whether they are made to entities registered as humanitarian organisations or not.
Should this possibility not have been provided, the expenses for humanitarian aid (to entities which are not registered as humanitarian organisations, such as the Government of Serbia) during last spring's floods would not be deductible for tax purposes.
These expenses are subject to a general threshold for deductibility of expenses made for health, educational, scientific, humanitarian, religious and other purposes – 5% of taxpayer's total annual income.
These rules will apply to the assessment of tax obligations for 2014 onwards.
Tax treatment of bankruptcy surplus
All surplus above the contributed capital paid to shareholders of companies in bankruptcy will be treated as a dividend and will be taxed accordingly.
According to the amendments, public companies (owned by the Republic of Serbia, autonomous provinces and cities and municipalities) will not be treated as related parties anymore, meaning they will be out of the scope of transfer pricing rules.
This exclusion will apply to the assessment of tax obligations for 2014 onwards.
New rules for filling CIT returns
The amendments introduced several new rules regarding filing tax returns prescribed by the CIT Law:
a) starting 1 April 2015, a (general) CIT return and tax balance will have to be filed only electronically.
b) withholding tax return (for taxable income of non-residents) will have to be filed on the day of payment of income. Due to an oversight of the legislator, the deadline for filing of this return has not been prescribed by any law for almost a year. Starting on 1 January 2016, these tax returns will have to be filed only electronically.
c) deadlines for filing tax returns in case of liquidation, bankruptcy and status changes have been changed, as follows:
- Liquidation: Taxpayers in liquidation will be required to file a return and balance: within 60 days from initiation of liquidation (for profit between 1 January and the date of initiation of liquidation) and within 60 days following the finalisation of liquidation (for profit generated during liquidation). Obligations to pay monthly installments during liquidation have been abolished, provided that the obligation to pay tax (if any) after finalisation of liquidation remains;
- Bankruptcy: Taxpayers in bankruptcy will be required to file a return and balance: within 60 days from the final resolution on continuing the bankruptcy procedure and within 60 days from the final resolution on termination of bankruptcy. The obligation to pay monthly installments during bankruptcy has been abolished, provided that the obligation to pay tax (if any) after finalisation of bankruptcy remains;
- Reorganisation procedure: Taxpayers undergoing reorganisation procedures will be required to file a return and balance: within 60 days from the initiation of bankruptcy proceedings and within 60 days after beginning of implementation of the reorganisation plan. Companies in reorganisation procedure will continue to pay tax in monthly installments during reorganisation;
- Status changes: Companies which cease to exist in status change have to file returns and balance within 60 days starting from the registration of the status change.
2. Excise tax
The amendments to the Law on Excise Tax introduced new rules regarding administrative and notification requirements.
The amendments abolished the obligation of taxpayers to file quarterly and annual calculations of excise tax. Instead, taxpayers will be required to file semi-monthly returns (along with the payment of excise tax). This does not impact obligations for 2014, meaning that taxpayers will have to submit their quarterly and annual calculations of excise tax for 2014.
Taxpayers will instead be required file annual inventory lists as of 31 December by the end of the following January.
Excise tax returns will have to be filed only electronically starting on 1 January 2016.
The amendments to the Law on Value Added Tax (VAT Law) introduced VAT exemption for supplies made under the international donation agreements financed by national cofinancing which are consolidated with IPA funds. So far, VAT exemption has applied only to IPA funds, and not on national cofinancing funds.
4. New opinions of the Ministry of Finance
Audit firms prohibited from preparing transfer pricing study for their audit clients
The Ministry of Finance issued the obligatory official opinion stating that the audit firms are not allowed to prepare transfer pricing studies and audit financial statements for same company.
As the results of transfer pricing studies can impact the adjustment of the final tax liability of a company, a situation where the same firm is engaged in both the preparation of a transfer pricing study and the audit of statements creates a conflict of interest and may result in doubt of the impartiality of the audit firms.
Legal representative of the company and entrepreneur required to sign financial statements using the qualified electronic signature
According to the official opinion of the Ministry of Finance, only legal representatives of Serbian companies or entrepreneurs are authorised to sign financial statements for 2014 and only via a qualified electronic signature.
This interpretation is expected to result in significant difficulties for companies represented by foreigners, as in order to obtain a qualified certificate, a foreigner has to obtain a temporary residence permit and a temporary personal identification number in Serbia Therefore, the ministry allowed that companies represented by foreigners appoint another individual (in addition to the legal representative) for signing the financial statements.