1. Law on Amendments to the Law on Corporate Income Tax (Official Gazette of the Republic of Serbia no. 112/2015)
Amendments to the Law on Corporate Income Tax (the “Law”) are applicable as of 1 January 2016, with the exception of the provisions related to changes in taxation of the income of non-resident legal entities under withholding tax and a tax resolution issued by the Tax Administration, which will be applicable from 1 March 2016.
It is also important to note that provisions of the Law on Corporate Income Tax that was in force before enactment of the Law shall apply to procedure on determination, calculation and payment of tax liability, for the year of 2015, .
The most important change introduced by the Law refers to the introduction of a withholding tax at the rate of 20%, regarding the income that non-resident legal entity receives from the services provided or used on the territory of the Republic of Serbia, in case when the income payer is a resident legal entity. In the situation when there is no concluded agreement on the avoidance of double taxation between the Republic of Serbia and the country of residence of the entity who realizes such income (or if such agreement exists but in the particular case it is not possible for it to be applied) the resident legal entity will have to calculate and pay withholding tax. One of the practical problems that may occur is the situation of non-submitting a certificate of residency. Namely, if a taxpayer at the time of payment, does not possess a certificate of residency, it shall not be entitled to the application of the agreement on avoidance of double taxation, and will be required to calculate and pay withholding tax at the rate of 20%. It should also be noted that, if the taxpayer is a resident of a country that has preferential tax rates, the withholding tax shall be calculated and paid at the rate of 25%.
The Law introduced significant changes related to the recognition of expenses based on write-off of receivables. In the text below, we list some of these changes.
It is known that in the Republic of Serbia a number of problematic loans exist that burden banks and restrict credit activity and economy development. The Law introduces a solution that allows banks to carry out the write-off of uncollectable receivables arising from the loans granted to individuals and legal entities (i.e. NPL) in a simpler way, which is in accordance with the Strategy for Resolving NPL (Official Gazette of the Republic of Serbia, no. 72/2015). The write-off of value of individual receivables, based on credit approved to non-affiliated entity, will be recognized as the banks’ deductible expense, , provided that at least two years passed from the moment of the maturity of the receivables , whereby the bank will, in the process of supervision, provide the documents proving the debtor’s inability to fulfill its monetary obligation (e.g. debtors’ loan file information regarding settlement of its liabilities toward bank in the last twelve months, correspondence and other documents regarding contacts between bank and debtor in relation to the collection of receivables, measures taken by the bank regarding collection, as well as other documentation at the banks’ disposal, by which the bank can prove that every step has been taken in order to collect the receivables). Also, amendments to the Law accomplished that a write-off of the value of the remaining part of the individual receivables of the bank that could not be collected in the procedure of sale of immovable property conducted in accordance with the law (e.g. the remaining amount of the receivable upon the loan which is secured by mortgages, whereby the sales value of real property is not enough for the settlement of the entire amount of the debt) will be recognized as deductible expenses.
2. Law on Amendments to the Law on Tax Procedure and Tax Administration (Official Gazette of the Republic of Serbia no. 112/2015)
Amendments to the Law on Tax Procedure and Tax Administration came into force on 1 January 2016. These amendments provide more lenient penalties for legal entities that fail to submit tax returns, or pay taxes within the legal prescribed deadline (fines have been reduced from RSD 150,000.00 to RSD 100,000.00). The provisions of the law aiming to create the conditions for adequate implementation of regulations and establishing the deadlines for submission of electronic applications, or filing tax returns in electronic form, have been clearly specified which shall significantly reduce the administration costs, increase tax compliance and generally the tax base. In addition, these amendments have determined that the provisions of the Law on Tax Administration and Tax Procedure governing the statute of limitation for the Tax Administration to assess and collect taxes, may not apply to mandatory social insurance contributions. We also note that the Law on Tax Procedure and Administration has been harmonized with the provisions of the law governing the confidentiality of data (regarding the implementation of the official secrets principle), the protection of personal data, as well as with the provisions of the Law on Misdemeanors.
3. Law on Amendments to the Personal Income Tax Law (Official Gazette of the Republic of Serbia no. 112/2015)
Amendments to the Law on Personal Income Tax also came into force on 1 January 2016, with exception of the provisions related to income obtained from real estate, which will be applicable as of 1 January 2017. One of the major changes is introducing the non-taxable amount of daily allowances for business trip abroad in the amount of EUR 50 per day, as well as the new manner on calculation of price for usage of private vehicle for business purposes (price shall be multiplied by the number of spent liters of fuel, not by the number of kilometers traveled). Capital gains realized by individuals shall be subject to taxation by the tax resolutions again, issued by the Tax Administration (until now, the capital gains realized by individuals were subject to taxation through self-taxation). When it comes to the taxes on salaries, a significant change has been introduced regarding determination of the tax base for the individuals – residents of the Republic of Serbia who have been transferred abroad to work for legal entities – residents of the Republic of Serbia – the tax base for the tax on salaries is the amount of the income that could be realized in accordance with the Law, general act and employment agreement in the Republic of Serbia for the same or similar works (earlier solution prescribed that the tax base represents the amount of income received for the performed work).
4. Law on Amendments to the Law on Mandatory Social Insurance Contributions (Official Gazette of the Republic of Serbia no. 112/2015)
Amendments to the Law on Mandatory Social Insurance Contributions came into force on 1 January 2016. For the purpose of employment of new persons fully in accordance with the law, incentives have been introduced for small and micro legal entities, as well as for entrepreneurs, in the case they employ at least two new employees. According to this new solution, these employers are entitled to refund 75% of paid mandatory social insurance contributions, charged to the employee and the employer based on the salary for newly employed person, being paid by 31 December 2017. In addition, by these amendments the legislator has performed the necessary harmonization of this law with the Law on Personal Income Tax.
