On 14 December 2017, the National Assembly of the Republic of Serbia adopted amendments to a number of tax laws, including the Corporate Income Tax Law, the Value Added Tax Law, the Personal Income Tax Law and the Law on Mandatory Social Security Contributions. The adopted changes have generally been in force since 1 January 2018.
The Corporate Income Tax Law underwent important changes. Banks will benefit from an amendment according to which the write-off of individual loan receivables for loans, which are classified as non-performing loans according to the National Bank of Serbia's regulations, will represent tax deductible expenses for corporate income tax purposes.
Starting from 1 April 2018, the catalogue of services provided by non-resident service providers, which are subject to 20% withholding tax, will be narrowed down. Serbian resident legal entities will have to pay withholding tax only for service fees paid to non-residents providing market research services, accounting and auditing services, as well as other services in the field of legal and business consulting. The Serbian Ministry of Finance has published a new rulebook in March 2018, whereby the list of services provided by non-residents and subject to withholding tax in Serbia is further specified. Further, given that in practice the payment of withholding tax in Serbia was very problematic for Serbian legal entities, the deadline for the payment of withholding tax will be extended, so that withholding tax may now be paid within three days after the payment subject to withholding tax in Serbia has been made (previously, withholding tax had to be remitted on the same day as the payment).
Other amendments include changes regarding the depreciation rules. As an exception from the general rules, the tax depreciation of fixed assets which consists of immovable and movable parts should be classified in tax depreciation groups, which correspond to the classification made for financial accounting purposes. Also, the manner of tax depreciation of intangible assets (e.g., licenses and patents) has been changed, so that now the tax depreciation of such assets will be carried out using the proportional method (instead of the declining method).
There will also be certain simplifications related to transfer pricing rules (e.g., transactions between related parties which are below RSD 8 million do not have to be determined in line with the "arm's length" principle). Related to this, the Serbian Ministry of Finance has published a new rulebook in March 2018 which prescribes safe harbour rates applicable to intra-company loans.
In the area of value added tax, certain changes were introduced related to concession agreements and public-private partnership agreements. Any services provided between the concessionaire and the grantor of the concession will – subject to certain conditions – not be deemed to constitute a supply of services and goods and, thus, will not be subject to VAT in Serbia. Other changes to the Value Added Tax Law include a further alignment of the Serbian rules with the EU rules (e.g., the supply and intermediation in the supply of "investment gold" will be exempted from VAT).
Changes to the Personal Income Tax Law and the Law on Mandatory Social Security Contributions mainly concern clarifications of, and changes to, the existing incentives for employers. For example, newly established companies/entrepreneurs will, starting from 1 October 2018, be exempt from paying personal income tax and mandatory social contributions for up to nine employees for the first 12 months of employment.
Numerous changes to the Personal Income Tax Law concern the taxation of salaries (e.g., increase of the non-taxable amount of salaries from RSD 11,790 to RSD 15,000 and introduction of new tax exemptions for collective life insurance premiums and payment of employees' medical treatment). One noteworthy change is that in the latest amendments it is clearly stipulated that employees seconded from abroad to Serbia are liable to pay salary tax in Serbia.
In line with the amendments to the Corporate Income Tax Law mentioned above regarding the deductibility of banks' NPL write-offs, the Personal Income Tax Law was amended to make clear that such write-offs could not be regarded as income of an individual debtor, and thus, personal income tax would not be payable if a bank writes-off receivables from a client.
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