On April 10, 2020 the Government of Serbia adopted the Decree on Fiscal incentives and direct payments to business entites in the private sector and financial aid to citizens in order to ease the economic consequences caused by COVID-19 and a Program of financial support for business entities for perseverance of liquidity and working capital in tough economic conditions caused by COVID-19 pandemic.
- payment oftaxes and social security contributions on salaries received between April 1 and June 30 could be extended until January 4, 2021;
- CIT advance payments due on April 15, May 15 and June 15 could be extended until June 29 2021 (date of filling of the anual tax return for 2020);
- delayed payment of taxes and social seccurity contributions on salaries could be repaid in 24 monthy instalments without any interest applying, under the terms set forth by the Minister of Finance;
- direct aid to private companies (excluding large companies) in the amount of minimum three monthly salaries per employee for March, April and May (calculated as the product of the minimum wage for March and the total number of employees in March, April and May);
- financial aid for large companies in the amount of 50% of minimum net salary per employee that has been on temporary leave by employer’s decision (not by employee’s request) or by the decision of the authorities in order to lower the health risks. Large companies must submit a list of employees that had received the financial aid no later than the 20th day of each month for the payment to be made in the following month.
Potential users of fiscal benefits:
All resident business entities are eligible for tax relief (including their branches and representatives of foreign legal entities) excluding banks, insurance and reinsurance companies, voluntary pension fund management companies, financial leasing providers and other payment institutions. Benefits are also available for entrepreneurs, registered agricultural holdings and entrepreneurs paying lump sum taxes. It has been clarified that fiscal benefits are available for associations and other non-profit organizations as long as they are not on the List of Beneficiaries of Public Funds.
Obligations and restrictions:
Businesses that have not reduced the number of employees by more than 10% from March 15 until April 10, 2020 are entitled for fiscal benefits, not considering the employees hired under a fixed-term employment with whom employment contract expires after March 15, 2020. In addition, companies will have to keep the existing number of employees three months after the last payment of financial aid (minimum wage) in order to avoid consequences and responsibilities for the misuse of funds. In order to receive direct aid, companies will have to open a special bank account. These accounts should be opened in communication between Tax Administration, The National Bank of Serbia and a commercial bank in charge of running companies bank accounts. Entities opting for fiscal benefits cannot pay dividends until the end of 2020.
Procedure for fiscal benefits:
An entity that choses to use the fiscal benefits must file a PPP-PD tax return form. In that way, the entity is filing the form for the approval of the deferral of corporate income tax, salary and social contribution taxes as well as using the direct aid, all at the same time.
Business entities can use fiscal benefits and direct aid defined by this Decree:
- in order to use the fiscal benefits and the direct aid for all three months, the first PPP-PD tax return form must be filled by the end of April 2020.
Private sector entities that are not filing the PPP-PD tax return form – the ones that have not hired any employees and are not entrepreneurs and agricultural entrepreneurs, and that have chosen to receive direct personal income, can use fiscal benefits defined by the Decree.
Business entities that reduced the number of employees by more than 10% in the period of three months since the last payment of minimum wage or the ones that pay dividends by the end of 2020, will face the following consequences:
- the return of funds to the Republic’s budget within five days;
- payment of the deferred tax as well as the interest for the delay in tax payment;
- business entities may receive a RSD 500.000 penalty for the tax payment delay (approximately EUR 4.300).
Value Added Tax Exemption:
When the VAT payer performs without consideration supply goods and services to the Ministry of Healthcare, the Republican Health Insurance Fond or a publicly owned health institution, it has an input VAT supply right from such supply.
Financial support through loans for perseverance of liquidity and working capital:
- Entrepreneurs, micro, small and medium entities that are privately or cooperatively owned and that are engaged in production, service, trade and agriculture are entitled to financial aid defined by this Program;
- Repayment period will be 36 months with 12 months grace period with 1% annual interest rate;
- Loans will be approved and to-be-repayed in RSD;
- The minimum loan amount for companies is RSD 1 million, and for entrepreneurs and business entities is RSD 200 000;
- Maximum loan amount for one loan user and for related parties can be: up to RSD 10 million for entrepreneurs and micro entities, RSD 40 million for small entities and up to RSD 120 million for medium entities.
- The main condition for loan approval is keeping the current number of employees on and after March 16 2020, agreed that up until the filing of the form reducing the number of employees by 10% will be accepted. Other conditions are defined by the Program, that should be thoroughly revised.