A new package of measures to aid business entities in Seriba

published on 12. March 2021 | reading time approx. 5 minutes

The Government of the Republic of Serbia has adopted a Decree establishing a Programme of direct aid from the budget of the Republic of Serbia to private-sector business entities aimed at mitigating the economic consequences of the covid-19 epidemic. The Decree entered into force on February 13, 2021.

Unlike the Decree on fiscal benefits and direct aid 2020, the Programme involves only the measure of direct aid, without providing for a new deferral of due tax and contribution payments. A single restrictive measure has been stipulated, namely business entities that opt for using direct aid are not allowed pay dividends until the end of 2021.

Business entities eligible for direct aid

According to the Programme, the right to direct aid may be exercised by:

resident legal entities,
resident sole proprietors and
branches and representative offices of foreign legal entities.

Term of the measure prohibiting the payment of dividends

Business entities in the private sector that pay dividends in the period from the day the Programme enters into force (February 13) until the end of 2021 shall not be entitled to direct aid payments. In the event that a business entity to whom direct aid has been paid should violate the prohibition of paying dividends, rules relating to the loss of right to use direct aid shall apply accordingly.

Consequences of paying dividends before the end of 2021

If business entities in the private sector should contravene the stipulated measure prohibiting the payment of dividends, they shall lose the right to use direct aid. Business entities that lose the right to direct aid stipulated under the Programme shall recover (reimburse) direct aid received, including interest calculated at a rate used to calculate the interest on tax arrears starting from the day on which individual direct aid was paid to them and not later than five days from the date of forfeiture of the right to use direct aid.

Right to use and procedure for accepting direct aid

According to a definition given in the Programme, direct aid means payments of grants to business entities in the private sector that may be used solely for payment of salaries and benefits to employees.

Direct aid is granted for no longer than three months

A private-sector business entity shall be eligible to receive direct aid payments from the budget for no more than three months – in April, May and June 2021. A business entity is not obliged to use direct aid for all three months. Instead, they are free to opt for aid for each individual month.

The amount of direct aid is determined based on the product of:

the number of employees (to be determined by using a prescribed method) and
RSD 15,450.12 (50 percent of the minimum wage for January 2021).

Number of employees used to determine the amount of direct aid to be received in April

In April 2021, the amount of direct aid shall be determined based on the number of full-time employees for whose salaries and benefits a PPP-PD Form has been submitted for the February 2021 accounting period before March 31, 2021. The number of employees shall be reduced by the number of employees whose employment has been terminated with the given business entity from February 13 to March 31, 2021.

Number of employees used to determine the amount of direct aid to be received in May

In May 2021, the amount of direct aid shall be determined based on the number of full-time employees for whose salaries and benefits a PPP-PD Form has been submitted for the March 2021 accounting period before April 30, 2021. The number of employees shall be reduced by the number of employees whose employment has been terminated with the given business entity in the period April 1 to April 30, 2021.

Number of employees used to determine the amount of direct aid to be received in June

In June 2021, the amount of direct aid shall be determined based on the number of full-time employees for whose salaries and benefits a PPP-PD Form has been submitted for the April 2021 accounting period before May 31, 2021. The number of employees shall be reduced by the number of employees whose employment has been terminated with the given business entity in the period May 1 to May 31, 2021 (irrespective of the reason for termination of employment).

Permanent/temporary empolyees

When determining the number of employees, all full-time employees are counted in, regardless of whether a permanent or temporary employment contract has been signed with them. Employees who worked for the entire month and employees with whom an employment contract was signed during the given month shall be counted in the number of full-time employees (proportion does not apply here).

Part-time employees

For every part-time employee, the total number of employees shall increase proportionately to the percentage of their engagement under the contract relative to full-time hours (determined based on information stated in the PPP-PD Form for the corresponding accounting period). For instance, if an employee works half the number of full-time hours, the business entity in question is to be granted direct aid amounting to 50 percent of the half of the basic minimum net wage for January 2021, which totals RSD 7,725.06.

Employees in relation to whom the right to direct aid may not be exercised

The number of employees shall be reduced by the number of employees whose salary or benefit payments for the given accounting period are entirely borne by other payers, specifically:
1) sick-leave benefits when sick leave lasts more than 30 days;
2) benefit payments to disabled workers (category II disabled persons) borne by the Pension and Disability Insurance Fund;
3) contribution payments made during an unpaid leave before a child turns three years of age;
4) benefit payments after termination of employment;
5) benefits payments to category III disabled persons borne by the Pension and Disability Insurance Fund.

How to opt for direct aid

A private-sector business entity accepts the payment of direct aid by making a special statement on the Tax Authority’s platform called e-Taxes. A statement of acceptance of direct aid payments is made for every individual payment of direct aid for every month preceding the month in which direct aid is disbursed, but not later than the last day of that month.

A statement of acceptance of direct aid payment:

in April is made in March, not later than March 31, 2021;
in May is made in April, not later than April 30, 2021;
in June is made in May, not later than May 31, 2021.

Opening a dedicated Account

A special dedicated account – Direct Aid Payment - covid-19 – will be opened for a business entity for the purpose of receiving direct aid payment. A bank opens a special dedicated account for a business entity based on information obtained from the Tax Authority.

A business entity may hold only one dedicated account for payment of direct aid with only one bank.
If as of February 13, 2021, a business entity had a current account opened with only one bank, direct aid will be paid into a dedicated account to be opened for that purpose with that bank. Business entities that had current accounts opened with several banks as of February 13, 2021 are obliged to submit information about the name of the bank with which a dedicated account is to be opened via Tax Authority’s electronic services (e-Taxes platform) not later than March 25, 2021.

Use of direct aid for (non-)designated purposes according to the programme

According to the Programme, a business entity may use direct aid solely for payment of salaries and benefits to its employees no later than July 30, 2021. When using direct aid from a dedicated account, taxes and salary contributions must be calculated and paid according to general rules at the moment of salary and benefits payment to employees. In other words, that amount is not tax-free.

(A lack of) obligation to make a payment from the designated account to every single employee

The is no obligation to make a salary or part of salary payment to every single employee specifically from the dedicated account. Instead, an employer may, for example, pay the entire amount of net salary to an employee from the dedicated account and to another employee from its regular account.

Loss of the right to (new) direct aid as a result of reducing the number of employees

A business entity shall lose its right to use direct aid if:

it reduces the number of its employees by more than 10 percent in the period from the day of entry into force, i.e., February 13, 2021, until the expiry of a three-month period from the last direct aid payment,
excluding temporary employees who signed an employment contract with the business entity prior to February 13 for a term ending in the period from February 13 to the expiry of the three-month period from the last direct aid payment.

How to calculate the three-month-period from the last payment of direct aid

For a specific business entity, the three-month period is counted from the last payment of direct aid – the stipulated period is observed starting from the day of the last payment until the expiry of approximately 90 days from that day.

Assuming that the third (last) payment of direct aid is expected to be effected to the substantial majority of business entities that opt for using all three payments beginning of June 2021 (but certainly by the end of that month), said three-month period will not expire on September 30, but prior to that date, i.e., no later than that day (this applies to business entities to which the last payment will be made on the last day of June).

Recovery of direct aid in the event of loss of rights according to the programme

Business entities that lose the right to direct aid stipulated under the programme shall recover the direct aid received, including interest calculated at the rate used to calculate the interest on tax arrears starting from the day on which they received individual amounts of direct aid, but no later than five days from the day of the forfeiture of the right to use direct aid.

This rule shall be applied in the event of:

reducing the number of employees by more than 10 percent within the stipulated time period,
as well as in the case of violating the measure prohibiting the payment of dividends (payment of dividends before the end of 2021).