Serbia: New Regulation on Fiscal Benefits and Direct Grants

published on 22 April 2020 | reading time approx. 3 minutes

The Government of Serbia adopted on 10 April 2020 the Regulation on Fiscal Benefits and Direct Grants to Private Business Entities and Financial Aid to Citizens Aimed to Alleviate the Economic Impact of the COVID-19 Pandemic (“RS Official Gazette”, No 54/20).

The Regulation on Fiscal Benefits and Direct Grants to Private Business Entities has two parts, which concerns Fiscal Benefits and Direct Grants to Private Business Entities. The following is an overview of most important elements of the Regulation:

Who qualifies for the aid

The measures are available to the following entities:

• Entrepreneurs, including those who have registered temporary closing of business activities on or after 15 March 2020;
• Small and medium-sized enterprises (SMEs), as per the accounting criteria measured against the 2018 financial statements;
• Large companies, as per the accounting criteria of the 2018 financial statements;
• Branches and representative offices of foreign entities.
• The Regulation does not apply to large legal entities that are established under special laws governing financial institutions and payment institutions:
• Banks
• Insurance and reinsurance companies
• Voluntary pension funds
• Financial leasing companies
• Payment institutions and e-money institutions

Fiscal benefits

Fiscal benefits include the right to deferred payment of certain public revenues that are due for payment between 1 April  and 30 June 2020, and exceptionally, until 31 July 2020:

• Deferral of payment of salary tax and social contributions, and salary tax and contributions for March, April and May 2020, or for April, May and June 2020 for those Tax payers  which paid Salary taxes and contributions for March 2020 partial or in full amount until the day of adoption this Regulation;
• Deferral of advance payments for corporate income tax for the 2nd quarter 2020. Possibility to defer advance payments for corporate income tax for March, April and May 2020 (for taxpayers with business year different than the calendar year, this refers to advance payments due on 15 April, 15 May and 15 June 2020). The liability is deferred until the submission of the final corporate income tax return for 2020. Upon maturity, the payment of accumulated liabilities can be further postoned for up to 24 months, without payment of interest;
• Upon maturity, the payment of accumulated liabilities may be paid in 24 monthly instalments without interest, under conditions further to be set by the Minister of Finance;

Direct grand (cash subsidy)

Legal entities are entitled to cash subsidy in accordance with this Regulation which can be used solely for payment of net wages and salaries. 

Cash subsidy to employees of self-employed entities, micro, small and medium companies in the private sector refers to cash subsidy in the amount of the net minimum wage for March 2020 per employee. Payments would be effected in May, June and July 2020.

Cash subsidy to employees of large companies in the private sectorrefers  to cash subsidy in the amount of 50 percent net minimum wage but only for those employees for whom a decision on paid leave has been issued starting from 15 March 2020 due to a decreased scope of work or the interruption of work (Articles 116 and 117 of the Labor Law).

Acceptance of fiscal benefits and direct grants

Businesses entities exercise the right to use fiscal benefits and direct payments by submitting a PPP-PD form with a payment date 4 January 2021. The offered measures can be used:

• 3 months if the PPP-PD is first submitted by the end of April 2020.
• 2 months if PPP-PD is first submitted by the end of May 2020.
• 1 month if PPP-PD is first submitted by the end of June 2020.

It is prescribed by this Regulation that, If a business entity has no employees and does not submit Form PPP-PD,  still may use fiscal benefits and direct payments in accordance with the Regulation. A more detailed procedure,for these cases, is expected to be published.

Exercise and loss of right to use benefits

Business entities are entitled to use the benefits under the following conditions:

• starting from 15 March 2020 until 10.04.2020. if Business entities did not reduce the number of employees by more than 10 percent, excluding employees who concluded a fixed-term employment contract with a private sector entity before March 15, 2020 for the period ending March 15, 2020. until 10.04.2020. years
• if that they were established and registered with the competent authority or organization before March 15, 2020, that is, if they became VAT taxpayers during the said period.

 
A business entities may lose the right to use fiscal benefits and direct payments if in the period from 15 March 2020 until u the expiration of three months from the last payment of direct grants reduce the number of employees for more then 10 percent ,not including employees who have a fixed-term employment contract before 15.03.2020 for the period ending in the period 15.03.2020 until the expiration of three months from the last payment of cash subsidy.

 
Business entities that lose the right to use the fiscal benefits and direct GRANTS provided by this Regulation are oblidged to:

• pay all liabilities for which they have been granted a deferred payment together with the interest accrued at the rate at which interest is calculated for late payment of tax liabilities, calculated from the day on which the said obligations are due for payment in accordance with the laws governing payment of the corresponding obligation, not later than five days from the date of termination of the right to use fiscal benefits and direct benefits and
• repay direct payments with interest calculated at the rate at which interest is calculated for late payment of tax liabilities, starting from the day on which individual direct payments were paid to them, not later than five days from the day of termination of the right to use fiscal benefits and direct grants.

Prohibition of divided payments

Businesses entities that have opted for the use of fiscal benefits and direct benefits cannot pay dividends until the end of 2020. In case the Company pays the dividend before the end of 2020 then it loses the right to use the benefits.

VAT treatment of donations for health purpose

Donors are exempted from the obligation to pay VAT on the sale of goods and services performed by the VAT taxpayer without compensation to the Ministry of Health, the Republican Health Insurance Fund or a state owned health institution. The exemption applies to all shipments with a turnover date from the date of introduction to the date of expiration of the state of emergency.