In order to implement the Program of economic measures, the Government of the Republic of Serbia adopted the Regulation on Fiscal Benefits and Direct Aid to Private Sector Entities and Financial Aid to Citizens to Mitigate the Economic Impact of COVID-19 (“Regulation”) on 10 April 2020.
The Regulation provides tax benefits and direct payments to private sector, aiming to reduce the negative effects caused by the COVID-19 pandemic.
In that regard, the Ministry of Finance and Serbian Chamber of Commerce have prepared the Guidelines for the Implementation of the Regulation (“Guidelines”) explaining in more detail the most significant provisions of the Regulation.
Business Entities Entitled to Use the Benefits.
The benefits are available for the business entities registered in the Republic of Serbia, which are neither part of the financial sector nor the users of public funds.
Legal entities (including branches and representative offices of foreign companies) as well as entrepreneurs, registered farmers, and lump-sum entrepreneurs may use the benefits.
On the other hand, benefits are not available to banks, insurance and reinsurance companies, pension fund management companies, financial leasing companies, payment institutions and electronic money institutions.
Conditions for Using the Benefits.
All business entities in private sector may apply for the benefits from the Regulation, provided they have not reduced the number of employees by more than 10% from 15 March 2020 until 10 April 2020, whereby the employees engaged under fixed-term employment contract expiring after 15 March 2020 are not counted for these purposes.
Moreover, in order to avoid losing the benefits, the business entities will also have to maintain the number of employees in a manner not to reduce the number of employees for more than 10% during the period from 15 March 2020 until the expiry of three months after the payment of the last instalment of direct aid.
In order to receive direct aid, business entities will have to possess special purpose account. This special purpose account shall be automatically opened to business entities with the bank in which they already have a bank account, by the joint action of the Tax Administration, the National Bank of Serbia as well as the commercial bank.
When it comes to business entities that have opened bank account with multiple banks, they should submit information at which bank they wish to open the special purpose account, through the Tax Administration electronic services, by 25 April 2020 at the latest.
Business entities using benefits shall not be allowed to pay dividends until the end of 2020 (except in shares). Otherwise, they will lose the right to benefits and will have to pay back all received benefits.
How to Apply for the Benefits?
By submitting the tax return for withholding taxes for salaries (Form PPP-PD) with 04 January 2021 marked as a payment date, the business entities simultaneously accept to use (i) fiscal benefits including delay of payment of advances for corporate income tax or individual business activity income tax; salary tax and contributions for compulsory social security, as well as (ii) payment of direct aid.
Business entities that are not obliged to submit the Form PPP-PD, will use the benefits in accordance with the Regulation.
In addition to submitting the tax return, large legal entities are also obliged to submit in writing to the competent organizational units of the Tax Administration and the Treasury Administration a list of employees for whom they are entitled to direct aid.
Business entity that (i) achieves the right to direct aid even though it is not entitled to it, or (ii) uses the funds from direct aid contrary to its purpose, or (iii) loses the right to direct aid and does not repay the amount of the received direct aid shall be fined for the misdemeanor in the amount of 30 – 70% of the received direct aid, but not less than RSD 500,000 for a legal entity and RSD 100,000 for an entrepreneur.
Business entity that (i) achieves the right to defer payment of public revenues even though it is not entitled to it, or (ii) loses the right to defer payment of public revenues and fails to pay it in total along with the interest shall be fined for the misdemeanor in the amount of 20 – 50% of the received direct aid, but not less than RSD 250,000 for a legal entity and RSD 50,000 for an entrepreneur.