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Changes and amendments of provisions governing the tax procedure and the submission of withholding tax returns

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Changes and amendments of provisions governing the tax procedure and the submission of withholding tax returns

The Government of the Republic of Serbia has submitted to the National Assembly a Proposal of the Law on changes and amendments of the Tax procedure and tax administration law.

The main reasons stated for the changes and amendments of the Tax procedure and tax administration law (“Off. Gazette RS”, no 80/02, 84/02 – corr., 23/03 – corr., 70/03, 55/04, 61/05, 85/05 – oth. law, 62/06 – oth. law, 61/07, 20/09, 72/09 – oth. law, 53/10, 101/11, 2/12 – corr., 93/12, 47/13, 108/13, 68/14, 105/14, 91/15 – auth. interpretation and 112/15, hereinafter: the Law) are enabling taxpayers to perform their business activities, as well as the need to further specify certain provisions of the Law.

Additionally, the provisions of the Rulebook on the changes and amendments of the Rulebook on the contents of the tax return for the calculation of corporate income withholding tax on income and fees realized by nonresident and resident legal entities (Off. Gazette RS”, no. 14/16) come into force on March 1 2016, through which certain adjustments are performed of the provision of the existing Rulebook (“Off. Gazette RS”, no. 97/15 and 111/15, hereinafter: the Rulebook).   

The text below contains a detailed overview of the selected changes and amendments, considered as the most significant for business activities performed in the Republic of Serbia.

Termination of tax liability

The changes of Articles 23 and 67 of the Law introduce the possibility of settling a tax liability by handing over material goods to the competent state authority in lieu of payment, based on a specific legal act issued by the Government. Article 68 was supplemented by an additional paragraph specifying that the date of payment, in case of payment via material goods, is the day the Government issued the act regarding the handing over of goods.

Assignment of tax identification number

The changes to Article 26 prescribe that the Tax authority cannot, among other cases already provided for by the Law, assign a tax identification number (hereinafter: the TIN) in the case when a TIN was withdrawn from the company’s founders – legal entities and entrepreneurs, from legal entities founded via a demerger, as well as from entrepreneurs. Additionally, the tax authority will withdraw a previously assigned TIN via a decision in the case when a taxpayers` bank account was blocked, if it lasts longer than one year.

Deferred tax payment

Changes to the Law provide for deferred payment of tax up to 60 months in monthly instalments (in lieu of the previously prescribed 24 months). The amount of owed tax for which no collateral will be required from the taxpayer has also been increased, i.e. RSD 1,500,000 for legal entities and entrepreneurs and RSD 200,000 for individuals.

Additionally, new changes prescribe that if deferred payment is granted in accordance with Article 73, 74, 74a and 74b, while such deferral lasts interest will be calculated at a rate equal to the yearly base interest rate of the National Bank of Serbia (without the 10% increase).

Submission of corporate income withholding tax return

As a reminder, as of March 1 2016, the submission of the corporate income withholding tax return for income and fees realized by nonresident and resident legal entities will be performed electronically.

The proposed changes of Article 2 of the Rulebook provide that the Serbian entity – payer of income, submits a tax return even if a double tax treaty provides that the nonresident legal entity pays tax in its state of residence. Thus, even if the provisions of a double tax treaty may apply, a stamped certificate of residence should be submitted along with the tax return.

Due to this change, it is now clear that a resident payer of income has to submit a tax return, as well as an appropriate certificate of residence, even if the income in question is exempt from taxation in the Republic of Serbia due to the application of double tax treaty provisions.

Additionally, the submission of tax returns in accordance with the Rulebook on the form of the consolidated tax return for the calculated and paid corporate income withholding tax on income realized by nonresident legal entities (“Official gazette RS”, no. 122/12) is performed on February 29 2016 at the latest, except in the following cases (when such tax returns are submitted even after March 1 2016):

  • When the tax liability for corporate income withholding tax has been paid on February 29 2016 at the latest, but the tax return was not submitted and
  • When submitted amended tax returns concerning tax returns submitted on February 29 2016 at the latest.
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