Law on Amendments to the Law on Property Taxes has been adopted

The Law on Amendments to the Law on Property Taxes (LPT) has been adopted by the National Assembly of the Republic of Serbia on November 26th 2020, and will enter into force on 1st January 2021.

The largest number of changes is the specification of the existing provisions, i.e. the codification of the practice and the Opinion of the Ministry, while the most significant changes can be found below.

For any question regarding the application of the LPT, please contact Pavle Kutlesic, LL.M., Senior Manager in Tax Department via: pkutlesic@deloittece.com.

- The new amendments specify the subject of taxation, in terms that the relevant factors are the size of a single plot of land and ownership of property, including co-ownership of a single plot of more than 10 acres, that is, according to the amendments to the LPT the total area of the land, even when the proportional area of the share of an individual taxpayer is less than 10 acres.

- The subject of inheritance and gift taxation has been expanded, and "digital property" has been introduced as a subject of taxation. This means that the tax on inheritance and gift is also paid on inheritance or gift received as digital property, and whose details are regulated by a special law.

- Amendments to the LPT provide for the definition and classification of real estate, as well as their meaning:

• „apartment” is a separate part of the building that forms a functional unit consisting of one or more rooms intended for housing and, as a rule, has a separate entrance, except when it is (whole or mostly) categorized for performing activities or in it (as a whole or mostly) performs a registered activity;

• „construction land” is a type of land that is defined as such by the law governing planning and construction;

• „agricultural land” is a type of land that is defined as such by the law governing the use of agricultural land;

• „forest land” is a type of land that is defined as such by the law governing the use and management of forests and forest land;

• „dwelling house” is a facility intended for living or for occasional residence (family house, villa, cottage, mountain hut, hunting lodge, etc.), except when it is (in whole or in part) categorized for performing activities or the registered activity is performed in it (in whole or in part);

• „business facility” is a building or other (above-ground and underground) construction facility, i.e. a special part of the facility (premises, office, etc.), which is intended for performing activities, including:

1.  an apartment and a residential house, which is (in its entirety or in the predominant part) categorized for performing activities or a registered activity is performed in it (in its entirety or in the predominant part);
2. a garage consisting of several garage spaces, i.e. garage boxes, with common parts that serve access to each garage space, i.e. garage space, intended for performing the service activity of vehicle parking, i.e. accommodation of aircraft, i.e. vessels;

- „garage” is a facility or a special part of the facility that forms a functional unit, i.e. garage box, or garage space, intended for parking vehicles, i.e. for accommodation of aircraft, i.e. vessels, except the garage that represent business facility;

• „auxiliary facilities” are:

- independent facilities that are not used for housing or performing activities and are not classified into apartments, houses, business facilities, as follows: (1) ancillary facilities other than buildings (wells, pools, reservoirs, cisterns, etc.);
(2) auxiliary buildings (ground floor buildings and buildings whose floor area is below the ground) which are in the function of a residential or business facility, which is built on the same land (boiler rooms, basements, sheds for fuel storage, etc.);
- economic facilities, in accordance with the law governing planning and construction;
- canopies based on over 10 m2 that are independent buildings.”

Auxiliary facilities are valuated, i.e. are taxed as garages.

Additionally, we would like to point out that taxpayers who do not keep business records are required to submit tax returns for the determination of property tax for real estate by January 31st, 2021, which in accordance with the amendments to the LPT are classified in a different group from the group in which they were classified for the purpose determining the property tax for 2020.

Finally, starting from January 1st 2022, local authorities units will take over the competence of the tax administration for determining, collecting and controlling taxation of inheritance, gifts, and the transfer of absolute rights, as well as the information system and archives.

Amendments concerning the taxpayer who keeps business records

The amendments specify the manner of determining the tax base in cases when taxpayers do not separate the value of land from real estate for which it is envisaged that the tax base is equal to the book value, and these are, among other warehouses, processing plants, energy facilities, etc.

Manufacturing plants of the processing industry are related to the classification of activities, and in order for the facility to be considered a warehouse from it, retail trade or businesses-activities that are not related to storage and retrieval of goods and raw materials must not be performed.

The determination of the tax base was also specified when the average price is used as a basis in situations when there was no supply in the zone and border zones.

In addition to the situation when the local authority did not publish an act determining average prices and an act determining zones by November 30 of the current year, the book value of a real estate on the last day of the previous year is considered the tax base.

Finally, local authorities no longer have to to adopt acts determining the depreciation rate, tax rate, zone every year until November 30 of the current year, to classify unfinished construction land into agricultural or forest land while using it as such, if the application of previous acts is arranged is not limited to the current year.