What are the transfer prices and do we really have to?


7 questions for Nenad Cvjetićanin, Lawyer from the Cvjetićanin Law Office


Vladislav: Nenad, I would like to start this interview on an informal note. We are talking to the audience that does no know what transfer prices are, so, they are “running” away from that subject. So, I propose we play a game: you be you, and I will play the "average uninformed businessman”. We will try to create a train of thoughts of a businessman in Serbia on such prices, and then create a response that everybody will understand. Ok?


Nenad: Ok Vladislav.


V: The term "Transfer prices” points to an expert area. What do you say ?


N: It is really very complex and requires expert analysis.

This area of science represents a transition between legal and economic science, thus, it is necessary to know both areas of science.

Transfer prices are prices used for the sales of goods and services between related parties, as well as providing mutual loans. 

The Law on Corporate Income Tax and the Rulebook on Transfer Prices mandate all business entities conducting business with related parties to submit Transfer prices reports to Tax Authorities, in addition to data presented in tax balances.


V: So, why do I as the “average uninformed businessman” have to give money for it to some agency? Can I write it myself?

N: In addition to knowledge, you need experience as well, therefore, it is better to leave this task to an expert.


V: Why did the Government introduce this transfer prices report in the first place? What is the purpose of it?


N: Considering the fact we are talking about the trade between related parties, there is a possibility of manipulation for the purpose of tax evasion. This is a very complex task, especially from the information gathering perspective, in the sense of who is and in what manner considered related party in the sense of the Law and the Rulebook.  


transferne cene


V: And then this dreadful term “related party”. What is this relation, that is, connection?


N: Related parties are considered those natural and legal persons related to taxpayer in the sense of possible control or significant impact on business decisions.  


V: I heard that my mother in law is also a related party? So, it is not enough that she is stalking me every evening when I get home from work, we are even more intertwined?

N: Yes, mother in law too, in her capacity of the parent of a spouse. Not only that, a spouse, children, adoptees and children of adoptees, parents, foster parents, brothers and sisters and their children, grandmothers and grandfathers and their children, as well as brothers and sisters and parents of the spouse. Related persons include those individuals that are appropriately related to the natural person that holds at least 25% of stock or shares in taxpayer's equity, or at least 25% of voting rights in taxpayer's management. 

V: Finally, explain one more thing for us, I read somewhere that it is prohibited to import bananas from Bahamas? Is this true?

N: You can import them, but since the Bahamas are on the list of jurisdictions with preferential tax system, that is, they are a tax haven, you will have to prepare a transfer prices report. But not only at that time, you are obligated to prepare such report in other cases as well, namely:

  • when your company is a founder or a co-founder of another company with which you conduct business
  • in case you lease office space from a related person
  • in case you provided loan to your company, as a founder
  • in case you traded goods and services with a company seated on the territory of "tax haven"

V: Nenad, where did you study all of this ?

N: It is the business of a lawyer to know the law and to warn the client in a timely manner to the changes of the legislation. We, in Cvjetićanin Law Office pay close attention to the education of our staff and timely client advice. We specialize in commercial, contractual and labor law, and you are always welcome for legal advice and consultations.

V: Thank you for this interview.

N: You are welcome. We could repeat topics like this?

V: Of course, as soon as the opportunity presents itself.

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