The Government of the Republic of Serbia, on 15 March 2020, due to the spreading of the epidemic of infectious disease COVID-19, proclaimed state of emergency, with the adoption of necessary measures that will aid in preservation of health and life of citizens. 

Also, national crisis headquarters has been formed, with the purpose of mitigating negative consequences for citizens and economy, with the priority of preservation of jobs and aid in functioning of economic subjects in emergency situations. 

Based on adopted economic measures in developed European countries, as well as the countries in the region, followed by recommendations of the International Monetary Fund and the European Commission, including the proposals of the domestic business associations, the Government of the Republic of Serbia adopted a program of economic measures for the support of economy (hereinafter: Program of measures). 

Next step was the adoption of Decree on Fiscal Benefits and Direct Payments to Companies in the Private Sector and monetary aid to citizens (hereinafter: Decree). All this for the purpose of mitigating the issues in the economy due to COVID-19 pandemic. This Decree defines measures including fiscal benefits and direct payments from the budget of the Republic of Serbia to companies in the private sector.

How will the companies use adopted measures?

In line with the adopted Program, measures may be utilized by companies registered in the Republic of Serbia, provided they are not public companies and not part of the financial sector.

These are:

• Resident companies (LLCs, partnerships, limited partnerships, joint stock companies and associations of citizens)
• Resident entrepreneurs 
• Branches and representative offices of foreign companies

Resident companies are classified, within this Decree, as micro, small, medium and large companies. This classification is in line with accounting regulations on the date of financial statements balance from 2018. Therefore, if a company moved from medium to large group during 2019, it will be classified as medium.

Resident entrepreneurs include:

• Entrepreneurs with self-taxation,
• Entrepreneurs with salary payment,
• Entrepreneurs flat-rate taxpayers,
• Entrepreneurs farmers and
• Entrepreneurs other persons.

Terms companies must meet to become beneficiaries of adopted measures

• that companies did not reduce the number of employees by more than 10% starting from 15 March 2020 until the date of the Decree. This includes employees that resigned on their own and those that terminated employment by mutual consent. This does not include employees whose temporary employment contract expired after 15 March 2020. 
• that they were founded and registered with competent authorities before 15 March 2020 (that is, if they became VAT taxpayers in the stated period)
• in case of entrepreneurs, they were in "inactive" status starting from 15 March 2020

FIRST SET OF MEASURES - Fiscal benefits for companies

Micro, small and medium companies, as well as branches and representative offices of foreign companies may delay maturity of payments (due payments) for:

• taxes and contributions for salaries and salary compensations until 04 January 2021
• advance payments for income tax of companies until the submission of final tax application for income tax of companies for 2020

This set of measures envisages that the contributions for mandatory social insurance, payment of which is delayed in line with the Decree, shall be considered paid, and shall refer to the rights based on health, pension and disability insurance, then, based on rights related to unemployment and based on rights on financial support of families with children. This means that, without the payments of taxes and contributions the tax cards of such companies will register lines as if such obligations were paid. But these lines will be "erased" from cards on 04 January 2021. 

Also, the plan is that resident companies, as well as branches and representative offices of foreign companies are entitled to delay payment of tax obligations, whose maturity is delayed for a maximum of 24 equal monthly installments without interest. Details on payment of such 24 installments shall be prescribed by law. Our position is that there will be a request or form submitted to the Tax Administration. 

Entrepreneur and entrepreneur farmer, who pay taxes through self-taxation, and do not pay salaries, are entitled to delay advance payments of taxes and contributions on income from independent business activity, in line with the same rules that apply to companies. 

Entrepreneurs flat-rate taxpayers are entitled to delay payment of obligations from monthly advance payments for taxes and contributions on income from independent business activity for March, April and May 2020 until 04 January 2021. They will pay obligations for these three months in 24 installments, without interest. 

SECOND SET OF MEASURES - Direct payments to private sector

Entrepreneur, entrepreneur flat-rate taxpayer, entrepreneur farmer, entrepreneur other person and companies, in line with the Decree adopted, are entitled to the payment of non-refundable funds from the budget of the Republic of Serbia in the period of three months (May, June, July). 

Payment of non-refundable funds shall be as per the following formulas. In short: number of employees x “March minimum wage”, that is, number of employees x 30367.04 dinars. Details are as follows:

• In May 2020 - multiplication of full-time employees for whose salaries and compensations Form PPP-PD was submitted for the accounting period March 2020 and the amount of basic minimum wage for March 2020.
• In June 2020 - multiplication of full-time employees for whose salaries and compensations Form PPP-PD was submitted for the accounting period April 2020 and the amount of basic minimum wage for March 2020.
• In July 2020 - multiplication of full-time employees for whose salaries and compensations Form PPP-PD was submitted for the accounting period May 2020 and the amount of basic minimum wage for March 2020.

When it comes to companies classified as Large, they are also entitled to non-refundable funds (May, June, July) in line with methodology of calculation prescribed in Article 10 of the Decree of the Government of Serbia, which is not the topic of this article. 

How will be direct payments be disbursed

Payment to companies in the private sector shall be performed from a special purpose account opened with the Treasury Administration. 

On the other hand, companies are obligated to open special purpose accounts with their banks - payment of direct payments - COVID-19. In case a company has only one bank, such bank is obligated to automatically open the special purpose account for the company. 

In case a company holds accounts with several banks, using the electronic service of the Tax Administration, such company shall be obligated to open a special purpose account, by 25 April 2020 at the latest. Bear in mind that the deadline is pretty close and deliver information to your accounting department or bookkeeping agency!

How will the companies accept the use of financial benefits?

Companies accept the benefits and direct payments by submitting the Form PPP-PD and entering the payment date of 04 January 2020. This is an automatic application for all measures of fiscal benefits. This can be done during the application for March, thus receiving benefits for March, April and May, or during the application for April, thus receiving fiscal benefits for April, May and June. This can be done on subsequent applications too (for example, for May, but then they lose fiscal benefits for April, they can get only May and June). 

Companies that do not submit Form PPP-PD but that do not have employees, and are not entrepreneurs use measures in line with the provisions of the Decree. So, since there are no employees, no "minimum wage", but there is an option to pay income tax advance payment in 24 installments without entering 04 January 2021 in the PPP-PD application. These are usually LLCs or citizen associations without employees. 

Loss of entitlement to benefits – attention !

If, as of 15 March 2020 until the expiration of three months after the last payment of direct payments, the number of employees is reduced by more than 10%, the company loses the right to use prescribed benefits. The term "reduce" means that it is possible for the employee to resign, to be fired or to terminate employment by mutual agreement, but it will not include the case of expiration of the part-time employment contract after 15 March 2020. 

In this case, the company shall:

• pay all taxes and contributions for which delay way approved, with interest, within five days at the latest from the day of termination of right to use fiscal benefits and direct payments
• return net "minimum wage" salaries with interest,  within five days at the latest from the day of termination of right to use the aid

Prescribed penalties

If a company exercising the right to direct payments even though such right does not exist, spends the received funds inappropriately or loses the right to payments and fails to return the amount in full shall be fined by pecuniary penalty in the amount of 30-70% of received funds, not less than 500,000 dinars for a company, that is, 100,000 dinars for an entrepreneur. 

From this it can be concluded that the received funds for the payment of "minimum wage" cannot be used as refund, that is, employer that would have enough funds to pay the entire net salary to employees before the payment to the special purpose account by the state, must not do that, since, in our opinion, such payment would be considered inappropriate use of received funds. This is one of the major objections to the measures introduced by the experts and can be subject to subsequent interpretation and updating of this article. 

Also, the penalty for the responsible person in the company in violation is from 50.000 to 100.000 dinars.

In case the company in private sector uses the right to delay payment of public income even though not entitled to it, or loses such right and fails to pay them in full with interest, such company shall be fined with pecuniary penalty of 25-50% of the amount of delayed public income, not less than 250,000 dinars for the company, that is, 50,000 dinars for the entrepreneur. 

In this case the penalty for the responsible person in the company in violation is from 25.000 to 50.000 dinars.

Other important provisions

Companies that accepted the adopted measures cannot pay dividends until the end of 2020. Payment in stocks is possible. 

In case the VAT taxpayer performs, without compensation, trade of goods and services to the Ministry of Health, Republic Fund for Health Insurance or publicly owned health institution, VAT shall not be calculated and collected, while such VAT taxpayer shall be entitled to deduction of previous tax based on such trade. 

In the future period, at the end of this article , questions and answers shall expand based on comments and opinions from the public debate of professional public. Please send us your questions and comments and we will respond to them in the shortest possible term.