Tax Alert

Serbia, Issue 1, December 2013

Amendments to Corporate Income Tax Law and new Rulebooks adopted

The Serbian Parliament adopted amendments to Corporate Income Tax (CIT) Law in December 2012, which recently came into effect. Some of the notable amendments are increase of tax rate to 15%, additional methods for determining transfer prices, mandatory keeping of transfer pricing documentation documentation from 2013 and introduction of special rules for payments to non-resident non resident legal entities from jurisdictions with a preferential tax system. The Ministry of Finance issued four rulebooks to implement these amendments, which are in effect from 24 December Dece 2012. The most important novelties of these rulebooks are outlined below.

List of jurisdictions with preferential tax system

Rulebook on the list of jurisdictions with preferential tax system defines a list of territories considered as jurisdictions with preferential tax system for CIT Law purposes. Non Nonresident legal entity incorporated or having its registered seat i.e. place of management or place of effective management in one of the following territories will be considered as a non-resident resident legal lega entity from jurisdictions with preferential tax system: 1. Andorra 2. Anguilla 3. Antigua and Barbuda 4. Aruba 5. Bahamas 6. Bahrain 7. Barbados 8. Belize 9. Bermuda 10. British Virgin Islands 11. Cayman Islands 12. Christmas Island 13. Cook Islands 14. Dominican Republic 15. Falkland Islands 16. Fiji 17. Gibraltar 18. Grenada 19. Guam 20.Guernsey 21. Guyana 22. Hong Kong 23. Isle of Man 24. Jersey 25. Liberia 26. Liechtenstein 27. Macao 28. Maldives 29. Marshall Islands 30. Mauritius 31. Monaco 32. Montserrat 33. Nauru 34. Netherlands Antilles 35. Niue 36. Normand Isles 37. Palau 38. Panama 39. Saint Kitts and Nevis 40. Saint Lucia 41. Saint Vincent and the Grenadines 42. Samoa 43. San Marino 44. Seychelles 45. Solomon Islands 46. Tonga 47. Trinidad and Tobago 48. Turks and Caicos Islands 49. Tuvalu 50. US Virgin Islands 51. Vanuatu

Resident payer is obliged to calculate and pay withholding tax at an increased rate of 25% on income realized by non-resident non resident legal entity from one of the said territories on the basis of royalties, interest, lease payment for real estate and movables and service fees irrespective of place of supply or use of those services. Additionally, non non-resident legal entities from jurisdictions with a preferential tax system will be considered as related parties with resident taxpayers for transfer pricing purposes.

Determining value of liquidation surplus

Rulebook Rulebook on the procedure of determining value of liquidation surplus for purposes of determining the taxable amount of the dividend which is realized by the shareholders of the company in liquidation liquidation prescribes the form which is filled out by the liquidation administrator of the company in liquidation, and in case the dividend is realized by a non nonresident legal entity it is also submitted to the competent tax authority.

Capital gain of non-residents non

Amended Rulebook on the content of the tax return for calculating tax on income realized by non-residents residents taxpayers legal entities defines that tax return is submitted to the competent tax authority in the municipality where the real estate is located or where is the seat of the company in which the non-resident non resident legal entity has share or securities which are subject of sale. In case of sale of an investment unit or industrial property rights return for capital gains tax realized by non-resident non is submitted itted to the competent tax authority of the municipality where the seat of the investment fund is located i.e. in the municipality of residence or domicile of the buyer of industrial property. Additionally, Rulebook prescribes that the tax return is submitted submitted within 30 days from the realization of income.

Cumulative tax return for withholding tax

Rulebook on the form of cumulative tax return on the calculated and paid withholding tax on income realized by non-resident non resident legal entities makes technical harmon harmonization with CIT Law amendments and, amongst others, precisely determines organizational unit of the Tax Authority to which the cumulative tax return is submitted to.

Key Contacts
Krzysztof Lipka
Partner krzysztof.lipka@rs.pwc.com Tel: + 381 11 33 02 100

Dragan Draca

Senior Manager dragan.draca@rs.pwc.com @rs.pwc.com Tel: + 381 11 33 02 100

PwC Serbia
Omladinskih brigada 88a 11070 Belgrade Tel: + 381 11 33 02 100 www.pwc.rs/tax www.pwcacademy.rs

Stojan Denkic

Consultant stojan.denkic@rs.pwc.com @rs.pwc.com Tel: + 381 11 33 02 100

This Tax Alert is produced by PwC Serbias Tax and Legal Departments Legal Disclaimer: The material contained in this alert is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this alert. 2013 PricewaterhouseCoopers Consulting d.o.o. All rights reserved. PwC refers to the Serbian firm of PricewaterhouseCoopers Consulting d.o.o. or, as the context requires, the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and indepe independent legal entity.