The announced economic relief measures of the Serbian Government in response to the corona virus pandemic became effective under the Regulation on Fiscal Facilities and Direct Grants to Private Business Entities and Financial Aid to Citizens Aimed to Alleviate the Economic Impact of the COVID-19 Pandemic (“RS Official Gazette”, No 54/20), dated 10 April 2020 (Regulation).
All interested business entities shall apply for the above economic aid scheme by the end of April 2020 and are required to notify the Tax Administration by 25 April at the latest of their choice of bank for the special purpose account to which aid will be released.
Who benefits from the Regulation?
Eligible recipients of the relief measures include resident business entities in the Republic of Serbia, resident sole traders, as well as branch offices and representative offices of foreign legal entities, in each case founded and registered before 15 March 2020, i.e. registered as VAT payers prior to this date.
It is important to note that business entities which reduced the number of their employees by more than 10%between 15 March and the date of entry into force of the Regulation, do not qualify for financial relief contemplated by the Regulation. The recipients of the facilities granted by the Regulation may not reduce their employee headcount as indicated until expiry of three months of the last instalment of direct grant under the Regulation.
The Regulation does not apply to certain large legal entities, established under special laws governing financial institutions and payment institutions, such as banks, insurance and reinsurance companies, voluntary pension funds, financial leasing companies.
Fiscal relief measures to support economy include the right to defer certain public duties accruing during the state of emergency, in circumstances of reduced business operations, to be repaid in 24 interest-free monthly instalments starting from the deferred due date.
Payment of taxes and statutory social security contributions on salary and leave entitlements accrued between 1 April and 30 June 2020, and exceptionally 31 July 2020, may be deferred until 4 January 2021.
In addition to the tax and contributions deferral, entities may defer payment of the corporate income tax advance for March, April and May 2020, specifically, the corporate income tax advances that fall due on 15 April, 15 May and 15 June 2020, until the final date for submission of the corporate income tax return.
Direct Cash Grants
In addition to the above tax relief, business entities are also entitled to cash grants from the budget of the Republic of Serbia, which may be used only towards the payment of salaries and leave entitlements to employees.
The Regulation differentiates entities, in line with the accounting regulations and financial statements from 2018, and sets different rules for the micro-, small, and medium-sized enterprises and sole traders on the one hand and for the large enterprises on the other.
MSMEs and all categories of sole traders are eligible to cash grants in the amount equal to 3 minimum net salaries in Serbia (in March, April and May 2020) for all full-time employees.
On the other hand, the aid available to large enterprises is far more limited. Large enterprises are entitled to compensation only for the full-time employees put on furlough after the state of emergency was declared, in accordance with the Labour Law (Art.116,117), in the amount of 50% of minimum net salary for the relevant period (March, April and May 2020).
These categories will have access to the financial aid for part-time workers proportionally to the percentage of their engagement as compared to full time work.
How to apply?
All interested business entities must apply for the above economic aid scheme by the end of April 2020 using a prescribed form.
The financial aid will be paid into a special purpose account with a commercial bank where the beneficiary holds the current account. If the business entity holds current accounts with several banks, it is required to notify the Tax Administration by 25 April at the latest of its choice of bank for the special purpose account to which aid will be released.
What aid recipients should consider?
The recipients of tax relief and direct grants under the Regulation will forfeit their rights if they reduce the number of their employees by more than 10% between 15 March 2020 and three months after the date of the last grant instalment, while special rules for fixed-term contract apply.
The Regulation also provides for a prohibition of dividend payment until the end of 2020 for the businesses using the benefits under the Regulation.
The business entities acting in breach of aid requirements will face not only forfeiture of their rights and the obligation to repay the aid received together with the statutory interest, or pay the public duties at statutory due dates, but also substantial misdemeanour fines.
The amendments to this Regulation came in effect on 24 April 2020. Find out more here