Economic Measures, Fiscal Benefits and Direct Payments for Economic Entities as a Result of COVID-19 Crisis
April 13, 2020At the session of the Government of the Republic of Serbia held on 10 April 2020, a set of regulations was adopted for implementation of the announced economic measures of support to the private sector.
- Regulation on fiscal benefits and direct payments for economic entities in private sector and financial assistance for citizens with a view to mitigating economic impact of COVID-19 disease.
Fiscal benefits and payments refer to economic entities in private sector i.e. all resident legal entities, all resident entrepreneurs, branches and representative offices of foreign legal entities.
Legal entities in private sector may use fiscal benefits and direct payments given that, in the period starting from 15 March 2020 until entry into force of the Regulation i.e. 10 April 2020, they did not reduce the number of employees by more than 10%, excluding the employees who concluded a fixed-term contract with an economic entity in private sector prior to 15 March 2020 for the period ending between 15 March 2020 and the day of entry into force of this Regulation. Also, it is required that the economic entities have been established and registered with the relevant authority or organisation prior to 15 March 2020 i.e. that they became VAT payers in the stated period.
Fiscal benefits and direct payments can also be used by entrepreneurs, farmers and flat-rate taxpayers who registered temporary suspension of business as early as 15 March 2020.
- DELAY OF MATURITY OF PUBLIC REVENUES
The Regulation prescribes fiscal benefits in terms of delay of maturity for payment of certain public revenues due in the period from 1 April until 30 June 2020, exceptionally until 31 July 2020 for taxes and contributions for mandatory social insurance paid against salary for June 2020, and the delay of their payment, namely:
– citizens’ income tax for salaries and salary compensations and contributions for mandatory social insurance against salaries and salary compensations, as well as taxes and contributions for personal wages of entrepreneurs and farmers, for March, April and May 2020 i.e. at the choice of taxpayer for April, May and June 2020 for the taxpayers who executed the payment of salaries and salary contributions, as well as personal wages of entrepreneurs and farmers for March 2020 in part or in full until the day of entry into force of this Regulation;
– advance tax for self-employment income for March, April and May 2020, for entrepreneurs and farmers who opted for payment of personal salary and other entrepreneurs;
– advance tax and contributions for self-employment income for March, April and May 2020 for entrepreneurs and farmers who did not opt for payment of personal salary, as well as advance tax and contributions for self-employment income for March, April and May 2020 for flat-rate taxpayers;
– advance profit tax for legal entities for March, April and May 2020, and for taxpayers whose business year varies from calendar year, the advance profit tax due on 15 April, 15 May and 15 June 2020.
Maturity period for the above stated taxes and contributions can be delayed until 4 January 2021, with debt repayment option of maximum 24 equal monthly instalments, without interest.
- DIRECT PAYMENTS
Direct payments imply payment of financial grants to economic entities, designated exclusively for payment of salaries and contributions to employees.
Entrepreneur, flat-rate taxpayer, farmer, other entrepreneur, legal entities categorised as micro-, small and medium, can benefit from financial grants from budget, namely: in May, June and July 2020 in the amount that is a product of: number of full-time employees whose salaries and salary compensations have been applied for in form PPP-PD for accounting period March, April and May 2020 and the amount of basic minimum net salary for March 2020.
The number of employees with the entrepreneur shall be increased by 1 (one), unless the entrepreneur simultaneously has the status of employee or pension user, and it shall also be increased by the number of employees with part-time employment so that the total number of employees will be proportionally increased according to the agreed percentage of engagement of each part-time employee relative to full-time employment, which shall be established on basis of information from PPD-PD form for the appropriate accounting period.
However, the number of employees shall be reduced by the number of employees whose salary or salary compensation in the accounting period is fully covered by other payers (e.g. salary compensations paid by the Republic Health Insurance Fund: for sick-leave exceeding 30 days for temporary inability to work due to illness or injury outside work, for prescribed mandatory isolation, for illness or complications relating to special-care pregnancy, during pregnancy leave, leave from work for child care, leave from work for special child care).
Legal entity categorised as large legal entity can be entitled to financial grant in the amount obtained as a product of the amount of 50% basic minimum net salary for March 2020 and the sum of full-time employees whose decision on employment termination was passed as from 15 March 2020 under Article 116 of the Labour Law and full-time employees whose decision on employment termination was passed as from 15 March 2020 under Article 117 of the Labour Law.
The number of employees shall also be increased by the number of part-time employees whose decision on termination of employment under para. 1 of this article was passed in the manner described for the entrepreneur, in accordance with the Regulation.
The right to financial grant payment shall not apply to certain large legal entities, namely banks, insurance and re-insurance companies, companies for management of voluntary pension funds, providers of financial leasing, payment institutions and e-money institutions.
Acceptance of measures and losing the right to measures
Economic entities shall accept the use of fiscal benefits and direct payments prescribed by this Regulation by submitting PPP-PD form with indicated payment date of 4 January 2021.
Economic entities who lose the right to use fiscal benefits and direct payments prescribed by this Regulation shall be obliged to pay all obligations that the delay was approved for, to refund direct payments and to pay relevant interest no later than five days after the day of termination of right to use fiscal benefits and direct payments.
Payment of direct payments to economic entities
For the purpose of payment, an economic entity shall be opened a special purpose account with the bank that manages the current account of such entity at the moment of entry into force of the Regulation, while economic entities that have current accounts in several banks shall be obliged, no later than 25 April 2020, to submit through e-services of the Tax Administration the information on the name of the bank that the special purpose account will be opened with. The funds concerned shall be exempt from enforced collection, except at the order of Tax Administration for settlement of financial liabilities of the economic entity in case of its losing the right to use fiscal benefits and direct payments.
- VAT TREATMENT OF TRANSACTIONS WITHOUT COMPENSATION FOR HEALTH PURPOSES
The Regulation stipulates that the trade in goods i.e. services realised without compensation by VAT payer to the Ministry of Health, Republic Fund for Health Insurance or health institution in public ownership, shall be exempt from VAT calculation and payment, whereas VAT payer shall be entitled to deduction of previous taxes on basis of such transactions.
Exemption from VAT payment shall apply to all deliveries as on the day of transaction in the period from the day of introduction until the day of termination of the state of emergency in the Republic of Serbia.
- PROHIBITION OF DIVIDEND PAYMENT
Please note a significant provision of the Regulation that stipulates that economic entities that opt for the use of fiscal benefits and direct payments from the budget will not be able to pay dividends until the end of 2020. Considering the stated formulation, it arises that the prohibition shall apply to all payments in the course of 2020, regardless of the year of profit generation, including the payment of interim dividend for 2020.
In case of acting in contravention to this prohibition, the entity shall lose the right to use fiscal benefits and direct payments prescribed by this Regulation, including the application of the above mentioned consequences (refund of the received amounts and interest payment).
- Regulation establishing the programme of financial support to economic entities for maintenance of liquidity and working capital in difficult economic conditions due to COVID-19 pandemics caused by SARS-CoV-2 virus
The right to apply for loan within this programme shall be granted to entrepreneurs, micro-, small and medium-sized economic entities. Loans can be approved even if the official financial statements of the entity for one of the past two years contain net loss but business profit was generated.
The loans for preserving current liquidity and purchase of working capital shall be approved under the following terms: repayment period up to 36 months, including grace period up to twelve months, total loan duration is up to 12 grace months and up to 24 months of repayment, interest rate is 1% annually, loans are approved and returned in dinars, whereas minimum amount of loan for one beneficiary with associated entities for companies is RSD 1,000,000.00, and for entrepreneurs, cooperatives and economic entities entered into relevant registries RSD 200,000.00;
Maximum loan for one loan beneficiary with associated entities may be: for entrepreneurs and micro entities up to RSD 10,000,000.00, for small entities up to RSD 40,000,000.00 and for medium entities up to RSD 120,000,000.00. Loan repayment shall be done in monthly annuities, the interest in grace period shall be calculated and added to the principal amount, the main requirement for realisation of these loans is retention of employees, in accordance with the report of the Central registry of mandatory social insurance on the number of full-time and part-time employees as on 16 March 2020, whereas the 10% deviation from the stated number of employees shall be allowed until the day of application and during the loan use.
- Regulation on the requirements and criteria for state aid alignment for elimination of harmful consequences caused by epidemics of COVID-19 disease
The Regulation specifies the requirements and criteria for state aid alignment for elimination of damage caused by epidemics of COVID -19 disease in accordance with the Law on State Aid Control.
Justified expenditure for state aid assigning for elimination of damage caused by epidemics of COVID – 19 disease represents a real loss as a direct consequence of the epidemics. Maximum amount of state aid to be granted is up to the amount whereby the market player covers justified expenditures i.e. up to 100% of justified expenditures.
- Regulation on requirements and criteria of alignment of state aid for elimination of severe market disruption caused by epidemics of COVID – 19 disease
This Regulation specifies the requirements and criteria of alignment of state aid for elimination of severe disruption of the economy caused by epidemics of COVID –19 disease (state aid for market players’ liquidity).
State aid for market players’ liquidity can be assigned by the following instruments (state aid) for: market players’ liquidity in form of subsidy, debt write-off, tax reliefs; subsidised interest rates for loans; guarantees for loans under the terms more favourable than the market ones; delayed payment of taxes and/or social insurance contributions; employee salaries for avoidance of downsizing during the epidemics of COVID – 19 disease; liquidity of market players in form of short-term export insurance.
- Regulation on the procedure for issuance of debt securities
This Regulation stipulates a simpler procedure for issuance of debt securities in the territory of the Republic of Serbia and it shall apply in all cases when a company passes a decision on issuance of debt securities during the state of emergency in the Republic of Serbia introduced due to the danger from spreading of COVID-19 disease caused by SARS-CoV-2 virus i.e. within 180 days after the termination of the state of emergency in the Republic of Serbia.
This article is to be considered as exclusively informative, with no intention to provide legal advice.
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