The Government of the Republic of Serbia passed the Regulation establishing the Programme of direct payments from the budget of the Republic of Serbia to economic entities in private sector for the purpose of mitigating the economic consequences of COVID-19 epidemic caused by virus SARS-COV-2 (“Programme”). The Regulation was published in the Official Gazette of RS no. 11/2021 and it has been in force since 13 February 2021.

This is the third package of support to the economy and citizens aimed at mitigating the consequences of coronavirus pandemic in the amount of RSD 249,4 billion.

Who is eligible for direct payment?

Under the Programme, economic entities in private sector are eligible for direct payments, namely:

• Resident legal entities in terms of the law regulating corporate profit tax;
• Resident entrepreneurs (entrepreneurs, lump-sum tax entrepreneurs, farmer-entrepreneurs and other entrepreneurs in terms of the law regulating citizen income tax); and
• Branches and representative offices of foreign legal entities.

The stated entities can exercise their right to direct payments under the following terms:

• To be established and registered with the relevant body or organization by the day of entry into force of the Programme, inclusive, i.e. to be registered as VAT payers until the day of entry into force of the Programme, inclusive;
• Not to be subject to temporary revocation of PIB (as a Tax Administration measure) on the last day of the month preceding the month when direct payments are effected;
• Not to have paid dividend in the period following the entry into force of the Programme.

Entrepreneurs, farmer-entrepreneurs and lump-sum tax entrepreneurs that registered temporary suspension of business activity shall also be entitled to direct payments if they registered such suspension on the day of entry into force of the Programme at earliest.

Who is not eligible for direct payment?

Certain large legal entities shall not be eligible for direct payments, namely: banks, insurance and re-insurance companies, companies for management of voluntary pension funds and pension plans, financial leasing providers, as well as payment institutions and e-money institutions.

What do direct payments imply?

Direct payments from the budget imply the payment of non-refundable money that may only be used for payment of salaries and contributions for employees no later than 30 July 2021.

Direct payments will be paid in April, May and June 2021 in the amount of one half of basic minimum net salary for January (i.e. RSD 15,450.12) per full-time employee, whereas the number of employees shall be established as follows:

• In April 2021, this will be the number of employees whose salaries and contributions were applied within tax application PPP-PD for the accounting period of February 2021, by 31 March 2021, reduced by the number of employees whose employment with that employer was terminated starting from entry into force of the Programme until 31 March 2021;

• In May 2021, this will be the number of employees whose salaries and contributions were applied within tax application PPP-PD for the accounting period of March 2021, by 30 April 2021, reduced by the number of employees whose employment with that employer was terminated in the period from 1 to 30 April 2021;

• In June 2021, this will be the number of employees whose salaries and contributions were applied within tax application PPP-PD for the accounting period of April 2021, by 31 May 2021 reduced by the number of employees whose employment with that employer was terminated in the period from 1 to 31 May 2021.

The number of employees is also increased by the number of part-time employees, so that for each part-time employee the total number of employees is increased in proportion to the agreed percentage of engagement of part-time employee compared to the full-time, which is established on basis of data from tax application PPP-PD for the relevant accounting period.

On the other hand, the number of employees will be decreased by the number of employees whose salary and/or compensation is entirely paid by other payers in the relevant accounting period (e.g. sick leave).

The number of employed persons with entrepreneurs, lump-sum tax entrepreneurs, farmer-entrepreneurs and other entrepreneurs shall be increased by one, which means that the very entrepreneurs shall be entitled to direct payment (whether he pays personal income or not), except when the entrepreneur simultaneously has the status of employed person or pension beneficiary.

Application for direct payments

Economic entities who wish to receive direct payments will have to apply in accordance with the Programme. Unlike the direct payments in 2020, the application will be different this time since direct payments are not accompanied by fiscal benefits (deferred payment of taxes and contributions), hence it is impossible to apply the same manner of application (entry of a later due date for taxes and contributions in PPP-PD application).

Economic entities will apply by giving a special statement on the Tax Administration portal – ePorezi, and separately for each direct payment in the month preceding the month when direct payments are effected, no later than the last day of the month.

The Programme envisages that the application should be filed in accordance with the explanation that will be published on the Tax Administration website.

Exceptionally, economic entities in private sector that do not file PPP-PD application i.e. that do not have employees and who are not entrepreneurs i.e. farmer-entrepreneurs who opted for payment of personal salary, direct payments will be paid without the given statement on acceptance of payment.

Special purpose account for direct payments

As in the case of direct payments paid in 2020, the economic entities will use special purpose accounts (so-called COVID account) with the banks where, at the moment of entry into force of the Programme, such entities have current accounts.

The economic entities that have current accounts with several banks shall be obliged, no later than 25 March 2021, to submit through e-services of Tax Administration the information on the name of the bank where their COVID account will be opened.

Commercial banks shall be obliged to open COVID accounts no later than 31 March 2021.

The Programme elaborates that the opening of COVID account does not entail the right to direct payment, but only the right to payment of funds on that account, providing that the requirements of the Programme have been met.

The funds on COVID account shall be exempt from forced collection in terms of regulations on forced collection, except by order of Tax Administration for forced collection for the purpose of settling an economic entity’s obligations in case of losing the right to direct payments.

Losing the right to direct payments

Economic entities shall lose the right to direct payments in following cases:

• In the period from entry into force of the Programme until the expiry of three months from the last direct payment i.e. by 30 September 2021, they reduce the number of employees by more than 10%, excluding the employees who concluded part-time contracts with the private sector entity before entry into force of the Programme and for a period of time ending between the day of entry into force of the Programme until the stated date.

• Payment of dividend, starting from the day of entry into force of the Programme by the end of 2021.

Fulfilment or conditions for losing the right to direct payments shall be verified by Tax Administration on the last day of the month starting from March 2021 until 30 September 2021, while the fulfilment of conditions for losing the right to direct payments can also be verified after that, by the deadlines for expiry of the right for the establishment and collection of taxes and auxiliary tax payments.

Economic entities that lose the right to direct payments shall be obliged to return direct payments including interest starting from the day when their individual direct payments were made, no later than five days after the day of cessation of right to direct payments.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.