The application of the Law on Determination of the Origin of Property and Special Tax has started on 12 March 2021. We have already presented a brief overview of legal solutions in our previous article [link]. Having regard to the numerous objections stated in public, it is no wonder that the law had been amended even before it started to apply (The law amending the Law on Determination of the Origin of Property and Special Tax, Official Gazette of RS no. 18/2021 of 1 March 2021), which is not the usual practice. However, the amendments did not eliminate most of the objections to the main text of the law.

One of the significant amendments refers to the replacement of term “unlawfully acquired property” with the term “property subject to special tax”. As we have already noted, the use of term “unlawfully acquired property” created confusion because it was identified with the institute of “proceeds of crime” which is regulated by a special law. It is therefore particularly strange to have a legal solution whereby the unlawfully acquired property is subject to 75% tax rate, which allows a person who acquired the property in an unlawful manner to keep as much as 25% of such property – instead it being fully confiscated given that it is criminal proceeds.

The expression “expenditures for private purposes of a natural person” was added to the law and these are defined as expenditures incurred by a natural person for private purposes and with a view to establish the origin of income acquired by a natural person that was not spent for property acquisition.

One of the important objections to the main text of the law was non-transparency in terms of annual guidelines enacted by the director of Tax Administration, based on which the preliminary procedure is conducted and which are not available to public.

The amended provision now stipulates that the Tax Administration shall conduct preliminary procedure on basis of risk analysis. It is nevertheless indicated in the rationale to the law proposal that there was another reason for amendment and that “during the preparation of by-laws it was established that it was sufficient and worthwhile to conduct preliminary procedure on basis of information contained in risk analysis preceding the preparation of Annual guidelines, instead of Annual guidelines, which helps to reduce excessive administration by the Tax Administration”.

Immediately upon the start of application of the law, the Government enacted the Regulation on the manner and procedure for establishing the value of property and income of natural persons and expenditures for private purposes of natural persons (Official Gazette of RS no. 23/2021), which prescribes the manner and procedure for establishing the value of property of a natural person at the beginning and at the end of a calendar year, expenditures for private purposes of natural persons in a calendar year and registered income of a natural person in a calendar year increased by the income that is not subject to taxation in the Republic of Serbia, property acquired without encumbrance, property acquired through debt, or property acquired in another lawful manner and tax bases subject to special tax. The Regulation has been applied since 17 March 2021.

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