Regulation on Fiscal Benefits and Direct Assistance to Private Sector Businesses, and Financial Assistance to Citizens to Mitigate the Economic Impact of the COVID-19 Pandemic
In order to reduce the negative effects of the COVID–19 pandemic on the economy and its citizens, the Government of the Republic of Serbia has adopted the Program of Economic Measures to Support the Economy (the “Program”). The legal framework of the Program is defined in a number of regulations, the most important of which is the Regulation on Fiscal and Direct Assistance to Private Sector Businesses, and Financial Assistance to Citizens to Mitigate the Economic Impact of the COVID-19 Pandemic (the “Regulation”). After being co-signed by the President, the Government issued the Regulation on 10 April 2020; the Regulation was published on the same day in the Official Gazette of the Republic of Serbia with immediate effect.
The Regulation offers three basic sets of measures (i) fiscal benefits to businesses, (ii) direct assistance to businesses, and (iii) financial assistance to the citizens.
The fiscal benefits and direct assistance are intended for those businesses that are registered in the Republic of Serbia and are not recipients of public funding. The Regulation defines them as (i) resident legal persons, (ii) resident entrepreneurs (entrepreneurs; entrepreneurs that are subject to flat rate tax; agricultural entrepreneurs; and other entrepreneurs within the meaning of law governing personal income tax), and (iii) branches of foreign legal entities and representative office of foreign legal entities.
Article 3 of the Regulation sets the requirements that the businesses must meet to qualify for the fiscal benefits and direct assistance:
– they have not reduced the number of employees by more than 10%, not including fixed-term contract employees employed before 15 March 2020 for the period ending between 15 March 2020 and the effective date of the Regulation,
– they had been established and registered with the competent authority before 15 March 2020,
– also, the benefits of the Program may be used by entrepreneurs who have registered the suspension of their business activity – as of 15 March 2020.
The first set of measures concerns fiscal benefits for businesses and it deals mostly with the deferment of tax obligations that are to be repaid in interest-free 24 installments starting from 2021. Such a deferment has been put in place to ensure liquidity, sustain business activity, and employment. The tax advance payment on profit payable in the second quarter of 2020 is also deferred, and the basic requirements thereof are the same for all tax payers regardless of their economic strength.
The deferment of labor taxes and social security contributions for all private companies, to be repaid in installments starting from 2021, applies also to the deferment of income tax of all self-employed entrepreneurs. The Regulation announces a subordinate regulation to be passed by the Ministry of Finance, which will regulate these issues in details.
The contributions, deferred in accordance with the Regulation, shall be deemed paid for all purpose of exercising entitlements under the pension and disability insurance, health insurance, unemployment, and exercising the right to financial support for families with children.
The second set of measures is related to direct assistance to businesses, differentiating between “small” businesses, on one hand, and legal entities classified as large legal entities in accordance with the law governing accounting, on the other hand.
So-called small businesses (entrepreneurs; entrepreneurs that are subject to flat rate tax, agricultural entrepreneurs, and other entrepreneurs; micro, small, and medium-sized legal persons) are entitled to a grant payable from the budget in the amount equal to the number of full-time employees employed during the accounting periods March/April/May 2020 multiplied by the amount of basic minimum net earnings for March 2020 (i.e. 30,367.05 RSD).
On the other hand, large legal persons are entitled to a grant payment in proportion to the number of employees (i) who have been issued a decision suspending their employment agreement starting from 15 March 2020 in accordance with Article 116 of the Labor Law; (ii) who have been issued a decision suspending their employment agreement starting from 15 March 2020 in accordance with Article 117 of the Labor Law, based on the decision of the competent government authority related to the COVID – 19 pandemic.
In all these cases, the submission of a PPP-PD Form is necessary (for the purpose of applying this measure, the number of employees of those entrepreneurs that have no employees is increased by one). The Regulation also recognizes the company’s part-time employees by increasing the total number of employees by the proportionate percentage of the part-time employees’ engagement relative to the full-time employment.
It is important for the economy that the process of accepting the measures is quite simple and without too much bureaucratic red tape. As provided in Article 11 of the Regulation, acceptance of the measures is made by submitting the PPP-PD Form with the indicated payment date of 4 January 2021. The businesses that need not submit the PPP-PD Form use the measures in accordance with the Regulation, which seems to mean that these entities do not have any specific method of accepting the measures but enjoy them solely on the basis of the Regulation.
The Regulation defines certain groups of businesses to which the measures do not apply. Those are banks, insurance and reinsurance companies, voluntary pension fund management companies, financial leasing providers, payment institutions, electronic money institutions.
The third set of measures – payment of the one-time financial assistance is provided in Article 15 of the Regulation and it applies to each adult citizen of the Republic of Serbia. The Government will adopt instructions to regulate the procedure, manner and conditions for payment of this assistance in more details; these instructions are presumed to provide answers to certain questions that have already been raised by the public (the timing of the 18th birthday of such beneficiary, the mode of payment, etc.).
The Regulation prohibits the payment of dividends until the end of 2020 under the threat of losing the right to use the fiscal benefits and direct assistance. Exceptionally, payment in stocks and shares is possible. Certain penal provisions are also provided therein.
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