Adoption of the Law on Amendments to the Property Tax Law
On December 7, 2018 Serbian National Assembly adopted the Law on Amendments to the Property Tax Law,(“Official Gazette of the Republic of Serbia”, no. 95/2018, hereinafter: The Law), which came into force on December 16, 2018. The aim of the Law was to increase legal certainty and clarify existing rules. It introduced many significant changes which refer to the provisions regulating property tax, gift and inheritance tax and transfer tax.
Regarding property tax, the Law, among other things, prescribes that in case when a person is, apart from the ownership right, entitled to some other right on the same immovable property (e.g. the right to use the property), this person will be obliged to pay property tax on that right and not ownership right. Additionally, the Law obliges branches established in Serbia that use the property owned by non-resident legal entity operating in Serbia through these branches, to pay taxes and comply with the Serbian law. Other relevant changes concern the question of determination of the value of the immovable property and tax base. The law clarifies the term “useful surface of the land” by stating that this includes surface under the building, and it classifies the immovable property in eight groups for assessing the tax base. Furthermore, the Law shows that the existence of property tax liability will not be influenced by the type of construction permit or the fact that the building and corresponding rights were not registered in the relevant cadastre. Furthermore, the Law prescribes tax exemption on immovable property owned by private partner, on land acquired by the private partner after conclusion of the concession agreement based on which the estimated value of concession exceeds 50 million euros, as well as on the buildings built on additionally acquired land, if certain conditions are fulfilled.
Regarding gift and inheritance tax, the Law prescribes that inheritance and gifting of human cells, tissues and organs is exempted from taxation, as well as gift tax for free of charge transfer of immovable property to the provider of concession in the case of concession contract when transfer is done by a private partner under the concession contract and the value of concession exceeds 50 million euros. On the other hand, amendments clarified that only used motor vehicle or aircraft which are inherited or gifted are subjected to taxation.
Regarding transfer tax, amendments clarified that only the ownership of the used motor vehicle is subject to transfer tax. Additionally, they prescribe that lease of water land in public possession for the purpose of construction established for a period longer than one year is subject to taxation. Furthermore, transfer of absolute rights to the provider of concession in the case of concession contract when transfer is done by a private partner under the concession contract and the value of concession does not exceed 50 million euros is exempted from taxation.
In the end, maybe the most important change concerning all three types of taxes is the fact that the taxpayer now has a possibility to submit tax return via the public notary in case where rights on immovable property were acquired or disposed based on the document issued or certified by the public notary. As well, it is important to mention a general obligation of certain authorities, such as courts, state or other public authorities, etc. to deliver documents to the tax authorities and local authorities, which was introduced by this Law.
Adoption of the Law on Amendments to the Law on Personal Income Tax
On December 7, 2018 Serbian National Assembly adopted the Law on Amendments to the Law on Personal Income Tax (“Official Gazette of the Republic of Serbia”, no. 95/2018, hereinafter: The Law), which came into force on December 16, 2018. The aim of the Law is the suppression of the grey economy in the area of providing accommodation services by natural persons, creation of conditions for increase of birth rate by providing tax relief for solidarity aid and increase of employees’ motivation by stimulating incentive plans.
First important change introduced by the Law concerns the taxation of securities, stock options and shares of the employer or employer’s related entity, which employee receives free of charge or at a discounted price from the employer and employer’s related entity. Mentioned securities, stock options and shares are exempted from salary tax in case certain conditions are met. However, the employee will not be exempted from salary tax in case the employee alienates such securities before the expiration of 2 years from the moment he or she acquires full ownership rights, employer or employer’s related entity redeems such securities or the employment terminates before the expiration of 2 years from the moment of the employee acquires full ownership rights.
Second important change concerns expenses for recreational and team building activities of employees, where by employer’s expenses related to these activities are exempted from salary tax.
Third important change introduced by the Law prescribes that founder of the newly established legal entity, a newly registered entrepreneur and entrepreneur farmer, has a right to a tax relief from salary tax for a period of 12 months from the moment of establishment or registration, and for an amount of monthly net salary up to 37,000 dinars, if certain conditions are met.
Furthermore, the Law regulates the tax treatment of the income realized by a natural person from the provision of accommodation services in the home craft facilities or the facility of a rural tourist household, by defining taxable income and tax rate. These amendments are intended to stimulate taxpayers to legalize their services in this area.
In the end, some of the additional amendments concern the removal of a tax relief that was available in situations where a shareholder transfers shares or securities or a part of the shares or securities held in the company and based on that transfer the company acquires its own shares or securities, introduction of tax relief for solidarity aid in case of birth of a child and introduction of tax relief on other income in the event of the write-off of a part of the bank’s claims against the debtor on the basis of a loan, when, in accordance with mutual out-of-court settlement, the debtor pays a part of the claim that the bank holds towards him and the bank writes off the remainder of the debt.
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