Fic rEcommEndationS - Eurobank EFG

TAX
A. CORPORATE INCOME TAX
WHitE BooK BaLancE ScorE card
cUrrEnt SitUation
Recommendations:
Introduction of by-laws that would regulate implementation of provisions
of the CIT Law. Primarily, by-laws should provide guidelines with
respect to transfer pricing and taxation of permanent establishments.
The clarifications for the application and consistency in the approach of
the Serbian tax authorities with respect to capital tax incentives such as
10-year tax holiday.
The alignment of the tax return with current and proposed changes of the CIT
Law, including the tax return for foreign branches that should provide for no
less favourable taxation of foreign branches compared to resident companies.
Taxation of cross-border corporate reorganisations should be addressed
by the amendments of the CIT Law, as the currently applicable legislation
completely lacks provisions regarding the taxation of cross-border corporate
reorganisations.
The introduction of a precise procedure for applying for different tax year
(other than a calendar year).
Revisit the currently applicable rule that only paid taxes are recognised
as an expense in tax return and align the above provision with the rules
outlined in IFRS which do not impose payment of taxes as a condition for
their recognition as an expense in the Profit & Loss Account.
Formulating a longer-term tax policy with respect to recognizing marketing
expenses for CIT purposes as rules adopted in March 2010 (i.e. recognition
of marketing expenses up to 5 percent of total revenues) were
opposite of the previously stated position that marketing expenses would
be fully deductible. In other words, whether currently applicable rule
represents one of the anti-crisis measures of the Government of Serbia
or long-term tax policy with respect to marketing expenses.
Taxation of corporations in Serbia is governed by the Law
on Corporate Income Tax (the “CIT Law”). The CIT Law is
supplemented by a number of by-laws governing the implementation
of the CIT Law provisions.
The Serbian Parliament adopted amendments to the CIT
Law on 23 March 2010. These amendments were published
in the Official Gazette of the Republic of Serbia, No 18/2010
of 26 March 2010, are applied retroactively from 1 January
2010, and include the following changes:
Introduced
in the WB:
Significant
progress
Certain
progress
2010 √
No
progress
2010 √
2010 √
2010 √
2010 √
2010 √
New thin capitalisation rules have introduced pure debt/
equity ratio of 4:1, and have abolished carry-forward of
interest expenses not deductible due to thin capitalisation;
With respect to tax incentives, tax credit for newly employed
workers has been abolished and the criteria for
granting tax credits for investment in fixed assets and the
ten-year tax holiday have been tightened;
The losses carry-forward period has been reduced from
10 to 5 years;
A new 20 percent withholding tax on income from entertainment,
sports, artistic and similar programmes and
110 top �
2010