New Social Security Treaty signed between Serbia and France
Serbia and France signed a new convention on social security in November 2014. The ratification procedure before the Serbian Parliament is underway. This new convention will replace the outdated General Social Insurance Treaty of 1951 between the two countries. The provisions of the new treaty are based on generally accepted social security principles and relevant European Union regulations.
The treaty prescribes that employees (i.e. nationals of one treaty country who are assigned to work in the other country) will remain insured in the country from where they were assigned, for a maximum period of twenty four months from the beginning of the assignment.
Self-employed entrepreneurs registered in one of the treaty countries who work in the territory of the other country or who work in both countries will remain insured in the country of registration for a maximum period of twelve months.
Foreign firms restricted from employing Serbian nationals
At the end of 2014, the Serbian Ministry of Labour (the "Ministry") issued an official opinion providing that Serbian nationals are not allowed to conclude employment agreements with foreign employers, if their work is to be performed in the territory of the Republic of Serbia. In line with the opinion of the Ministry, in order to conclude employment contracts with Serbian nationals, a foreign company must establish a local presence in Serbia, such as a branch, a representative office, or a fully incorporated subsidiary.
The legal rationale of the Ministry's opinion is somewhat dubious. The Ministry begins its opinion by citing the provision of the Serbian Labour Law which explicitly states that such law applies to all persons who are employed in domestic and foreign firms in Serbia, thus making it possible for foreign employers to directly employ Serbian nationals. Nevertheless, in its opinion the Ministry further attempts to explain that Serbian nationals employed by foreign employers cannot derive any social security rights from such employment, as the rules governing social insurance (such as pension, health and other) do not apply to employers who are not registered in Serbia.
At this point it is not clear whether and how this new opinion of the Ministry of Labour will impact the practice of the social security funds and the Serbian Tax Administration. The Serbian Tax Administration has in the past required Serbian nationals who were employed with foreign companies to pay both tax and social security contributions in Serbia. Following the Ministry's opinion, any social security contributions which a Serbian national pays on the basis of the order of the Tax Administration will be paid in vain, as the employee cannot have any rights on the basis of such contributions. The Ministry's opinion is not clear on whether a Serbian national will be able to exercise his/her rights under mandatory social insurance if he/she is engaged by a foreign company on the basis of some other type of contract, such as a service contract.
It can be expected that the latest opinion of the Ministry of Labour will result in confusion concerning both the labour and tax status of Serbian nationals engaged to work in Serbia by foreign companies. It remains to be seen whether and how this confusion will be resolved in the practice of Serbian social security funds and the Tax Administration.
Legal entities are entitled to tax credit for taxes paid on profits generated abroad
The Ministry of Finance confirmed in its official opinion that Serbian companies have the right to offset taxes due in Serbia by the amount of tax paid on profits generated by their permanent establishment abroad. The amount of the tax credit should be calculated in accordance with the rules prescribed by Serbian law, and cannot exceed the total amount of tax due in Serbia.
The Ministry also explained that the amount of the tax credit and the total tax base must be declared in the company's corporate income tax return and the tax balance in line with Serbian regulations.
Transfer of shares without consideration between natural persons is not subject to tax
The Ministry of Finance clarified in its official opinion that the transfer of shares between natural persons without consideration does not trigger any tax in Serbia. The Ministry explicitly stated that such transfers are not subject to the gift tax or to personal income tax.
This opinion resolves controversies concerning the obligation of natural persons to pay personal income tax on the market value of received shares.
New charts of accounts published in December
The Securities Commission amended the rulebooks on charts of accounts for investment funds, investment fund management companies and for brokers. Amendments apply to financial statements for the 2014 financial year.
Amendments are mainly of a technical nature, and involve harmonisation of titles of accounts, and clarification of the definition of entries in specific accounts. New forms of financial statements and statistical reports were also introduced.
Investment fund and investment fund management companies must now file financial statements by the 30th of April of the current year for the previous year (as opposed to by the 31st of March).
The volume of annual financial statements for investment funds has been significantly decreased. At the same time, amendments introduce the obligation on management companies to file semi-annual financial reports by the 31st of August.
License not required for bookkeepers
The Ministry of Finance issued an official opinion stating that individuals responsible for bookkeeping and preparing financial statements do not need to hold a professional license for such purpose, nor do they have to fulfill any other specific work or educational requirements. Since the Law on Accounting does not prescribe any specific requirements, companies and entrepreneurs are free to decide on their own requirements for bookkeepers and individuals responsible for preparing financial statements.
It is important to note, however, that aside from the person in charge of preparng financial statements, the legal representative of a company (i.e. the Director) or an entrepreneur are personally liable by law for the content of financial statements.