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In terms of simplicity in making additional contributions, as well as tax attractiveness, the model for financing subsidiary companies through additional payments has become one of the most common methods for financing subsidiaries in Serbia.
The Serbian Law on Companies provides the possibility for company founders and members to make additional payments without increasing the company’s share capital. The founding act or a general assembly decision may establish the obligation for members to make additional payments to a company, either proportionally or in a different ratio relative to their share in the company.
Additional payments can only be made in cash.
An assembly’s decision to establish the obligation for additional payments must be adopted unanimously, unless the founding act stipulates a different majority.
Additional payments can only be returned to the members if they are not required to cover the company’s losses or satisfy the company’s creditors.
Additional payments are not considered loans granted by the parent company and therefore are not subject to interest calculation or the associated tax rules for transactions between related parties
Given that additional payments do not increase the company’s share capital, such payments need not be registered with the Serbian Business Registers Agency (APR).
However, the procedure for returning additional payments is partially aligned with the procedure for reducing share capital, as it requires that the decision on the return be registered and published on the APR website. Such a decision must remain posted on the APR website for three months, though it does not result in any changes to the registered data.
As with other methods of subsidiary company financing by a parent company, the tax implications of executing these transactions need to be considered carefully. It should be noted that additional payments are not considered loans granted by the parent company and therefore are not subject to interest calculation or the associated tax rules for transactions between related parties. Moreover, given that additional payments do not incur interest, the return of funds on this basis does not lead to a withholding tax obligation on interest payments to a foreign legal entity.