BEPS – International Tax Reform ImportantFor Serbia

As part of a global company, LeitnerLeitner Serbia is devoted to aligning practises in CEE with global advisory and accounting standards and best practises in tax counselling, audit and accounting services

JELENA KNEŽEVIĆ

As part of a global company, LeitnerLeitner Serbia is devoted to aligning practises in CEE with global advisory and accounting standards and best practises in tax counselling, audit and accounting services. In that respect, LeitnerLeitner Serbia wants to bring the attention of Serbian regulators and foreign companies operating in Serbia to The Tax Treaty Related Measures.

The main goal of the Treaty is to Prevent Base Erosion and Profit Shifting (BEPS), based on three core principles: coherence, substance and transparency. The intention of the project is to prevent tax planning that exploits gaps and non-compliance of tax regulations, in order to reduce the tax base or “artificially” shift profits to countries with more favourable tax jurisdictions, where economic activity either does not take place or takes place on a small scale.

BEPS will impact greatly Serbian legislation, but at this moment two significant changes might impact foreign companies planning an investment in Serbia.

One of the changes is to taxation on the transfer of dividends. BEPS proposes implementing a condition whereby the beneficial owner must prove that, in a certain period of time prior to dividend payment (365 days), they possess the proprietary rights on the basis of which dividends are paid.

Another proposed far-reaching change is preventing artificial avoidance of the status of a permanent establishment (PE) through commission arrangements where BEPS prescribes that there is PE when the commissioner regularly concludes agreements on behalf of a company, for providing services by that company or for transfer of ownership. It is considered that this proposition has economic justification and should therefore be accepted by Serbia. However, if adopted, it will represent a huge challenge in terms of practical application.