Serbia

  1. A. Transfer pricing documentation requirement
    1. In your jurisdiction, are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    2. What is the content of the documentation that must be prepared?
    3. What is the deadline or timescale for providing transfer pricing documentation to the tax authorities (is it to be provided for example upon filing of the tax returns, at the beginning of a tax audit, or on the specific request of the tax authorities)?
    4. In the event that the documentation is not provided within the applicable timescale, or is incomplete, do documentation-related penalties apply in your jurisdiction? If so, please detail the penalties and the circumstances in which they do and do not apply.
    5. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?
    6. In the event that the tax authorities (i) impose documentation-related penalties and (ii) make a transfer pricing reassessment, does the imposition of documentation-related penalties prevent the taxpayer from initiating any mutual agreement procedure which may be contained in an applicable tax treaty (or, for EU countries, the procedure contained in the EU Arbitration Convention) with a view to eliminating any double taxation resulting from the transfer pricing reassessment?
    7. Any other relevant aspect not addressed above?
  2. B. Country-by-Country reporting (“CbCR”)
    1. Did your jurisdiction implement the obligation to file a CbCR? If not, is the introduction of the CbCR in your jurisdiction contemplated and, if so, when?
    2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?
    3. Which taxpayers have to file a CbCR in your jurisdiction?
    4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?
    5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?
    6. Are there tax treaties in force in your jurisdiction allowing the communication of CbCR with other jurisdictions?
    7. Any other relevant aspect not addressed above?
  3. C. As the case may be, other documentation/filing requirement in relation to transfer pricing?
    1. In your jurisdiction, are there any other documentation/filing requirements in relation to transfer pricing?
    2. If so, what is the content of such documentation/filing requirement? What language(s) are to be used by taxpayers?
    3. What is the deadline for meeting this documentation/filing requirement?
    4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    5. What is the penalty for failing to meet this requirement on time?
    6. Any other relevant aspect not addressed above?

A. Transfer pricing documentation requirement

1. In your jurisdiction, are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

The Corporate Income Tax Law (“CIT Law”) imposes obligations to: declare all transactions between related parties, maintain transfer pricing documentation and provide such documentation along with the annual tax balance sheet. Such transactions are declared in the tax balance sheet separately from transactions with non-related parties. This obligation also applies to transactions between permanent establishments in Serbia and their non-resident head offices.

On the basis of current practice, in cases where adequate transfer pricing studies are not available to substantiate transactions between related parties, the taxpayer faces a risk that the tax authorities will not fully recognise the expenses generated or will increase revenues by the difference between the actual and arm’s length prices.

There are no special provisions in the CIT Law limiting the obligation to maintain appropriate documentation to certain categories of taxpayers.

2. What is the content of the documentation that must be prepared?

The documentation must include: analysis of the group; analysis of the company’s business activity; functional analysis; choice of method for checking compliance of transfer prices with the “arm’s length” principle; conclusion; and appendices.

a) Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?

A one-off transaction or sum of transactions with a related party within a tax year, which are below RSD 8m threshold, principally do not need to be documented for corporate income tax purposes. However, such documentation may be useful for other purposes such as: customs import purposes (see section 7 below), in case of a foreign exchange audit (for cross-border transactions), and in cases when the tax authorities reassess the transactions in such a way that after the reassessment they exceed the said threshold.

b) What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment and its head office in the scope of the documentation requirement)?

According to the CIT Law, any person holding (in)directly (i) at least 25% of the shares in a taxpayer, or (ii) at least 25% voting rights in the taxpayer, is considered a related party for tax purposes.

In addition, any non-resident legal entity with a seat or place of effective management in a jurisdiction with a preferential tax regime (“tax heaven”) is considered to be a related party. The list of tax heaven jurisdictions is published by the Ministry of Finance.

c) For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?

Not applicable as Serbia is not an EU Member.

d) For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to chapter V of the OECD transfer pricing guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach?

The content of the documentation is determined by a Rulebook prescribed by the Ministry of Finance, which is a part of the CIT Law and mostly follows OECD guidelines. For all matters not explicitly regulated by the Rulebook, the taxpayers may principally apply the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, and other applicable OECD guidelines.

e) Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?

Upon request from the tax authorities, a resident taxpayer must provide accounting and business records of its permanent business units (e.g. branches) located abroad.

f) If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?

The tax authorities accept regional benchmark studies if they can be substantiated with reliable documentation.

g) If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum guidelines on low value adding services1Report called “Guidelines on low value adding intra-group services” adopted by the European Union Joint Transfer Pricing Forum during the meeting of 4 February 2010. or revisions to chapter VII of the OECD transfer pricing guidelines about low value adding intra-group services) in your jurisdiction or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances taxpayers are exempted from benchmark studies?

A taxpayer is exempt from submitting benchmark studies only if (i) a one-off transaction or the sum of all the taxpayer’s transactions with a related party within a tax year does not exceed the mandatory VAT registration threshold of RSD 8m (approx. EUR 65,000), and (ii) if such transactions were not credit or loan related.

For transactions between related parties in connection with credits or loans, taxpayers may also use “safe harbour” arm’s-length interest rates published periodically by the Ministry of Finance.

h) What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?

If the documents are in a foreign language and the tax authorities request a translation, the taxpayer must provide them with translation made by a certified Serbian court sworn-in translator.

3. What is the deadline or timescale for providing transfer pricing documentation to the tax authorities (is it to be provided for example upon filing of the tax returns, at the beginning of a tax audit, or on the specific request of the tax authorities)?

The taxpayers must provide transfer pricing documentation along with the tax balance sheet, when filing corporate income tax return. If the taxpayer fails to do so, the tax authorities will issue a warning notice and order the taxpayer to provide the documentation in the following 30 to 90 days.

A taxpayer may be fined from EUR 800 to EUR 16,000 for each of the following offenses:

  • Failure to separately declare, in the tax balance sheet, the value of all transactions with related parties;
  • Failure to submit or submitting incomplete transfer pricing documentation;
  • Failure to submit requested transfer pricing documentation within the additionally set deadline
  • Failure to submit the accounting and business records from abroad (see section 2.e above)
  • Failure to submit requested Serbian translations of the documents

In each of these instances, a taxpayer’s responsible person may be additionally fined from approximatively EUR 80 to EUR 800.

5. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?

Generally, the burden of proof is borne:

  • With respect to facts establishing a tax liability, by the tax authorities,
  • With respect to facts reducing or eliminating a tax liability, by the taxpayer.

However, as an exception to this general rule, if the tax authorities challenge and reassess the tax base during a tax audit, the burden of proof shifts to the taxpayer.

No, the imposition of document-related penalties does not prevent the taxpayer from initiating mutual agreement procedure contained in the applicable tax treaty with a view to eliminate any double taxation resulting from the transfer pricing reassessment

7. Any other relevant aspect not addressed above?

The availability of transfer pricing documentation and benchmark studies prior to annual filing of a transfer pricing report may be prudent for import purposes, as these may be used to prove that transfer prices are at arm’s length if this is challenged by the Customs Authority.

This mostly applies to companies importing products and raw materials, as the Customs Authority may apply a market price, instead of the invoiced price, when assessing the customs and excise duties.

B. Country-by-Country reporting (“CbCR”)

1. Did your jurisdiction implement the obligation to file a CbCR? If not, is the introduction of the CbCR in your jurisdiction contemplated and, if so, when?

There is no obligation to file a CbCR. So far, the introduction of this obligation has not been contemplated.

2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?

Not applicable.

3. Which taxpayers have to file a CbCR in your jurisdiction?

Not applicable.

4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?

Not applicable.

5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?

Not applicable.

6. Are there tax treaties in force in your jurisdiction allowing the communication of CbCR with other jurisdictions?

Not applicable.

7. Any other relevant aspect not addressed above?

Not applicable.

C. As the case may be, other documentation/filing requirement in relation to transfer pricing?

1. In your jurisdiction, are there any other documentation/filing requirements in relation to transfer pricing?

No, the only documentation and filing requirements in relation to transfer pricing are the ones provided above.

2. If so, what is the content of such documentation/filing requirement? What language(s) are to be used by taxpayers?

Not applicable.

3. What is the deadline for meeting this documentation/filing requirement?

Not applicable.

4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

Not applicable.

5. What is the penalty for failing to meet this requirement on time?

Not applicable.

6. Any other relevant aspect not addressed above?

Not applicable.