Transfer pricing documentation requirements in Serbia

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)?

Serbian corporate profit tax (“CPT”) law imposes obligations to declare transactions made between associated persons in the tax statement (an additional document submitted with the tax return), to maintain transfer pricing documentation and to provide such documentation with the tax statement. There are no special provisions in the CPT legislation limiting the obligation to maintain appropriate documentation to certain categories of taxpayers / thresholds.

Such transactions are declared separately, making a comparison between the actual prices and the arm’s length prices. 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 associated 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.

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

Serbian CPT law does not explicitly regulate the content of transfer pricing documentation. However, the law stipulates which transfer pricing methods may be applied, as well as imposing the obligation to declare transactions between associated persons in the tax statement, and to provide the documentation with the tax statement. In addition to the obligation to maintain transfer pricing documentation, the taxpayer has a general obligation to maintain business documentation that is relevant for tax purposes (not specifically transfer pricing documentation) in accordance with prescribed accounting principles and the Serbian Law on Tax Proceedings and Tax Administration. Furthermore, the Ministry of Finance is expected to issue specific rules as to the content of transfer pricing documentation in the near future.

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

There are no exceptions / thresholds regarding the transactions that are to be documented.

b) What is the definition of “associated enterprises” for the purposes of this requirement?

According to the Serbian CPT legislation, a related party is a natural or legal person whose relationship with the taxpayer is such that control or significant influence may be exercised in business decisions. Entities owned, controlled or managed indirectly or directly by the same natural or legal entities are also considered associated parties.

A person holding 25% or more of the shares in the taxpayer is deemed to be in control of it. Furthermore, it is considered that holding 25% or more of voting rights in the taxpayer enables a person to exert significant influence over the taxpayer’s business decisions. In addition, any non-resident from a jurisdiction with a preferential tax regime (“tax paradise”) is considered to be a related party as are certain persons in marital or common-law relationships with the taxpayer, and the taxpayer’s blood relatives.

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.

d) 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?

The Serbian Law on Tax Proceedings and Tax Administration stipulates that a taxpayer is obliged to deliver accounting books and related business documentation located abroad if it has control or influence over the foreign entity such that it can procure delivery of the requested documentation.

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

Generally, the tax authorities accept regional benchmark studies if they can be substantiated with reliable documentation. However, the requirements are rather stringent in this regard.

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

Under the Serbian Law on Tax Proceedings and Tax Administration, the taxpayer must submit verified Serbian translations of the documents where documents are submitted in a foreign language and the tax authorities request a translation.

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)?

Under the Serbian CPT legislation the taxpayer is generally obliged to provide transfer pricing documentation upon filing of the tax return. However, if this is not done the tax authority will set an additional period for the taxpayer to provide the documentation, ranging from 30 to 90 days.

For failure to declare the value of the transactions conducted with associated persons in accordance with the “arm’s length principle” in the tax statement, a fine in the amount of approximately EUR 900 – 18,000 is imposed.

If the taxpayer fails to submit transfer pricing documentation, or submits incomplete documentation, the tax authority will issue a warning requiring the taxpayer to submit or complete the documentation within a fixed period, ranging from 30 to 90 days. If the taxpayer still does not submit or complete the documentation, a fine in the amount of approximately EUR 900 – 18,000 will be imposed.

Should the taxpayer fail to obtain the accounting and business documentation from abroad (see above) a penalty in the range of approximately EUR 900 – 5,400 is imposed.

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

Generally, the Law on Tax Proceedings and Tax Administration prescribes that the burden of proof is borne:

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

There is an exception to this general rule where the tax authorities challenge and reassess the tax base during a tax audit.

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 eliminating any double taxation resulting from the transfer pricing reassessment.