Serbian Government rolls out EUR 5.1 billion package of economic measures in fight against COVID-19

This article was updated on 14 April 2020 to reflect the decrees regulating the economic measures adopted by the Government of Serbia on 10 April 2020.

Following the example of many European countries, the Serbian Government has prepared a package of economic measures that is intended to help its citizens and private sector fight the financial consequences of the COVID-19 pandemic.  

The Serbian Finance Minister, Siniša Mali, presented the measures at a press conference on Tuesday, 31 March 2020, and they were subsequently codified within the Decree on Fiscal Subsidies and Direct Payments to Private Business Entities on 10 April 2020 (Decree).

Fiscal subsidies and direct payments

The Decree prescribes the conditions, procedures and amounts of fiscal subsidies to business entities operating in Serbia:

• All Serbian resident legal entities, resident entrepreneurs and branches and representative offices of non-resident legal entities are eligible for fiscal subsidies and direct payments.

• The fiscal subsidies refer to:
  • salary tax and social security contributions on salaries, salary compensations and personal salaries of entrepreneurs and agricultural entrepreneurs due for March, April and May 2020 (or April, May and June 2020 if so chosen by the taxpayer, in case March salaries have been paid out before the Decree entered into force), 
  • personal tax on income from entrepreneurship for March, April and May 2020 for entrepreneurs and agricultural entrepreneurs who have opted for personal salary,
  • personal income tax and social security contributions for March, April and May 2020 for entrepreneurs and agricultural entrepreneurs who have not opted for personal salaries, and for lump sum entrepreneurs,
  • advance payment of corporate income tax for March, April and May 2020, and in case of taxpayers who have a business year different from the calendar year – for advance corporate income tax payments due on 15 April, 15 May and 15 June 2020.

• The direct payments refer to grants to business entities that may be used only for payment of salaries and salary compensations.

The benefits prescribed by the Decree may not be used by banks, insurance and re-insurance companies, companies for management of private pension funds, financial leasing companies and payment institutions and e-money institutions.

Business entities can use the fiscal subsidies and direct payments subject to the following conditions:

• business entities did not decrease the number of employees by more than 10% between 15 March 2020 and 10 April 2020 (employees employed for a definite period of time before 15 March 2020, whose employment expired until 10 April 2020 do not count towards the 10% criterion);

• business entities have timely submitted the PPP-PD form, which practically acts as a subscription tool for the fiscal subsidies and direct payment. The fiscal subsidies and grants may be used in full if the PPP-PD form is submitted by the end of April 2020.

The fiscal subsidies will be granted in the following way:

• salary tax and social security contributions will be deferred and due only on 4 January 2021,

• corporate income tax will be deferred and due after the submission of the corporate income tax return for 2020, i.e. for the current fiscal period for taxpayers whose fiscal year differs from the calendar year,

• the deferred salary tax, social security contributions and corporate income tax will be paid in 24 monthly instalments without any interest in a way to be prescribed by the Ministry of Finance.

The grants will be provided by the state in the following amounts:

• all entrepreneurs, micro, small and medium-sized enterprises will receive the March minimum salary according to the following schedules:
  • in May 2020, a grant for salaries and salary compensation due for March 2020, 
  • in June 2020, a grant for salaries and salary compensation due for April 2020,
  • in July 2020, a grant for salaries and salary compensation due for May 2020.

• large enterprises will receive 50% of the March minimum salary for all employees who were sent off work due to the decrease in work volume or following a decision of the competent state authority due to the COVID-19 pandemic, according to the following schedules:
  • in May 2020, a grant in the amount of 50% of the March minimum salary for salary compensations due for March 2020, 
  • in June 2020, a grant in the amount of 50% of the March minimum salary for salary compensations due for April 2020, 
  • in July 2020, a grant in the amount of 50% of the March minimum salary for salary compensations due for May 2020.

An employer, i.e. taxpayer, may lose the right to fiscal subsidies and grants if it decreases the number of employees by more than 10% between 15 March 2020 and expiration of 3 months after the last grant was paid in.

VAT exemption

A VAT exemption for deliveries of goods and services to the Ministry of Finance, the State Health Fund and hospitals (and other health institutions) has been introduced during the state of emergency. 

Namely, suppliers of goods and services to the designated recipients will not calculate VAT but have the right to input a VAT deduction.

Dividend payment restriction

Business entities that use fiscal subsidies and direct payments cannot pay out dividends until the end of 2020. 

Other state aid aimed at alleviating the effects of COVID-19 pandemic

The Serbian government also adopted several other decrees regulating the state aid related to the COVID-19 pandemic, as well as the programme of financial support to the liquidity and current assets of business entities.

State aid may be granted through subsidies, debt release, tax reliefs, subsidised loan interest rates, guarantees for loans, deferred payment of taxes and social security contributions for salaries of employees and for export insurance.

It is important to emphasise that state aid may only be granted to the business entities that were not in difficulties (as defined by the relevant state aid regulations) on 31 December 2019.

Financial support

The programme of financial support adopted by the Serbian government is intended to provide loans for maintaining liquidity and obtaining current assets. These funds can be used by entrepreneurs, cooperatives, and micro, small and medium-sized companies (in majority private or cooperative ownership) operating in the manufacturing, service, trade and agricultural business. Applicants may apply if they are not in financial difficulties, bankruptcy, reorganisation or liquidation proceedings. Loans may be granted even if the net loss is stated in the financial statements for the past two years, provided that the profit was generated. 

The main precondition for granting these loans is keeping the number of employees at the level of 16 March 2020 +/- 10%.

The main terms of these loans will be the following:

• repayment schedule of up to 36 months with the grace period of 12 months included, 

• interest rate of 1% p.a., 

• loans are granted in RSD currency, 

• minimum amount for companies with affiliated entities is RSD 1,000,000, whereas the maximum is
  • RSD 10,000,000 for entrepreneurs and micro legal entities, 
  • RSD 40,000,000 for small legal entities, and
  • RSD 120,000,000 for medium-sized legal entities. 

Applications will be received until the funds from the programme are spent, but not later than 10 December 2020. 

State aid help desk

Wishing to support the business community during this challenging period, CMS Belgrade has created a State Aid Help Desk where companies are able to inquire about available governmental measures and receive preliminary advice on the treatment of specific governmental measures under the Serbian Law on State Aid Control.

You can read more about the Help Desk and how to contact us here.