New Regulation establishing the Direct Payments Program to Mitigate the…

The Republic of Serbia’s Government adopted on 11th of February, 2021 the Regulation establishing Direct Payments Program to the business entities from private sector from the budget of the Republic of Serbia in order to mitigate the economic consequences of the COVID-19 epidemic caused by the SARS-Cov-2 virus (hereinafter referred to as the: the DecreeThe Regulation become effective on 13th February, 2021and it regulates:

• Categories of subjects entitled to the direct payments,
• Scope of the direct payments,
• Procedure of acceptance of the direct payments,
• Procedure of payment of the direct payments,
• Loss of the right to the direct payments.

As a reminder, during 2020, on the basis of special regulation and Government’s decision, Republic of Serbia provided help to the business entities in the form of direct payments, whereby the new Regulation regulates conditions, procedure and loss of the right to direct payments slightly different than the previous acts, among others, unlike previous acts, new Regulation establishes only the direct payments, not fiscal benefits.

Categories of subjects entitled to the direct payments:

Subjects that are categorized as the business entities on last day of the month which precedes the month for which the direct payment is provided are entitled to the direct payments.

Term business entities includes:

• – Resident legal entities – legal entities that are established on the territory of Republic of Serbia, or that have a place of effective management and control on the territory of Republic of Serbia,
• – Resident entrepreneurs (entrepreneurs, flat rate entrepreneurs, agricultural entrepreneurs and entrepreneurs other persons) – whereby the persons who has a place of residence or center of the business and vital interests in Republic of Serbia, or who stay in Republic of Serbia continuously or with interruptions 183 or more days in a period of 12 months which starts or ends in relevant tax year,
• – Branches and representative offices of the foreign legal entities.

Previously mentioned business entities are entitled to the direct payments under the following conditions:

• – That they are established and registered by the competent authority, i.e., organization on the 13th od February 2021, i.e., that they have become VAT payers on that date,
• – That on the last day of the month preceding the month in which the direct payments are paid, their personal identification number was not temporarily confiscated.

At this place, it is particularly significant to emphasize that the previously mentioned entrepreneurs (who satisfy general conditions) who registered the temporary cessation of the business activity earliest on the 13th of February, 2021 can also be entitled to direct payments based on Regulation.

Unlike previous acts regulating the help in the form of fiscal benefits and direct payments, new Regulation does not make a difference in the scope of rights between the micro, small and medium legal entities on the one hand and large legal entities on the other hand, however, this Regulation also exclude the right to direct payments for the following large legal entities: banks, insurance and reinsurance companies, voluntary pension fund and pension plan management companies, financial leasing providers, payment institutions and electronic money institutions.

Scope of the right to direct payments:

Direct payments will be provided for the following months: April, May and June 2021.

The basis for calculation of the direct payments is the ½ of the basic minimum net salary for January 2021, that in accordance with the available data amounts 15.450,12 dinars.

The amount of particular payment is determined by multiplying previously mentioned basis with the number of full-time employees for which salaries and compensation of salaries the business entity submitted the PPP-PD Form for accounting period:

• – February 2021 – 31st of March, 2021 – for direct payment for April,
• – March 2021 – 30th of April, 2021 – for direct payment in May,
• – April 2021 – 31st of May, 2021 – for direct payment in June.

Previously mentioned number of employees is being reduced:

a) for the number of employees for which the employment was terminated:

• – in a period from 13th of February, 2021 – 31st of March, 2021 – for payments in April,
• – in a period from 01 – 30th of April, 2021 – for payments in May,
• – in a period from 01 – 31st of May, 2021 – for payments in June;

b) as well for the number of employees for which the payment of salary, i.e., calculation of salary for accounting period is totally paid by the other payers and which was marked with the income type mark 204-211 in accordance with the Regulation on the Tax Return for Withholding Tax (which among others includes salary compensation during sick leave, salary compensation for persons with II and III category of disability etc.).

In the end, the number of employees relevant for calculating the amount of payments is being increased for the number of part-time employees in proportion to the percent of their contracted working time in relation to the full time working hours, which percent shall be calculated based on the data from the PPP-PD Form for relevant accounting period.

The number of entrepreneurs’ employees will be increased for 1 if such entrepreneur simultaneously has a status of employee or a pension beneficiary.

Procedure of acceptance of direct payments:

Unlike the acts regulating direct payments in 2020 where the acceptance of direct payments was realized by submitting PPP-PD Form, new Regulation stipulates that the acceptance of direct payments must be done in the form of statement submitted through the portal ePorezi, with corresponding application of the laws regulating the submission of tax return, with the exception to the certain categories of business entities (business entities which do not submit PPP-PD Form, i.e., which do not have employees nor they are entrepreneurs, i.e., agricultural entrepreneurs who opted for personal salary payment) to which the payments will be provided without special statement.

Regulation stipulates that the statement will be provided separately for each individual payment at latest until the last day of the month which precedes the month in which the payment is paid, in accordance with the special explanation which will be published on the Tax Administration’s site.

Considering the fact that the explanation is not currently available, it is uncertain whether the new manner of submission of the statement on the acceptance will be practically different then previous one, i.e., whether it will be more simple or complex for business entities that want to realize the right to direct payments. In any way, since the statement for the first month for which the direct payments will be provided must be submitted at latest until 31st of March, 2021, we can expect the publishment of explanation in days to come.

Payment of direct payments:

Like the payments in 2020, the payments in accordance with the new Regulation will be also made to a special purpose account – COVID account for direct payments.

Mentioned account will be opened with the bank where the payment beneficiary already has active bank account on the 13th of February, 2021. If payment beneficiary has active accounts with two or more banks, he is required to opt through the ePorezi at latest until 25th of March, 2021 for the bank in which the COVID account will be opened. The Regulation stipulates that the banks cannot charge the fee or compensation of expenses for opening and administrating accounts and executing transactions as well as for the provision of other services in relation to the COVID accounts.

The funds on the account can be disposed by the authorized persons whereby such funds are exempt from the enforced collection, with the exception of the enforced collection which will be carried out in case of loss of the right to the direct payments.

Paid funds can be only used for the payment of salaries and compensations of salary and it must be used at latest until 30th of July, 2021 otherwise it must be returned.

New Regulation stipulates the possibility of correction of the mistakes in payments, through the bank, with written notification and request of the business entity which made mistake, provided that the mistake consists from the payment of the funds to the account of the person for which the funds were not provided and provided that the bank evaluate after the conducted control that the mistake was unintentional and the business entity expresses the intention to compensate the funds at the purpose account which were mistakenly paid.

Loss of the right to the direct payments:

Right to the direct payments will be lost if business entity:

1. reduces the number of employees for 10% in the period starting from the 13th of February, 2021 until the expiration of 3 months after the last payment on the basis of Regulation was made,
2. pays the dividends in the period starting from the 13th of February, 2021 until the end of 2021.

When it comes to the restriction regarding reduction of the number of employees, Regulation stipulates that the employees with which the employment contract was concluded before 13th of February, 2021 for a definite period of time which expires in the period starting from the 13th of February, 2021 until the expiration of 3 months after the last payment on the basis of Regulation was made do not count in the relevant number of employees which cannot be reduced.

Mentioned solutions are the same as the solutions contained in the acts regulating payments in 2020 and as such it does not eliminate the problem of interpretation whether the previously mentioned exception from the restriction regarding reduction of the number of employees related to the employees hired for a definite period of time is applicable in case of the extension of the employment established before 13th of February, 2021 during the period of restriction application. To simplify previously mentioned, for example in case when the employment for a definite period of time was established on 10th of February, 2021 until 10th of May, 2021 and then extended until 10th of July, 2021 afterwards employer does not have the need to extend this contract anymore, it remains disputable whether this employee will be calculated in the number of employees which employer reduced during restriction. At the moment, there are no clear opinions nor instructions regarding this question.

Business entity which loses the right to direct payments is obliged to return the payments within 5 days from the loss of the right, increased with the interest which is calculated for the delay in payment of tax obligations, starting from the date of the receipt of individual payment. Otherwise, the return will be realized in enforced collections, on the basis of Tax Administration’s decision.

Business entity which loses the right to direct payments is obliged to return the payments within 5 days from the loss of the right, increased with the interest which is calculated for the delay in payment of tax obligations, starting from the date of the receipt of individual payment. Otherwise, the return will be realized in enforced collections, on the basis of Tax Administration’s decision.

To conclude, the right to direct payments is realized on the basis of the statement, exceptionally without the statement, for three months in 2021, according to the base amounting to 15.450,12 dinars, with restrictions for the payment beneficials in the field of the reduction of employees and payment of dividends. Until publishment of the explanation on the procedure of submission of the statement on accepting the payments, business entities which have the opened accounts with multiple banks may (and must until 25th of March, 2021) opt the bank at which the COVID account will be opened. Also, we advise all interested subjects to verify the needs of the process and organization of work, as well as to asses the results of business activities before submitting the statement on accepting the payments, all in order to determine whether the objective circumstances can change after the submission of statement in the manner which may lead to the loss of the initially provided right to direct payments and establishment of the obligation to return received payments.