Serbia: Updated transfer pricing guidance, information for country-by-country report

“Rulebook” regarding transfer pricing methods for purposes of arm’s length principle and determining prices of transactions between related parties

Updated transfer pricing guidance, information for country-by-country report

The Ministry of Finance adopted a “rulebook” (as tax regulations are referred to in Serbia) regarding the transfer pricing methods for purposes of the arm’s length principle and for purposes of determining prices of transactions between related parties.

The amending rulebook on transfer pricing was published in the official gazette on 1 October 2021 and is effective 9 October 2021.

The amending rulebook on transfer pricing includes more detailed guidance regarding the conditions, content, and manner of submitting the annual report on controlled transactions of an international group of related legal entities—that is, the country-by-country (CbC) report.

In accordance with the Article 61v of Serbia’s corporate income tax law, each taxpayer is required to provide information in the documentation on transfer pricing within the analysis of a group of related parties:

  • Whether the taxpayer is a member of an international group of related legal entities
  • Whether it is considered the ultimate parent entity
  • Information on the identity and country of residence of the ultimate parent entity if the taxpayer itself is not considered the ultimate parent entity

As a reminder, there was a requirement to compile and submit an annual report to the tax authority beginning from 2020. The CbC report is to be submitted only by the ultimate parent entity of the international group of related entities if it is a tax resident of Serbia.

An international group of related legal entities is defined as a group of parties that are interconnected based on ownership or control in terms of IAS or IFRS under the following conditions:

  • Total consolidated revenue of at least €750 million annually
  • At least one of the parties in the group has the obligation to prepare consolidated financial statements in accordance with IAS or IFRS (generally if its shares are traded on a regulated market)
  • Members of the group are subject to taxation in at least two tax jurisdictions (including a permanent establishment)

Moreover, the ultimate parent entity of an international group is a legal entity (a member of an international group) that has ownership or control over one or more legal entities that creates an obligation to prepare consolidated financial statements (i.e., if its shares are traded on a regulated market), as well as provided that there is no other legal entity within the international group that has ownership or control over that party and that is required to prepare consolidated financial statements.

The annual CbC report is to be submitted in hardcopy within 12 months from the end of the financial year for which it is compiled.

The CbC report [PDF 92 KB] must contain the following information:

  • Consolidated information about the amount of income, profit or loss before tax, calculated and paid corporate income tax, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalent for each tax jurisdiction in which the international group operates
  • Identification of each member of the international group, including the country where that member is a tax resident in accordance with the legislation of the country of residence, as well as the country where that legal entity is founded if different from the country of residence, as well as information on predominant activity or activities of a member of an international group

Read an October 2021 report prepared by the KPMG member firm in Serbia

 

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