Two crucial system laws presented

The Finance Minister Mr. Mladjan Dinkic presented today, at a press conference The Draft of the Law on amendments to the Law on corporate income tax and the Draft of the Law on value added tax.

“Both laws are crucial system laws rounding off the set of fiscal laws”, Minister Dinkic pointed out.

The most significant change proposed by the Law on corporate income tax is the reduction of tax rate from 14% to 10%. “The reduction of tax rate will help to attract foreign capital to Serbia, since this is the lowest rate of income tax compared to the surrounding and the EU countries”, explained Minister Dinkic.

Besides, the withholding tax (20%) on dividends and income share realised by one resident on account of another resident of the Republic.

Presenting the Draft of the Law on value added tax, Minister Dinkic stressed that this was a tax on consumption replacing the existing goods and services turnover tax.

“This Law will prescribe two tax rates: a general one amounting to 18% and a special rate of 8%, which makes Serbia one of the countries with lowest tax rates in Europe”, Dinkic said.

He explained that the difference between VAT and turnover tax is that with the VAT is paid in every stage of the production-turnover cycle and only for the part of the product and service value added at that stage. What is crucial in this law is that there is a VAT refund, i.e. the taxpayer is entitled to the refund of the difference in tax if the amount of the previous tax is larger then the amount of tax liability. The deadline for the tax-refund is 45 days after the expiry date for filing of tax return. In line with the experience of other countries, all foreign taxpayers, humanitarian organisations, foreign donors and foreign citizens are entitled to VAT refund.

VAT taxpayers are all legal entities which in one year time make a total turnover over 2 million Dinars, i.e., according to Dinkic, everybody who is not paying flat rate today. The ones having turnover under 2 million Dinars have the right to ask to be the VAT payers, since the ones who are not lose significant privileges, concerning they are not entitled to the tax refund.

Since this Law, if adopted in the Parliament, is supposed to come into effect starting on 01 January 2005, businessmen, and the Tax Administration will have enough time to prepare, so that the whole system can function properly.

The Minister of Finance also said that yesterday in Belgrade talks began with the World Bank mission on signing a new three-year loan arrangement for Serbia worth $550 million. The negotiations will last to Thursday, and the conclusion of the arrangement is expected before the end of the year.

Minister Dinkic emphasized the payments of “old” foreign currency savings in 2004 will begin on 31 May, amounting to €530 per depositor. “Total liability of the Republic of Serbia is €4.2 billion, €542 million of which have been paid out”, said Dinkic.

The payment of depositors of Jugobanka AD Kosovska Mitrovica began on April 26, 2004 and is executed via the National Savings Bank.