Preparedness and mitigation measures for COVID-19 pandemic

Following the adoption of economic and financial measures to mitigate the effects of the COVID-19 pandemic, the Government of the Republic of Serbia has adopted several regulations which prescribe specific measures that will be implemented to mitigate the economic effects of the COVID-19 pandemic.

The regulations adopted by the government, which were published on 10 April 2020 are:

Regulation on Fiscal Benefits and Direct Aid to Private Sector Entities and Financial Aid to Citizens to Mitigate the Economic Impact of COVID-19

This regulation provides tax benefits and direct payments to private sector companies.

The fiscal benefits and direct aid provided by regulation for legal entities are:

• payment of income tax and social security contributions that are due in the period between 1 April 2020 and 30 June 2020 may be deferred to 4 January 2021;
• advance payment of corporate income tax due on April, May, and June (or 15 April, 15 May, and 15 June, for taxpayers who have a business year other than the calendar year), may be deferred until the submission of the final tax return for corporate income tax for 2020;
• deferred salary taxes, contributions, and advance corporate income tax may be paid in 24 monthly installments without interest, under conditions further to be set by the Ministry of Finance;
• private entities, other than large companies, may receive direct aid in the amount of three minimum salaries per employee (employed for a definite or indefinite period), employed in March, April and May, in the amount calculated as a product of the number of full-time employees in March, April, and May, and the minimum net salary for March 2020;
• large legal entities may receive direct aid in the amount of 50% of the minimum net salary per employee for the months of May, Jun and July 2020, for employees who were absent from work due to an interruption of work based on a decision of the employer (in accordance with article 116 of the Labour Law) or under a decision of a competent authority (in accordance with article 117 of the Labour Law). The regulation contains a list of large legal entities which are not entitled to the aforementioned direct aid (i.e. banks, insurance, and reinsurance companies, etc.);
• Mentioned direct aid for private entities, both, large and other legal entities, may also be obtained for the part-time employees in equal proportion, regarding the aid obtained for the full-time employees.

Legal entities may apply for tax benefits and direct payments provided they have not reduced the number of employees by more than 10% from 15 March 2020 until the date the regulation enters into force (10 April 2020). Fixed-term employees, with whom an employment contract was concluded before 15 March, for the period ending from 15 March to 4 April 2020, are not relevant. Also, legal entities will lose the right on tax benefits and direct payments, if in the period from 15 March 2020, to three months, following the last installment of direct aid (minimum salaries), reduce the number of employees by more than 10%, fixed-term employees with whom the employment contract was concluded before 15 March 2020, for the period ending from 15 March, 2020, to three months following the last installment of direct aid are not relevant.

Legal entities in private sector using tax benefits and direct payments are not allowed to pay dividends until the end of 2020.

Regulation on the Establishment of the Programs of Financial Support to Business Enterprises for Maintenance of Liquidity and Current Assets in Difficult Economic Conditions due to Covid-19 Pandemic-Caused by Virus Sars-Cov-2

This regulation establishes a program of financial support for legal entities for maintaining liquidity, on the basis of which entrepreneurs, cooperatives, micro, small and medium-sized companies are entitled to apply for loans in order to maintain their current liquidity and for the purchase of current assets.

The requirements that business entities must meet in order to apply for funds under this program are prescribed in the regulation and one of the most important conditions is retaining the number of employees that the legal entity had on 16 March 2020, for the whole loan period with a tolerance of a 10% reduction in the total number of employees.

Regulation on Conditions and Criteria on State Aid Harmonisation for Remedy of Consequences Caused by Covid-19 Infectious Disease

This regulation provides the conditions and criteria on state aid to be granted as compensation of damages directly caused by the COVID-19 epidemic. State aid granted in accordance with the criteria provided in this regulation will represent state aid within the meaning of the State Aid Law.

State aid can be provided to legal entities which clearly and unambiguously prove that actual damages have been directly caused by the COVID-19 epidemic, whereby:

• the total amount of aid does not exceed the amount necessary to cover the reasonable costs;
• the state aid is provided as a scheme with an estimated duration, budget, instrument, intensity, and beneficiaries;
• the actual loss did not occur due to non-compliance with the rules during the COVID-19 epidemic, i.e. if such expenses would be incurred regardless of the COVID-19 epidemic;
• the beneficiary is not directly liable or it did not on purpose, i.e. with gross negligence or consciously contribute to the incurrence of damage.

If the above-mentioned criteria are met, all legal entities (i.e. companies, entrepreneurs, cooperatives, etc.), are entitled to require state aid to be granted.

The regulation does not prescribe a specific term within which state aid may be required.

Regulation on Conditions and Criteria on State Aid Harmonisation for Remedy of serious disturbance Caused by Covid-19 Infectious Disease

This regulation provides the conditions and criteria for compliance with state aid in order to eliminate a serious disturbance in the economy caused by the epidemic of COVID-19 (state aid for the liquidity of market participants). As in the previous regulation, state aid granted in accordance with this regulation is also state aid within the meaning of the State Aid Law.

If the conditions prescribed by the regulation are met, state aid for the liquidity of market participants may be granted in the form of the following instruments:

• state aid for the liquidity of market participants in the form of subsidies, debt write-offs, tax relief;
• state aid for the liquidity of market participants in the form of subsidized interest rates for loans;
• state aid for the liquidity of market participants in the form of loan guarantees on terms more favourable than market ones;
• state aid for the liquidity of market participants in the form of tax deferrals and/or social security contributions;
• state aid for the liquidity of market participants in the form of subsidies for employee salaries to avoid employment termination during the COVID – 19 epidemic;
• state aid for the liquidity of market participants in the form of short-term export insurance.

It should be noted that state aid for market participants’ liquidity (except the aid in the form of subsidized interest rates on loans and the aid in form loan guarantees on terms more favourable than market ones) could be cumulated with each other, regardless of the aid granting instruments.