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General Considerations
If one takes into account the Law on Companies of the Republic of Serbia, all branch offices, including the branch office of a foreign legal entity, are a separate management symbol of a company that operates that company in its business activities in Serbia. The branch office does not hold the status of a legal person and acts only in the name and on behalf of the company that established it, in the legal transactions of the company.
Considering this definition, it can be concluded that such a branch office does not represent a separate entity, i.e. an entity that falls under the scope of domestic law such as, independently of the company (is) – its founder. Strictly applying this definition requires a legal person (foreigner) – the founder of the branch office is the subject of rights and obligations in the Republic of Serbia, obligations can be determined by in its management team – branch office in the Republic. of Serbia, especially in the context of obligations to entities in the public sector, where the business of the branch office, in fact, is available.
Therefore, regardless of the nature of the branch office that does not have legal status, if there is a branch office of a foreign company in which the name and address of the branch office is in the Republic of Serbia, that branch office is direct reference to a project/entity that can be directly applied by the laws and regulations of the Republic of Serbia, bearing in mind that the branch office is only available to national authorities, but foreign legal persons .
This is particularly evident in the context of the application of laws and regulations related to taxation and accounting, which determine the branch office of a foreign legal entity as a special subject for the application of these laws , all in order to facilitate the conduct of business activities and the proper performance of duties in the territory of the Republic of Serbia by a legal person from his name on the branch operating in the Republic of Serbia.
Therefore, the Law on Accounting states that the branch office of a foreign legal entity (and other administrative units of a foreign legal entity) in the Republic of Serbia is the subject of this law. Therefore, for the purposes of the application of this law, the size and scope of the business activities of the branch office in the Republic of Serbia will be evaluated, and the branch offices will be classified as micro, small, medium or large, regardless of size and shape. most of the business activities of their producers are outside the Republic of Serbia. The branch office of a foreign legal entity is obliged to prepare and submit financial statements in accordance with the laws of the Republic of Serbia.
Similar to the Law on Accounting, tax-related laws and regulations apply directly to the branch office of a foreign legal entity in the Republic of Serbia. Therefore, the branch office is responsible for issuing tax returns, tax calculations and tax balances.
From the point of view of the Law on Corporate Income Tax, the branch office of a foreign legal entity represents the permanent business unit of that legal entity in the Republic of Serbia, therefore that legal entity falls under the scope of corporate income tax application for The company’s income derived from business activities in the Republic of Serbia, through its branch office.
However, when it comes to the interpretation of laws and regulations related to taxation and their application for a branch office of a foreign legal entity, especially for relationships, that is, transactions between the parent company – a foreign legal entity and its branch office. , and because of the knowledge of the expenses related to these relationships, it is not easy, many problems arise in practice.
The reason for the expenses is known by the branch office of a foreign legal person in the Republic of Serbia
Considering that a foreign legal person conducting business activities in the Republic of Serbia through his branch office is a taxpayer in the Republic of Serbia for the profits (company income) derived from his business in the territory of the Republic of Serbia, the question arises: expenses connected with business activities in the Republic of Serbia can be accepted by a foreign legal entity (i.e. its branch office) to determine the company’s taxable income?
On a general level, it cannot be assumed that these are expenses incurred in the Republic of Serbia (for example, salaries for suppliers/service providers in the Republic of Serbia, salaries for employees working in the Republic of Serbia, etc.), and if the payments were made for the sale of goods and services abroad, the foreign suppliers/service providers applied directly to the branch office or purchased directly for business management programs in the Republic of Serbia.
However, in addition to these expenses, there are other expenses related to the business that occur in the business activities of the branch office, for problems that arise in the work, that is, not in Please clarify if the branch office fee is known, and if so, in which category.
For example, there is a question whether the branch office should be calculated and the application for the payment of fixed assets is transferred by a foreign legal person – a mother company to the Republic of Serbia for conducting business activities there. Bearing in mind that in this particular case fixed assets are used in the Republic of Serbia, for the purposes of conducting business activities in the Republic of Serbia, the expenses should be recognized in the Republic of Serbia for the purposes of determining the tax liability of the branch office. If an immovable property is used in the Republic of Serbia only during a part of the relevant tax period, the amount of the upgrade fee must be divided by the duration of the immovable property’s use in the Republic of Serbia.
Another question that arises in this context is the following: can the parent company pay any kind of payment to its branch office for the fixed asset delivered (except for the fixed costs of delivery and bringing real property to the site), etc. Is there a tax on that payment? If we consider the basic law that the foreign legal person – the mother company and its branch office in the Republic of Serbia is not a separate subject / entity, but represents the parts of the same legal person, then the subject of payment (payment) for the services of The mother company to its branch office is opposed to the nature of this relationship. Accordingly, if the parent company is still paying the salary (salary) to the branch office, the question of whether the salary of the branch office can be paid, and whether it is appropriate, should be considered for determining the liability. taxes. in the Republic of Serbia. If there are fixed assets owned by the parent company, there is no obvious place for the recognition of such expenses in the Republic of Serbia, except if the parent company leases fixed assets or makes a lease (for leasing costs) or purchased fixed assets for the business activities of its branch office in the Republic of Serbia, the crediting of such funds to the branch office is reasonable and logical and should be considered as office expenses branch for those purposes of tax assessment in the Republic of Serbia.
Using the same concept, what is the role and activities of the mother company in relation to business activities in the Republic of Serbia? It is necessary to know in this case some expenses that have been calculated in the branch office by its parent company for those activities for the purposes of determining the tax payment in the Republic of Serbia, and if so, how to determine the amount of known expenses. ? For example, a branch office may not have its own information system, but may (and is usually) using a company-wide information system. In the cases described, for example, the cost of maintaining the information system is common to the parent company and its branch offices (and other forms of the company’s location in different countries) and is it is necessary to recognize a part of this expenditure in favor of the branch when determining the customs duties in the Republic of Serbia. It should also be noted that this type of expenditure (in the special examples of system maintenance) comes from the money paid to a third party for its service, but also comes from inside – the mother company itself keeps his systems. , but that maintenance takes some resources, energy, personnel, etc.
However, in this case, as in other cases of common expenses that cannot be divided equally between the parent company and its branch office, the question is how to determine the appropriate portion of the expenses to be informed about the branch office, how to determine the issue of documents necessary for such expenses in the Republic of Serbia.
These questions that arise in the work are very important, and remember that they create problems in business management and calculate the costs related to businesses, doing business projects commercial in the form of uncertainty in the circumstances of the opinion whether the evaluation has been appropriate. and record their expenses, without rejecting the tax administration.
Other issues that have arisen, arising out of the various views of the Ministry of Finance, relate to the question whether the branch office should be liable to pay tax on a retroactive basis in the circumstances he pays his mother company some money and goes under. one of the boards established by Art. 40 of the Corporate Income Tax Act. The position of the Ministry of Finance that the branch office should be empowered to calculate and pay the tax under the reverse charge mechanism in such cases, is contrary to the principle of the law cited by the Ministry itself , related to the issue of income. collected by a resident legal person from a resident legal person. That is, our case is not one of the basic areas for the application of Art. 40 – in the relations between the mother company and its branch office, there is no resident legal person, but the non-resident legal person and its permanent business unit. This position of the Ministry of Finance is very absurd if the Law on Income Tax considers that the relations between legal residents and non-residents are very different (established by Art. 40 of this law ), on the one hand, from relations between non-resident legal persons and their permanent businesses in the Republic of Serbia (Art. 20 of that law), on the other hand.
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