Tax Alert, October 2019

We hereby wish to inform you that a new Law on Accounting, “Off. Gazette RS”, no. 73/2019 (hereinafter: "the new Law" or "the Law") was passed at the session of the National Assembly of the Republic of Serbia on October 10^th 2019, effective January 1^st 2020.

It is stipulated that the by-laws necessary for the implementation of this Law will be adopted within six months from the effective date of this Law and will be applicable from the financial statements that will be prepared on December 31^st 2021. In addition to that, it is stipulated that legal entities or entrepreneurs are obligated to adjust their businesses to the provisions of this Law within three years from the day this Law enters into force at the latest.

Provisions of the new Law related to the ability of parent legal entities to be exempted from the preparation, submission and disclosure of the consolidated annual financial statement, the obligation of the Ministry of Finance to report to the European Commission on changes in types of companies and to the report on payments to authorities will be applicable from the day of accession of the Republic of Serbia to the European Union.

Key amendments refer to:

·        publishing translations of International Financial Reporting Standards;

·        organization of accounting and accounting documents;

·        bookkeeping and chart of accounts;

·        financial statements and annual business report, non-financial reporting and payments to authorities;

·        submission of financial statements;

·        financial statements register.

The overview of the aforementioned amendments will be presented in a more detailed way below. For any questions regarding the application of the new Law on Accounting, please contact Dusanka Bastaja, Manager in Tax Department via: dbastaja@deloittece.com.

Publishing translations of International Financial Reporting Standards

Provisions of the new Law stipulate that the ministry in charge of finances shall determine and permanently publish translations of International Financial Reporting Standards (hereinafter: "IFRS") or IFRS for the Ministry of finance (hereinafter: "MF"), with a clear indication during which period a specific published version of translated IFRS and IFRS for MF is applicable.

Micro legal entities and other legal entities, regardless of their size, may choose to apply IFRS or IFRS for MF, in which case they are required to apply them continuously for at least five years from the beginning of application.

Organization of accounting and accounting documents

Within this amendment, a clear division between the persons who prepare the accounting documents and the persons who carry out the review of the correctness of those documents before posting was made.

In this regard, an obligation of preparing and submitting the invoices as accounting documents in an electronic form exclusively is being introduced to legal entities or entrepreneurs. On this occasion, we note that this provision will be effective July 1^st 2021.

Namely, the aim of the proposed solution is to simplify the procedure of issuing invoices (no stamp or signature is required) and to shorten the time needed to perform such tasks. In addition to that, the obligation of controlling the credibility of accounting documents is being introduced.

Bookkeeping and chart of accounts

Within the provisions of the Law related to the term and content of business books, the way of keeping business books is regulated as well.

Namely, the period for which business books are kept is prescribed (the business year is the same as the calendar year, except when business books are kept for a business year that is different from the calendar one in accordance with this Law). Additionally, it is defined that a business year may be shorter than twelve consecutive calendar months, in case of establishment of a legal entity or entrepreneur, legal form change, liquidation, bankruptcy and in other cases in accordance with the Law.

In addition to that, bookkeeping and preparation of financial statements is being simplified by introducing a single Chart of Accounts and financial statement forms (as well as the Statistical Report) for all categories of legal entities that are subject to the application of the Law.

Furthermore, for persons that do bookkeeping by being employed by a legal entity or an entrepreneur (i.e. the bookkeeping is not entrusted to a legal person or an entrepreneur), there is no mandatory professional title in the field of accounting or auditing.

On the other hand, a legal entity or an entrepreneur can entrust bookkeeping and preparation of financial statements by a contract to a legal entity or an entrepreneur that is registered in the Register of Accountants. An exception to this obligation exists when, within a group of legal entities, the subsidiary entity keeps the books of related parties within the group, which simplifies the bookkeeping of related legal entities and reduces the costs in this respect.

Financial statements and annual business report, non-financial reporting and payments to authorities

In addition to the complete set of financial statements that are submitted to the Business Registers Agency (hereinafter: "the Agency") by large legal entities, medium legal entities, legal entities that are required to prepare consolidated annual financial statements (parent legal entities) and public companies, preparing of corporate governance reports, non-financial reporting and the preparation of reports on payments to authorities is prescribed as well, in order to comply with the Directive 2013/34/EU. Entities that are subject to such reporting will submit said reports within the annual or consolidated business report.

Submission of financial statements

The provisions of the new Law prescribe one deadline for submission of regular annual financial statements (which includes the Statistical Report as well) for public disclosure - by March 31^st of the current year for the previous year.

In other words, the obligation to submit two sets of reports (reports for statistical and other purposes and a regular annual financial report) is cancelled. This will allow the economy enough time to submit a single set of reports, given that there is no obligation to provide data for statistical and other purposes by the end of February.

Legal entities that prepare consolidated annual financial statements (parent legal entities) are required to submit reports to the Agency for public disclosure by April 30^th of the following year at the latest.

As an exception, the deadline for auditors of the financial statements to submit the audit report and supporting documents is June 30^th of the current year for the previous year or July 31^st for the auditors of the consolidated financial statements.

On the other hand, legal entities with a business year different from the calendar year are obligated to submit the regular annual financial statements for the reporting year to the Agency, for statistical purposes and for public disclosure, no later than three months from the date of the balance sheet.

It is envisaged that legal entities and entrepreneurs who have corrected their financial statements submitted to the Agency by March 31^st, based on the performed audit of the financial statements, will submit those corrected reports to the Agency by June 30^th, along with the audit report and the decision on their adoption or by July 31^st, in case of consolidated financial statements.

Additionally, the provisions of the new Law do not prescribe neither the obligation of submission of a statement that the profit has not been distributed (loss covered), nor submission of a decision on the distribution of profit or a decision on covering the loss, which further reduces the obligations of legal entities and entrepreneurs regarding the preparation of such documentation.