Serbia: Ministry of Finance publishes rulebook on arm’s length interest rates

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The Serbian Ministry of Finance adopted the amendments to the Rulebook on arm’s length interest rates (the Rulebook) on 10 March 2017. The rulebook contains the prescribed interest rates for taxpayers who had or will have related-party financing during 2017.

According to Corporate Income Tax Law (CIT Law), in determining arm’s length interest expense or revenue, taxpayers can either use interest rates as prescribed by a rulebook from the Finance Ministry or elect to apply general OECD-based methods for assessment of arm’s length interest as prescribed by the corporate income tax law. The method selected must be consistently applied to all loans to or from related parties. Unlike the calculation of transfer pricing adjustments, taxpayers may apply prescribed rates and general methodology interchangeably in determining potential withholding tax exposure.

The Rulebook prescribes separate interest rates on long-term and short-term loans for all non-finance entities and a single interest rate for banks and finance lease companies.

The following table provides an overview of market interest rates as prescribed by the Ministry of Finance.

Taxpayer

EUR loans and RSD loans denominated in EUR (%)

banks and finance lease companies

3.13

other companies (short-term loans)

3.98

other companies (long-term loans)

4.25

The rulebook is effective as of 18 March 2017.

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