On 24 January 2022 the OECD’s Inclusive Framework released the stage 2 peer review report on Serbia’s compliance with the minimum standard under Action 14 of the project on base erosion and profit shifting (BEPS). The minimum standard under BEPS action 14 aims to make tax dispute resolution mechanisms more effective, and member countries of the OECD’s Inclusive Framework are being reviewed and monitored in the peer review process in relation to compliance with the minimum standard.
The report on the stage 1 peer review process found that generally Serbia was compliant with most parts of the Action 14 Minimum Standard. Serbia was working to correct any deficiencies and this work has been monitored in stage 2. The peer review report finds that Serbia has solved most of the issues raised by the stage 1 peer review report.
Serbia has a relatively large tax treaty network and a small mutual agreement procedure (MAP) inventory with a small number of new cases submitted each year and five MAP cases pending on 31 December 2020.
Serbia’s tax treaties all contain a provision relating to the MAP, mostly following paragraphs 1 to 3 of Article 25 of the OECD Model. The treaties are generally consistent with the minimum standard under Action 14, but around 15% of the tax treaties do not contain a provision stating that mutual agreements should be implemented notwithstanding any time limits in domestic law; and do not contain the alternative provisions for Article 9(1) and Article 7(2) to set a time limit for making transfer pricing adjustments.
Serbia has signed and ratified the Multilateral Instrument and through the use of this instrument it will modify some treaties to fulfil the requirements under the minimum standard. For treaties and provisions not covered by the MLI Serbia intends to make the treaties compliant with the minimum standard, where necessary, by bilateral negotiations.
Currently Serbia has no bilateral APA programme in place.
Serbia provides access to the MAP in all eligible cases, but where treaties do not mention a time limit for submission of a MAP request, the applicable rules under domestic legislation may lead to a filing period of less than three years as from the first notification of the relevant action. The report notes that Serbia also has not established a documented notification process in cases where the competent authority considers the issues raised in a MAP request are not justified. Serbia has however issued comprehensive guidance on the MAP and practical information on the relevant procedures.
In the years 2018 to 2020, MAP cases were on average closed within the required timeframe of 24 months, the average length of a MAP being 10.10 months. However, Serbia was not able to issue position papers for some cases which were therefore still pending at the end of 2020. Therefore, Serbia should consider whether the available resources are sufficient for its competent authority function to resolve MAP cases efficiently. Serbia meets all other requirements of the minimum standard in relation to the resolution of MAP cases.