Date: 31/03/2020

Support package for the Serbian economy to counter the impact of the Covid-19 pandemic

The Serbian Government’s support package, aimed at countering the effects of the Covid-19 pandemic and providing aid to Serbia’s businesses, entails nine measures, with a total estimated effect of 608.3bn dinars.

Of the nine policies, three are tax-related, two each are intended to provide direct assistance to the private sector and safeguard liquidity, and the final two entail a stay on dividend payments and a fiscal stimulus in the form of direct assistance to all adult citizens of Serbia.

However, this support will not be available to businesses that have laid off more than 10 percent of their staff during the state of emergency, not including fixed-term employees, or those that suspended trading before the state of emergency was declared on 15 March.

SET 1
The key measure here is the deferral of matured tax liabilities, which will be payable in instalments beginning at the earliest at the start of 2021. The deferral of taxes and social contributions is meant to promote liquidity and permit businesses to continue operating and retain staff.

  • The deferral of payroll taxes and social contributions for the private sector, for the duration of the state of emergency, is intended to boost the liquidity of all private businesses that pay salaries to staff. This measure will also entail the deferral of income taxes payable by sole traders. All employers who choose to benefit from this measure may defer taxes and social contributions until the beginning of 2021, at which point they may seek additional interest-free deferral that may not exceed 24 months. The eligibility requirements for this measure are identical for all employers, regardless of their economic strength.
  • Advance corporation tax for 2020 payable in Q2 will also be deferred, which should also promote taxpayer liquidity. The eligibility requirements for this measure are identical for all employers, regardless of their economic strength.
  • Donors helping the Covid-19 effort will be exempt from VAT. This measure will waive VAT for entities that donate products they manufacture or sell to institutions directly engaged in combatting Covid-19 or treating those suffering from the disease.
SET 2
This group of measures comprises direct aid to businesses:

  • grants equal to the statutory minimum wage for all sole traders and micro-, small and medium-sized enterprises (MSMEs),
  • and subsidies equal to 50 percent of the statutory minimum wage to large enterprises whose staff have been given paid leave due to a diminished volume of business or a complete stoppage of operations.
Grants amounting to the statutory minimum wage for the duration of the state of emergency will be paid to sole traders (both those paying lump-sum tax and those taxed based on their actual income) and private-sector MSMEs. Large enterprises will receive aid equal to 50 percent of the minimum wage for each employee formally placed on paid leave.

This measure differentiates between businesses based on their economic strength: sole traders and MSMEs will be eligible for aid equal to the net statutory minimum wage for each person they employ. By contrast, large businesses will receive assistance in proportion to the number of employees they have retained even though the business may temporarily have lost the need for some of its staff.

These measures provide sufficient incentives for employers to retain all current staff and, additionally, strengthen liquidity of sole traders and MSMEs, in a bid to help them continue operating.

SET 3
This policy is intended to safeguard the liquidity of businesses through the economic crisis expected after the end of the state of emergency due to the Covid-19 pandemic.

In enacting this policy, the Government of Serbia aims to minimise the impact of external shocks, such as drops in demand or interruptions to supply chains, on the Serbian economy, as well as to address any increases in unemployment and illiquidity these disturbances may cause.

The policy envisages two programs:

  • Liquidity and working capital loans for sole traders, MSMEs, farms, and co-operatives registered with the relevant registers, to be extended through the Serbia Development Fund;
  • Guarantee schemes for liquidity and capital loans taken out by sole traders, MSMEs, farms, and co-operatives, which are intended to support businesses in weathering the Covid-19 crisis and will be provided through commercial banks operating in Serbia.
The total value of the programs that are part of this policy is 264bn dinars (about 2.2bn euros).

SET 4
The final measure will involve direct financial assistance in the form of a one-off payment amounting to the dinar equivalent of 100 euros to all adult citizens of Serbia.