Serbia: Arm’s length interest rates, loans | KPMG | BE

Serbia: Arm’s length interest rates, related-party loans

Serbia: Arm’s length interest rates, loans

A draft version of a “rulebook” concerning the arm’s length rates of interest on related-party loans was published in late February 2015 by the Minister of Finance of the Republic of Serbia. The final version of the “rulebook” was published in official gazette No. 23/2015 (2 March 2015) and has an effective date of 10 March 2015.


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The rulebook, published 27 February 2015, contains the prescribed interest rates applicable to related-party financing. It is expected that a final version of the rulebook will be released soon, and then published in the official gazette. It would apply to taxpayers who had related-party financing during 2014.

Effect on transfer pricing documentation for 2014

According to the provisions of Articles 59, 60 and 61 of Serbia’s corporate income tax law, taxpayers can either use the market interest rates as prescribed by the Ministry of Finance or may elect to apply other methods for determining an arm’s length interest rate. However, taxpayers can choose only one of these two methods, once the election is made, it must be consistently applied to all loans to or from related parties. Other measures provide:

  • Prescribed interest rates apply to interest income / interest expense incurred during 2014 regardless of the period from which the loan(s) originate.
  • For banks and finance leasing companies, unlike other companies, a single interest rate for both short- and long-term borrowings / placements is prescribed.
  • The rulebook does not prescribe the interest rate for loans / placements in RSD currency denomination, made by banks and finance leasing companies to other banks and finance leasing companies.

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