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.

Related content

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.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform