Amendments to the Serbian Corporate Profit Tax Law – Tax Regime of Liquidation and Bankruptcy Proceedings

Author: Attorney-at-Law Tubin M. Damjan, Law Firm “VUK Tax Attorneys”

Date: 25th December 2024

The Law on Amendments to the Corporate Profit Tax Law of the Republic of Serbia ("Official Gazette of RS", no. 94/2024, hereinafter: “CPT Law”) entered into force on 6th December 2024, and will start to apply as of 1st January 2025. These amendments clarify previously applicable provisions regarding tax regime of taxpayer’s liquidation and bankruptcy. Key amendments relate to defining authorized persons of the taxpayer who are obligated to submit tax declaration, deadlines for submission thereof and relevant date of accounting balance based on which corporate profit tax declaration and tax balance sheet are prepared for the taxpayer undergoing liquidation and bankruptcy proceedings. It is specified that authorized persons of taxpayers undergoing bankruptcy or liquidation proceedings, i.e. bankruptcy administrators and liquidators, are obligated to submit corporate profit tax declaration and tax balance sheet within 60 days from the date of registration of the following changes with the Serbian Business Registries’ Agency (SBRA):

• Decision on initiating liquidation proceedings – based on the accounting balance on the day preceding registration of such Decision;
• Decision on completion or termination of the liquidation proceedings – based on the accounting balance on the day preceding the registration of such Decision;
• Decision on opening bankruptcy proceedings – based on the accounting balance on the day preceding the date of Court’s Decision on opening of bankruptcy proceedings;
• Commencing implementation of the Reorganization Plan – based on the accounting balance on the day preceding the date when Court’s Decision confirming the Reorganization Plan became final.

However, we believe it is necessary to point-out that said amendments to the CPT Law regarding obligation of the liquidator to submit tax declaration and tax balance sheet, are not aligned with provisions of the Serbian Company Law. Namely, the person acting as liquidator ceases to have that capacity on the date when completion of the liquidation proceedings is registered, when liquidated company is also deleted from SBRA registry and ceases to exist. However, is stems from the amended provision of the CPT Law that the liquidator is still obligated to submit tax declaration and tax balance sheet within 60 days from the date of registering decision on completing liquidation, even though the liquidator no longer holds that role nor bears any rights or duties towards the taxpayer, due to the fact that the taxpayer ceases to exist upon deletion from the Registry of Business Entities with the SBRA. The amendments to the CPT Law also introduce joint and severe liability of shareholders of the company that ceases to exist as a result of liquidation proceedings, for fulfillment of corporate profit tax liability determined in the tax declaration submitted upon completion of the liquidation proceedings. Liability of company’ shareholders is limited up to the value of assets they individually received as liquidation residue, upon completion of liquidation. The aim of this amendment is to enable the Tax Administration to collect corporate profit tax liability of a legal entity that ceased to exist by liquidation, given that such claims can no longer be collected from the company’s assets. CPT Law is amended also by one vague provision which defines deadline for submitting tax declaration and tax balance sheet in case of deletion of branch office of non-resident legal entity. Namely, this amendment refers to legal provision requiring the liquidator to submit tax declaration and tax balance sheet within 60 days from the date of registering decision on completion of liquidation proceedings, with the accounting balance on the day preceding registration of such decision with SBRA. However, branch office of non-resident legal entity cannot cease to exist as a result of liquidation proceedings, but rather on the basis of decision of shareholders’ assembly of its founder (non-resident legal entity) or upon dissolution of non-resident legal entity of which it is part of. In that regard, in case of deleting branch office of non-resident legal entity, tax declaration and tax balance sheet can only be submitted within 60 days from the date of registering deletion of branch office with SBRA (and not from completion of liquidation proceedings, as said provision suggests), with the accounting balance on the day preceding registration of founder’s decision on termination of the branch office. Our Law Firm will continue to closely monitor effects of these amendments, in order to efficiently assist clients through expert analysis and extensive experience in resolving any uncertainties regarding application of legal provisions governing tax regime of liquidation and bankruptcy of the taxpayer.