“Arm’s length” interest rates for 2018

Author: Attorney-at-law Rilaković G. Ilija, Law Firm “VUK Tax Attorneys”

Date: 20th March 2018.

Based on the Law on Corporate Profit Tax of the Republic of Serbia, taxpayers are obliged to separately disclose transfer prices in their tax balance sheet, i.e. value of transactions realized with related parties, as well as value of those transactions calculated in accordance with the “arm’s length” principle, i.e. priced under market conditions. If their revenues realized from transfer prices are lower than revenues calculated at market prices, or if their expenses realized from transfer prices are higher than expenses calculated at market prices, taxpayers are obliged to increase taxable base for respective differences. The same applies for interest rates charged on loans between related parties. For calculating amount of interest rates that are in accordance with the “arm’s length” principle, taxpayers can either use general methods for determining market prices, as defined by the Law on Corporate Profit Tax, or they can use interest rates defined by the Minister of Finance on annual basis, which are considered consistent with market conditions.

That being said, the Rulebook by which the Minister of Finance defined interest rates for loans between related parties, which are considered to be in accordance with the “arm’s length principle” for 2018, is published in the “Official Gazette” of the Republic of Serbia no. 18/2018, dated 9th March 2018. Some of the interest rates from said Rulebook are presented in the following tables:

Banks and Financial Leasing Lenders

Other Companies