Economic measures for the economy
Regardless of the level of economic stability and strength of the affected countries before the pandemic is declared, stabilizing the economy and preserving overall economic stability is essential. These goals are being achieved through adoption of appropriate regulation and package of measures. Serbia is no exception. In that sense, the Government of Republic of Serbia on 31. March 2020 presented the Program of economic measures to reduce the negative effects caused by the COVID-19 virus pandemic and support the Serbian economy, further a program of measures, which will be analyzed below.
Also, the new situation has forced a number of employers to change their organization of work, so that a large number of employees are working from home, which we discussed in the article Remote work during the emergency situation, which also can be found on the website of the Pavleski Law Firm.
In addition to the topic that will be covered in this text, we wrote about another economic measure, of which you can read in the text Moratorium – a delay in repayment of obligations, on the already mentioned website.
What does the Program of Measures actually mean?
The measures that are part of the program of measures aim to preserve liquidity, production and working places. The program includes four packages / sets of measures, which will be explained below.
Before analyzing the package of measures, we emphasize that all of the following is based on a statement of the Minister of Finance and the President of the Serbian Chamber of Commerce from March 31 2020, in which is predicted that in the coming period, probably by mid-April 2020, the Government of Republic of Serbia is going to adopt a special decree that will be legal framework for the implementaion of the economic support program.
Who can’t use these measures?
In the following paragraphs we will present which persons are covered by each of the four packages of measures. However, no matter which measure we are talking about, the following entities do not have right to use new program of measures:
- entities which have reduced the number of employees by more than 10% during the state of emergency, (excluding the part-time employees whose contract expires during the state of emergency)
- entities which have suspended their business before the declaration of a state of emergency (before March 15, 2020)
- subjekti koji su privremeno prekinuli poslovanje pre proglašenja vanrednog stanja 15. marta 2020. godine
The first package of measures: Tax policy measures
The first package covers tax policy measures which should provide liquidity, wanted level of economic activity and employment. The measures from the first package are:
Delay in payment of tax expenses and contributions to earnings for the private sector
In order to increase the liquidity of employers in private sector during the state of emergency, the payment of obligations of these entities, based on taxes and contributions, is postponed. Entities which use this kind of relief will be obligated to pay off their debt in the future, but not before beginning of the year 2021. There is also the possibility of postponing the payment of these obligations after that time, for a maximum of 24 months and without the interest, only if the taxpayer files a request seeking it.
Delay in the payment of income tax advances in the second quarter
The aforementioned delay applies to 2020 income tax advance payments due in the second quarter of 2020, all in order to increase taxpayers liquidity in tax on profit area.
Exemption of donors from the obligation to pay VAT
This measure applies to those donors who donate their own products or product that they are selling to institutions directly involved in activities focused on prevention of spreading the COVID-19 virus and curing citizens who suffer from infections caused by this virus.
Second package of measures: Direct assistance to the private sector
The second package of measures contains two measures, with the distinction being made regarding the economic strength of the economy subjects. Namely, it is assumed that large enterprises have greater economic power than entrepreneurs, micro, small and medium-sized enterprises, so the amount of aid given to them is less than the amount belonging to economically weaker entities.
It’s important to say that the classification of entities into micro, small, medium and large enterprises performs in accordance with the Law on Accounting, all based on the average number of employees, business income and average value of business assets determined at the date of drawing up the regular annual financial report in the business year.
Regardless of this difference, the goal of the second package of measures is to give direct payments to these entities in order to motivate them to maintain the existing number of employees. Therefore, the goal is that, despite the reduced income and business difficulties as a result of the pandemic, employers refrain from laying off employees.
Accordingly, the second package includes the following measures:
- direct assistance to flat-rate entrepreneurs who pay real taxes income, micro, small and medium-sized enterprises in the form of payment in value of net minimum earnings for each employee
- direct assistance to large enterprises in the amount of 50% of the net minimum earnings for employees who don’t work, all based on employers decision made in accordance with the Labor Law (therefore, employees keep that status during the state of emergency, but due to reduction or suspension of work they have been sent to required leave)
So, employers are motivated to maintain the level of employment that existed before the declaration of the state of emergency, because part of the earnings that they owe to employees during a state of emergency will be paid by the state. However, the amount of direct aid depends on whether the employer is an entrepreneur, micro, small, medium or large company.
Third package of measures: Liquidity preservation measures
The purpose of the third package of measures is to help business entities, during the state of emergency and after the termination of it. Namely, it is about reducing external influences like reducing demand on market and breaking the chain supplies, all to maintain liquidity and prevent layoffs.
In order to achieve this goal, following measures are recommended:
- program for giving loans and working capital for entrepreneurs, micro, macro, medium enterprises, agricultural holdings and registered cooperatives whose realization is predicted through the Development Fund of the Republic of Serbia
- guarantee schemes for maintaining the liquidity of these entities through commercial banks operating in the Republic of Serbia
Therefore, all the above entities, under condition that they are engaged in the production or providing services, will be entitled to seek favorable loans that will be placed through:
- Development Fund of the Republic of Serbia
- commercial banks that the Government will support by taking part in the risk of loan repayment in amount of 24% of the approved sum
The repayment period of these loans would be 36 months with a grace period of 12 months. However, the maximum amount that can be approved to each of these entities will be determined in the following way:
- up to 5 million dinars for entrepreneurs and micro enterprises
- up to 25 million dinars for small businesses
- up to 50 million dinars for medium-sized enterprises
Another benefit, in addition to the long repayment period and relatively large amounts that can be approved, so is the interest, which is estimated to be 1%.
These measures will be implemented by the end of 2020, so these entities may until then apply for credit in above listed terms. But, one of the prerequisites of credit approval is the fact that these subjects have orderly fulfilled their obligations , both to the state and to banks and business partners, all before the declaration of the state of emergency.
For any concerns and questions regarding the above measures,our law office is at your disposal.