Amendments to the Law on Property Taxes Bring a Complete Transfer of Competence from the Tax Administration to Local Self-government Units

Amendments to the Law on Property Taxes Bring a Complete Transfer of Competence from the Tax Administration to Local Self-government Units

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In the Official Gazette no. 138/2022 from December 12, 2022, amendments to the Law on Property Taxes (“Law“) have been introduced.

The important note is that the provisions of the Law, in part which regulates the jurisdiction of the Tax Administration for determining inheritance and gift taxes and tax on the transfer of absolute rights, i.e. which regulates the obligation of authorities and persons to submit to the Tax Administration prescribed documents, decisions and acts related to the determination of the abovementioned forms of taxes, shall be applied until December 31, 2023.

After that, starting from January 1, 2024, local self-government units shall fully determine, collect and control the inheritance and gift taxes and the tax on the transfer of absolute rights and therefore shall be considered as tax authority, throughout the meaning of provisions of the Law.

In this regard, the local self-government units shall take over from the Tax Administration the employees who perform the tasks of determining, collecting and controlling the inheritance and gift taxes and the tax on the transfer of absolute rights, objects, information system and archive, as well as equipment and means for the purpose of exercising its competence areas in proportion to the number of hired persons, in the period from November 1 to December 31, 2023. Additionally, the procedures initiated by the Tax Administration for exercising rights for abovementioned taxes, which are not completed by the day of taking over by local self-government units respectively, shall be completed by the local self-government units.

Overview of other important amendments to the Law is presented below:

  • When it comes to the property tax base, the manner in which depreciation is calculated in order to reduce the value of a built facility over which an additional part has been built (so that the additional part is not considered as separate part of such facility) is regulated in detail in terms of the provisions of the Law on planning and construction;
  • When classifying immovable property, it was specified that a garage, defined as a space in which (in whole or in part) a registered business activity is performed, is considered to be a business facility;
  • In connection with the record of a land in the business books of business entities, it is now prescribed by the Law that when the tax payer who maintains business books has not recorded the land in business books on which, i.e. under which the business facility is located and which is duly recorded in its business books, for the purpose of taxation with property taxes, such land is considered to be recorded in business books;
  • Additionally, a specific situation has been regulated by provisions of the Law, upon which the tax payer did not separately state the value of the building in relation to the value of the land belonging to it in business books, while the local self-government unit did not publish the average price per square meter of land in either zone or in most equipped zone;
  • For the purpose of taxation with property tax, the day of acquisition of rights is considered the day of execution of the legal transaction, except when the right is acquired on immovable property as a future asset, when the day of acquisition of rights is considered to be the earlier of following days: (i) the day of registration of the acquired right in the appropriate cadaster or (ii) the day of handover, i.e. the day of taking possession of such immovable property;
  • The tax liability does not arise for a building: (i) which is considered to be an economic object, i.e. (ii) which is a type of building for which the construction permit is issued by the ministry responsible for construction affairs respectively, i.e. the competent authority of the autonomous province as a entrusted matter, in accordance with the law regulating planning and construction, except for certain types of buildings listed in that article;
  • The obligation based on property tax also ends on the day on which another person acquires a right, title or use an immovable property for which tax is paid on ownership right and which tax is paid in accordance with the provisions of the Law;
  • It is specified that tax on the transfer of absolute rights is paid upon transfer with compensation for the right to permanently use a parking space in an open residential block or residential complex.

Entry into force

Although the amendments and supplements to the Law entered into force on the eighth day of their publication in the Official Gazette of the Republic of Serbia, i.e. on December 20, 2022, the new provisions of the Law shall apply from January 1, 2023.

This article is to be considered as exclusively informative, with no intention to provide legal advice.

By Sara Necic, Senior Associate, PR Legal