Bojovic & Partners has promoted Ivan Gazdic to Partner.
Gazdic heads the Real Estate and Construction department at Bojovic & Partners. He is also the President of the Foreign Investors Council’s Real Estate Committee in Serbia. Aside from the real estate practice, he has expertise in finance, corporate, and commercial matters. He has been practicing law for over eight years.
Simultaneously, the firm also announced that Milomir Matovic had been promoted to Senior Associate.
The steady growth of the digital products market and an increasing demand for digital products required an adjustment to the Serbian VAT rules applicable to the supply of electronically supplied services (ESS), and that adjustment finally occurred in 2017. Combined with new rules on the VAT registrations of foreign suppliers, VAT obligations related to ESS became more straightforward.
After the introduction of VAT in Serbia in 2005, ESS were considered made at the place of the recipient (either legal entity or individual). However, until 2013, there was no definition or list of ESS, so the taxpayers had to rely on official opinions by the Ministry of Finance (MoF) explaining the nature of a particular service. In 2013, the MoF issued a rulebook listing the types of ESS – and, among other things, rules applying to the storage and maintenance of web pages, the supply of software, audio-visual content, access to data bases, and e-learning. The rulebook remains in effect at the moment.
For ESS supplied to Serbian recipients by foreign suppliers, the local recipient had to account for VAT by applying a reverse charge – unless the foreign supplier was registered for VAT. However, as foreign suppliers were not able to register in Serbia until October 2015 because there were no rules governing registration, the reverse charge was the only way to get a VAT assessment. The rules on VAT registration for foreign suppliers were enacted in 2015, but foreign suppliers of ESS were explicitly excluded from the obligation to register.
The 2017 amendments to the VAT law significantly changed the VAT position of foreign suppliers of ESS in Serbia. As of January 1, 2017, suppliers of ESS are obliged to register for VAT if they supply ESS to non-taxable persons (i.e., B2C). Foreign suppliers who provide services exclusively to taxable persons (B2B) are not obliged to register for VAT.
The VAT law now prescribes a different set of supply rules for services provided to taxable and non-taxable persons, as, for services supplied to taxable persons the place of supply is the place of the recipient, while for services supplied to non-taxable persons the place of supply is the place of the supplier. In April 2017, new rules on the supply of ESS were introduced, which – in contrast to the general VAT law – makes the place of supply for ESS provided to non-taxable persons the place of the recipient. As a consequence, foreign suppliers of ESS to consumers should register and account for VAT in Serbia.
Once registered, foreign suppliers have to account for VAT, issue VAT invoices, file VAT returns, and pay VAT. They also are required to appoint VAT representatives who will fulfill the VAT obligations on their behalf. Foreign suppliers which fail to register may be fined up to EUR 16,000.
VAT should be assessed at the moment the service is supplied. The time of supply for a one-off ESS is the time needed for the completion of the service. Continuous ESS services such as web hosting are deemed supplied at the moment of expiration or the termination of the agreement between the parties. Where parties agree on the issuing of periodical invoices, the time of supply is the last day of the invoicing period (no longer than a calendar year). If the ESS concerns the granting of a license (e.g., a software license), the time of supply would be the date of the invoice’s issuance.
The VAT base for ESS is the consideration payable to the supplier, increased for ancillary expenses, and decreased for the discounts granted at the time of supply.
Although the new VAT rules make the assessment of VAT for ESS suppliers simpler, regulation and oversight of foreign providers of ESS will be a challenging task for the STA. This is because the STA does not have efficient instruments to crosscheck cross-border transactions – especially payments made by consumers. Also, in some recent cases involving the STA’s attempts to collect VAT for supplies carried by foreign VAT payers, the STA was unsure whether to collect the VAT from a VAT representative or a foreign taxpayer.
New VAT rules would likely increase the price payable for ESS unless foreign suppliers agree to bear the VAT expense. Large global providers of digital content have obviously considered the effects of the new VAT rules, as some of them have already registered for VAT in Serbia in order to be compliant.
By Branimir Rajsic, Senior Consultant, Karanovic & Nikolic
This Article was originally published in Issue 4.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
CMS Belgrade has supported the Serbian government on its selection of a new operator for Serbia’s largest airport.
As a result of the process, Serbia awarded French company Vinci Airports, the world’s fourth largest airport operator, a 25-year concession. The total value of the agreement is EUR 1.5 billion. According to CMS, “the French company will run the airport for the next 25 years, being also committed to considerable investments to further develop Nikola Tesla Airport as part of the agreement. Vinci’s offer [is] worth EUR 1.5 billion and consists of EUR 501 million for the concession, an additional annual concession fee ranging between EUR 4.5 and 16 million, and the pledge to invest a further EUR 732 million.”
“The award procedure was conducted in a way that satisfied high international quality requirements, which goes to show that the Serbian government easily lives up to European standards in terms of transparency,” said CMS Partner Radivoje Petrikic, who co-headed the firm’s team on the matter along with Partner Maja Stepanovic. “This has once again strengthened Serbia’s standing as a favorable business location and attractive target for investors.”
In addition to Petrikic and Stepanovic, the Belgrade CMS team included Partners Marija Tesic and Dorde Popovic and Attorneys-at-Law Nebojsa Pejin, Dragana Jandric, Ljubinka Tubic, Jovana Bingulac, Anja Tasic, and Mihajlo Matkovic.
Zivkovic Samardzic has advised the SRA Group on setting up its presence in Serbia.
According to Zivkovic Samardzic, the group consists of 14 operating companies and SRA Holdings Inc., which is listed on the First Section of the Tokyo Stock Exchange. Its businesses involve systems development, system operations, and infrastructure development, and product sales businesses in Japan and around the world, delivering services “that directly enhance international competitiveness for clients aspiring to expand globally and provides outstanding, cutting edge product solutions and services from both Japan and overseas, starting with SRA’a own proprietary IP products.”
The Zivkovic Samardzic team was led by Corporate and M&A Partner Igor Zivkovski.
Zivkovic & Samardzic has achieved victory in a freedom of expression case for broadcaster B92, its former journalist Nikola Radisic, and its news and current affairs editor and chairperson of the Board of Directors Veran Matic, in the Supreme Court of Cassation of Serbia.
B92, Radisic, and Matic were defendants in civil proceedings involving a defamation claim brought by Dragoljub Milanovic, the former director-general of state broadcaster Radio Television Serbia (RTS). Radisic reported for B92 Television on Milanovic’s first public appearance in 2012, following the former RTS director-general’s release from prison, where he served a nine and a half year sentence handed down for failure to evacuate RTS employees from the broadcaster’s building during a NATO bombing campaign, despite being ordered to do so by the Federal Government. Sixteen employees of RTS died when a NATO missile hit the building on the night of April 23, 1999.
Milanovic claimed that a statement by Radisic on that broadcast in which he alleged that the former Director General had “sacrificed his employees’ lives“ was untrue. The Higher Court in Belgrade initially rejected Milanovic’s claim, but that judgment was later overturned at the Appellate Court in Belgrade. The Supreme Court of Cassation of Serbia set aside the ruling of the Appellate Court and affirmed the ruling of the Higher Court in Belgrade, finding that Radisic’s use of the term “sacrifice“ was a value judgment not susceptible of proof. Additionally, the Supreme Court of Cassation of Serbia held that Milanovic’s earlier conviction that resulted in the nine and a half year prison sentence served as a sufficient factual basis for the impugned statement, which was thus not excessive.
Zivkovic & Samardzic’s team was led by Media and Telecommunications Senior Associate and Head of Media Litigation Kruna Savovic.
The Maric i Mujezinovc law office in cooperation with Kinstellar provided local advice to Vetroelektrane Balkana in relation to the EUR 300 million financing of the largest wind farm project in Serbia. The lenders were advised by Karanovic & Nikolic and Norton Rose Fulbright.
The developer, Vetroelektrane Balkana, is owned by Tesla Wind – a joint venture between Masdar, a renewable-energy company based in Abu Dhabi – and Cibuk Wind Holding, a subsidiary of the US-based wind-energy developer Continental Wind Partners.
The lenders include EBRD, and the International Finance Corporation, which are joined by B-lenders including Banca Intesa, Erste Bank, UniCredit, and The Green for Growth Fund.
The EUR 215 million financing is divided equally between the EBRD and the IFC. The EBRD is providing a EUR 107.7 million syndicated loan, EUR 55 million of which is syndicated to B lenders. The IFC, a member of the World Bank Group, is providing EUR 107.7 million through its Managed Co-Lending Portfolio Program and partially through syndicated B loans.
The Cibuk 1 wind farm, which has a 158 MW capacity, is the largest wind farm project to date in Serbia and the Western Balkans. The wind farm will be located in the area belonging to Kovin municipality, and will possess 57 wind turbines, supplied by GE Renewable Energy. The wind farm will consist of 57 GE wind turbines and will cover an area of approximately 40 square kilometers. Cibuk 1 is expected to provide electricity to 113 thousand households and reduce carbon emissions by more than 370,000 tones.
According to estimates, the plant will be connected to the grid in the first half of 2019. The construction of Cibuk 1 is expected to create 400 jobs in the area, and Kinstellar reports that it will “improve the local infrastructure by providing for 50 kilometers of roads.” The project should help Serbia meet its commitment to having 27% of its gross energy consumption coming from renewable energy sources by 2020.
The Kinstellar team was led by Partners Branislav Maric and Selma Mujezinovic and included Senior Associate Tijana Arsenijevic and Associate Tamara Zejak. A number of other members of Kinstellar’s local and regional teams assisted throughout the duration of the project, including Budapest-based Partner Kristof Ferenczi and Managing Associate Balazs Sepsey and Belgrade-based Managing Associate Dragana Bajic, Senior Associate Andreja Vrazalic, and Trainee Una Draganic.
Karanovic & Nikolic acted as the local counsel for EBRD and IFC, and advised on all local law aspects of the financing, including the preparation of due diligence, support in the negotiations of the facility agreement, and other financing and project documents. The firm’s team was led by Partners Maja Jovancevic Setka and Petar Mitrovic and included, among others, Partner Katarina Guduric, Senior Associate Ana Lukovic, and Associates Marija Vicic and Aleksandar Sukiban.
Norton Rose Fulbright did not reply to our inquiries.
Editor’s Note: After this article was published Karanovic & Partners reported that Cibuk 1, the largest wind farm in the Western Balkans, had officially started operations on October 11, 2019.
BDK Advokati has advised Enlight Renewable Energy, as the sponsor, and Electrawinds K-Wind, as the borrower, on the EUR 142 million project financing of Serbia’s 104.5 MW Kovacica Wind Farm provided by parallel loans from Erste Group Bank AG (supported by the German Export Credit Agency Euler-Hermes), Erste Bank Serbia, and the EBRD. Dentons was international counsel to Enlight, and the lenders reportedly were advised on international law by Norton Rose Fulbright and by Harrisons on local legal matters.
BDK Advokati describes the deal as “Serbia’s first large-scale energy project financing transaction to have successfully reached financial close.”
The total project value of the Kovacica wind farm is approximately EUR 189 million. The wind farm will consist of 38 GE 2.75-120 wind turbines, and will provide electricity to more than 65,000 homes in northern Serbia while reducing Serbia’s annual CO2 output by approximately 247,000 tons, in the process contributing to the country’s goal to raise the share of energy consumption from renewable energy sources to 27 percent by 2020.
The BDK Advokati team was led by Senior Partner Dragoljub Cibulic with support from Senior Associate Jelena Zelenbaba and Associates Dragoljub Sretenovic and Djordje Zejak.
The Dentons team included Counsels Agnieszka Kulinska and Agnieszka Lipska.
The Harrison’s team advising the lenders consisted of Consultant Ines Matijevic-Papulin and Senior Associate Jovan Cirkovic, assisted by Lawyers Stefan Nesic and Mina Markovic and Associate Vladimir Boskovic.
JPM has advised Barentz, an international distribution company of high-quality ingredients, on the acquisition of Soforebo-Commerce d.o.o. Sombor.
Soforebo was established in 1993 and soon became a market leader in the distribution of functional proteins in the Balkans. Barentz has fully acquired the company, and will also take over the operation of the business.
JPM Partner Nikola Poznanovic led the JPM team.
Serbian lawyer Mirko Lalatovic has become the new Head of Compliance, Central and Northern Europe, at Fresenius Medical Care — a German company specializing in the production of medical supplies, primarily to facilitate or aid renal dialysis.
Fresenius Medical Care operates more than 40 production sites on all continents, with its largest plants in terms of production output in the United States, Germany, and Japan.
Lalatovic, who is based in Frankfurt am Main in Germany, first joined Fresenius as the West Balkan Compliance Office in October 2015. Before that he spent almost seven years with Kinstellar and a little over two years with DLA Piper. He graduated from the University of Belgrade in 2006 and obtained a Masters of Law in 2008 from the Pantheon-Sorbonne University in Paris.
According to Lalatovic, Fresenius “has more than 120,000 employees, operating in more than 150 countries, with an annual turnover of EUR 18 billion and more than 3,400 clinics worldwide. It is listed on most significant stock exchanges on the world, including the New York Stock Exchange. As such, this company falls under the watchful eye of numerous regulators, both local and those with worldwide authority and powers. Building a compliance program in such a company and working in the compliance department is a big professional challenge. In my previous role, I was responsible for five ex-Yugoslavia countries (Serbia, Croatia, Bosnia and Herzegovina, Slovenia, and Macedonia) which is a quite turbulent region from the compliance point of view. The CENE region is much bigger (it consists of 15 European countries, including big countries such as Germany and Poland) where business is much more complex and sophisticated than in Balkan countries. The medical devices sector is very dynamic and the challenges are high and interesting.
Also, contrary to my previous life, where I worked as a corporate lawyer with major international law firms like DLA Piper and Kinstellar, working in such a big company like Fresenius Medical Care allows me to learn more about business itself (I would even say three different businesses, since within Fresenius Medical Care, I am advising on production, sales, and providing business). Each of these businesses has its own compliance risks and in order to mitigate these risks, a compliance person must understand and learn about the business and its procedures. Compliance must be a business partner: to support, assist and correct, when necessary.”
AP Legal Acted has advised UniCredit Bank Srbija a.d. Beograd (a subsidiary of Elicio) on financing provided it and International Finance Corporation (IFC) for the development of the Alibunar wind-farm by Electrawinds-s d.o.o. Belgrade. IFC reportedly was advised on English law by Allen & Overy and on Serbian law by Karanovic & Nikolic.
AP Legal’s involvement included drafting and negotiating the VAT facility agreement, the hedging agreement, and all security documents related to the two agreements. The firm also supported various financing decisions involving all finance parties including the accounts agreement, the inter-creditor agreement, the project support agreement, and various security documents.
AP Legal’s team consisted of Counsels Aleksandar Preradovic and Aleksandra Jovic.