Category: Serbia

Fresenius Medical Care has appointed Belgrade-based Mirko Lalatovic to the role of Head of Compliance, Central & South East Europe, EMEA.

Lalatovic has been serving as the Head of Compliance for South Eastern Central Europe at the company since 2020 (as reported by CEE Legal Matters on January 9, 2020). He first joined the company in 2015 as the West Balkan Compliance Officer.

Before moving in-house, Lalatovic was a Senior Associate with Kinstellar between 2009 and 2015 and a Junior Associate with DLA Piper between 2006 and 2009.

“I am honored to take over the position of Head of Compliance, Central & South East Europe, EMEA, within my company Fresenius Medical Care,” commented Lalatovic. “In the last seven years or so, we did amazing progress in our compliance-related structures and processes. We have built and designed a robust compliance program to ensure that our company has everything necessary to make business decisions in the right and compliant manner. This is a keystone of our business success. We will continue with this task and we have to be committed to the common goal of creating a consistent compliance culture in our day-to-day lives. I am proud to be a part of such a project.”

Originally reported by CEE In-House Matters.

Former Senior Associate Andjelka Radovanovic has been promoted to Partner at NSTLaw Stankovic & Partners on January 1, 2023.

Specializing in labor, corporate and M&A, and dispute resolution, Radovanovic first joined the firm in 2021 as a Senior Associate and Head of its Commercial Practice (as reported by CEE Legal Matters on June 22, 2021). Before joining the firm, she practiced law within the Andjelka Radovanovic Law Office from 2015 to 2020. Radovanovic was an Attorney-at-Law with the Andric Law Office from 2013 to 2014, and with Ferretti Ippolito & Partners in 2012. Earlier, she spent over four years with Joksovic Stojanovic & Partners, as a Trainee Lawyer from 2007 to 2009 and an Attorney-at-Law from 2010 to 2012.

“We are delighted to recognize Andjelka with this well-deserved promotion and value her important contribution to our leading corporate and commercial practice,” NSTLaw Founding Partner Nenad Stankovic commented. “Her international links also further enhance Stankovic & Partners’ global outlook.”

The renewables sector in the Republic of Serbia has been growing for a while with a focus on wind energy, solar energy, biomass, and biogas and as recently on agrivoltaics.

According to the Republic of Serbia’s firm policy orientation towards renewables reflected in the draft of the Integrated National Energy and Climate Plan (NECP), it is expected that the Republic of Serbia should generate 40% of its overall energy generation from renewable resources in 2030. This represents a significant rise in comparison to 27% which is figurate as a set threshold today.

In April 2021, the Republic of Serbia adopted four energy laws, including the Law on the Use of Renewable Energy Sources. The enactment of the said laws together with the accompanying secondary legislation such as the Feed-in Premium Decree and the Decree on Prosumers, represents a significantly improved and modernized legal and regulatory framework for transitioning to auctions to award Contracts for Difference for utility-scale projects and FITs coupled with PPAs for small-scale projects.

In August 2021, the Republic of Serbia adopted a decree on “prosumers” that, together with the Law on Use of Renewable Energy Sources, creates a comprehensive framework for net metering that was later backed by a rebate program for rooftop PV. The decree defines the criteria, conditions, and billing methods for different types of prosumers, such as single-family households, residential buildings, companies, and power suppliers.

The first auction for 400 MW of wind power capacity was planned for late 2022
with technical assistance from the EBRD, whereby it is still delayed due to a lack of secondary legislation which is expected to be enacted in the first quarter of 2023.

The auctions for market premium cannot be organized before the enactment of the Decree on taking on balance responsibility and the criteria for determining the liquidity of the organized intraday market with a model of the agreement on taking on balance responsibility. The outstanding decrees to be enacted to complete the legislative framework for renewables are:

(i) the Decree on a model of the agreement on the Feed-In Tariff;

(ii) the Decree on the producer of electrical energy from renewable energy sources and an origin guarantee;

(iii) the Decree on the compensation for the incentive for preferred producers; and

(iv) the Decree on incentive measures for reaching the share of renewable energy sources in traffic.

In addition to the above legislative improvements and decrees to be adopted, it is expected that the Serbian energy regulator (Energy Agency of the Republic of Serbia) will carefully observe the changes in the market from the date of the enactment of the Methodology for determination of maximum purchase price for the electric energy adopted last December and to reflect them into the Methodology to be adopted by the end of December 2022 for the next year.

Currently, the renewable energy development in Serbia shows three parallel streams which are not followed by the same dynamics of implementation but go in the same direction of reaching the above-set threshold by 2030.

The first stream represents a robust initiative of a fan of private investors who are developing principally wind power plants and solar power plants, all together exceeding 15 GW, which is a significant step forward for a small country like Serbia, followed by the developments in biomass and biogas domain. This dynamic group gathers international and local players who have determined the further course of the renewables sector development due to the successfully completed projects and many of those in the pipeline, building long-term trust in clean energy and promoting the viability and sustainability of renewable projects in the Republic of Serbia.

The second stream represents an ambitious but still postponed in time project of the state-controlled power utility Elektroprivreda Srbija (EPS). EPS is shifting its operations to the renewables and construction of a 75 MW Kostolac wind farm with an installed capacity of 300 MW and well it envisages the construction of two pumped storage hydropower plants – Bistrica and Đerdap 3 for some time in 2025 for which year it also envisages the start of construction of its first solar power plant. The construction of wind and solar power plants is aimed to be implemented in former open-pit coal mines.

The third stream of development is represented by prosumers (the entities which are both energy producers and consumers) – the increasing number of citizens and companies that are installing solar power systems for their own consumption, leading to and resulting in decentralized energy grids.

The renewable energy market in the Republic of Serbia is dynamic and versatile which appears to ensure the expected further developments in direction of a smooth transition and reaching of the set energy generation threshold set for 2030.

There are several factors that draw the attention of investors to the renewables sector in Serbia. Firstly, there is the local availability of energy and energy sources in the Republic of Serbia in terms of the existence of all types of renewable energy sources – wind, sun, hydropower, biomass, biogas, etc.; as well as coal (lignite). The Republic of Serbia does not possess natural gas, oil, oil derivates, or nuclear fuel and it is significantly dependent on the import of these energy sources. Even in previous years during the short-term energy crisis, it has become apparent that the Republic of Serbia needs to ensure long-term energy stability via diversification of energy sources and energy supplies.

The current global energy crisis has additionally emphasized the importance of the security of supply and reliance on energy resources on our own territory or in very close vicinity. Secondly, renewable energy technologies by their nature are more resilient to different external factors than conventional energy technologies, which is extremely relevant in times of global energy crisis of conventional energy sources and risks associated with conventional energy systems. Thirdly, the renewable energy projects are expected to be commercially efficient as the full lifetime costs of construction and maintenance are expected to be well covered by the electricity generation price plus the power plants using renewable energy sources will have additional revenue by selling certificates of guarantee of origin on the domestic or regional market. Fourthly, there is an improved legislative framework and firm orientation of the stakeholders to the Green Agenda and clean energy as well as long-term support of the international financial institutions, especially EBRD, WB, and EIB. Fifthly, there is a strong renewable energy community enhanced by the incorporation of the Association Renewable Energy Sources of Serbia (RES Serbia), a business association founded in March 2021 and aimed at improving the business environment in the renewables sector and promoting the generation and use of electric power from renewable energy sources. Sixthly, there is a track record of successful renewable energy projects in the Republic of Serbia already generating electric power from renewable energy resources, constructed in line with the best international standards and finances by international financial institutions.

The role of EBRD as the leading institutional investor in Serbia should be emphasized as well. Apart from providing support to the state institutions in creating a stimulating environment for investments and a significantly improved legislative framework, it has made an immense contribution by fostering the introduction of an auction system for renewable energy sources.

Additionally, it is cooperating with several local self-governments in the Republic of Serbia on feasibility studies related to the implementation of renewable sources in remote heating systems. Together with the Government of Austria, it has formed the Renewable District Energy in the Western Balkans (ReDEWeB) Program, which was also supported by the Swiss State Secretariat for Economic Affairs (SECO), whereby capital grants and support in project realization and improvement of regulations were secured. These funds are dedicated to the preparation of studies that test the possibilities of implementing new technologies, such as solar-thermal facilities and heating pumps, but also the possibility of energy rehabilitation of facilities connected to the remote heating system. The studies are being prepared for the cities of Novi Sad, Pančevo, Šabac, Bor, Zrenjanin, Kraljevo, and Valjevo. The EBRD and other financial institutions in Serbia are providing designed credit lines dedicated to citizens and commercial entities to finance energy-efficient technologies in their homes and their premises/facilities.
Apart from the EBRD, the Republic of Serbian has been granted great support in the promotion and development of the renewable sector by the IFC, KfW Development Bank, EIB, GIZ, UNDP, USAID, etc.

On the other hand, there are still respective deterrents to more investments in renewables in Serbia such as:

(i) slow speed in project implementation – there is a recognized trend of slow speed implementation of renewable energy projects in the past years. This has predominantly been caused by delayed enactment of the adequate legislative framework supporting the implementation of renewable energy projects in compliance with international standards and it is continuing due to the delayed enactment of the relevant secondary legislation enabling the implementation of the incentive novelties introduced by the recent changes of relevant laws;

(ii) low tariffs for fossil-based energy – there is still a trend of subsidized energy tariffs for fossil fuel-based energy which represents a huge deterrent to the long-term success of renewable energy projects as they are directly affecting the level of competitiveness of renewable energy projects. To enter the greater room for renewables the public policy should be such that the conventional energy tariffs should be at a similar cost level as renewables;

(iii) competition with other energy sources – In times of a need for additional capacity to match the growing energy demand, nowadays dictated by the global energy crisis, different states are trying to urgently resolve the issue of increased demand in conditions of global energy instability. The Republic of Serbia is planning additional power capacities, especially coal plants but it is not even excluding the consideration of nuclear power as an alternative to decarbonizing the power sector;

(iv) protestor’s actions and public opposition – even though the Republic of Serbia is developing renewable energy projects for some time, there is still significant public opposition mainly around small hydropower plants (currently under moratorium). This problem could be mitigated by improved environmental, social, and sustainability assessments supported by improved legislation and public policy support. The new set of laws passed in 2021 improved the legislative framework and diminished the gaps leaving room for public opposition. However, it seems that there is still a need for raising awareness of the necessity of transformation to clean energy in the general public to support public policy and enhance investments;

(v) investment risks and uncertainties – the risks of the investments have increased with Covid 19 as well as with the current global instability which significantly affects the supply chains and causes long construction delays, especially in this sector which is highly dependent on technology import. These risks are today additionally complicated by the combined risk of inflation and associated local currency risks. On the other hand, renewable energy projects assume long-term financial planning supported by the proper policy ensuring the long-term sustainability of the project. The moment of transition from feed-in tariffs to feed-in premiums is also a very important factor associated with the investment risk as it tackles the issue of the real maturity of the market and its capacity to smooth the transition;

(vi) non-existence of a proper balancing of generation and consumption which is crucial for energy security – it is very important to ensure the balance of variable supply with the demand over various time frames. In times when variable energy is scarce it should be balanced by other energy sources or stored for future use on a seasonal basis. The existing wind power plants in Serbia are concentrated in a relatively small area, therefore spatial dispersion of renewables, both wind power, and photovoltaic plants is very important for reducing the balancing deviation. This introduces another “hot” topic of further investments into so-called hybrid projects that incorporate hydropower capacities and/or energy storage technologies. The hybrid projects are not commercially attractive as they assume significantly higher capital costs and extended payback periods and their implementation could not sustain without state support.

There are currently two commercially viable technologies for electrical energy storage: pumped-accumulation power plants and energy battery systems. In the next decade, hydrogen and ammonia storage is expected to become a commercially justified technology. In addition, load management and demand response, as well as the so-called “electrification” of the transport and heating sectors, can be effective ways to achieve a balance between production and consumption; (vii) lack of strong domestic technology supply chain – having in mind that renewable energy production is associated with relatively smart technologies, the deployment of renewables is usually based on import what increases the overall costs and creates less economic value.

Investing in the domestic technology supply chain would be one of the crucial instigators of the future development of the renewable sector.

By Jelena Gazivoda, Senior Partner, JPM Jankovic Popovic Mitic

NKO Partners has advised Emmezeta on its acquisition of Novi Sad real estate from Delhaize. Petrikic & Partneri in cooperation with CMS advised the seller.

According to NKO Partners, “the transaction is structured after a leaseback model, whereby Delhaize would manage and operate a part of the facilities which are to be reconstructed, while Emmezeta would use the remainder of the site for its retail operations.”

Emmezeta is a furnishings, household appliances, and home decor retailer with multiple stores in Croatia in Serbia.

Belgian retail store company Delhaize operates supermarket chains in eight countries, including Serbia, Romania, and Greece. It is listed on Euronext Belgium.

The NKO Partners team included Partner Djordje Nikolic and Senior Associates Branko Jankovic and Andjela Mirkovic.

The CMS team was led by Partner Ivan Gazdic.

Aleksic & Associates Special Advisor Vladimir Kozar has been elected as the new Head of the Civil Law Department at the Faculty of Law for Commerce and Judiciary in Novi Sad, a division of the University Business Academy in Novi Sad.

Kozar has been with Aleksic & Associates since 2015, which is the same year when he became a professor at the Faculty of Law for Commerce and the Judiciary.

Harrisons has advised the EBRD on its EUR 21.4 million loan to the Metalfer Steel Mill in Sremska Mitrovica, Serbia.

The Metalfer Steel Mill is a Serbian concrete-reinforcement steel manufacturer.

“The proceeds of the loan shall be used for the construction of a new rolling mill for processing scrap metal and semi-finished products, which will improve efficiency and reduce emissions, as well as a new rooftop solar photovoltaic mini-plant, producing up to four megawatts of renewable power to meet production needs,” Harrisons informed.

According to Harrisons, the loan will enable Metalfer to meet high demand from the construction industry, both domestically and across the region.

The Harrisons team was led by Consultant Ines Matijevic-Papulin and included Associates Mina Markovic and Aleksandar Jovicevic.

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

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

Overview of the most significant amendments and supplements is presented below:

• Citizens shall pay their annual income tax through self-taxation system on the income generated in the calendar year, in accordance with this law, and no longer on the basis of the decision rendered by the competent tax authority;
• Even though the tax payer for the annual personal income tax is obliged to submit a tax return with accurate data for the realized income to the competent tax authority at the end of such year, no later than May 15th of the following year, based on the data from the official records, the tax authority enters the data into the tax return application and posts it on the Tax Administration Portal until April 1st of the year following the year for which the annual personal income tax is determined, at the latest. The taxpayer is obliged to amend or supplement the tax return application in the part which does not show correct and appropriate data and afterwards submits the tax return application in electronic form via Tax Administration Portal, and if the taxpayer does not submit the tax return application within determined deadline, The Tax Administration submits a tax return application on behalf of that person;
• Standardized costs in the dinar amount of 96,000 dinars, i.e. in the amount of 57,900 dinars have been recognized based on the income that the natural person generates in a quarter, in connection with: (i) income from copyright and related rights on which tax is paid through self-taxation system (with exception of revenues generated by a tax payer who has the status of an independent artist in accordance with the law regulating field of culture) and (ii) income based on the agreed remuneration for the work performed, on which tax is paid through self-taxation system, which a natural person realizes on the basis of the agreed remuneration for the performed work, for which tax is paid through self-taxation system. It should be noted that the first adjustment of the mentioned standardized costs with the annual consumer price index shall be carried out starting from the year 2024;
• The non-taxable amount of salary has been increased and now amounts to 21,712 dinars, and the first adjustment of this amount with the annual consumer price index shall be carried out starting from the year 2024;
• In case of by entrepreneurs and agricultural entrepreneurs, persons who are not registered with the Business Registers Agency, notification on determination for paying personal salary shall be submitted in electronic form via Tax Administration Portal, within five days from the date of registration with the Tax Administration, i.e. from the day of the tax identification number assignment, and no later than December 31st of the current year;
• Persons are not registered with the Business Registers Agency submit a request for flat-rate taxation in electronic form via Tax Administrations Portal, within five days from the date of registration with the Tax Administration, i.e. from the day of the tax identification number assignment, and no later than December 31st of the current year;
• Although, in general, the tax rate on income from copyright and related rights and industrial property rights is 20%, exceptionally, the tax rate on income from contractual remuneration generated from copyright and related rights for which tax is paid through self-taxation system, and for which the abovementioned standardized costs are applied in accordance with the Law, shall be 10%;
• The tax rate for contractual renumeration for work performed, for which tax is paid through self-taxation system and for which the abovementioned standardized costs are applied in accordance with the Law, shall be 10%. 

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. If you should need additional information, please contact us directly.

By Sara Necic, Senior Associate, PR Legal

At the beginning of last year, the Electronic Invoicing Act (“Act“) was passed, which entered into force on May 7, 2021. Since the Act brought significant changes to the Serbian economy, the application of some provisions of the Act is postponed, so the latest set of provisions will apply from January 1, 2023. It is when VAT payers must start issuing electronic invoices in all mutual transactions with other VAT payers from the private sector and transactions with public sector entities. Even in the very first stage of this Act, Gecić Law gave an insight into which novelties we can expect.

The principal novelty of the Act is e-invoices as digital, dematerialized, and non-paper versions of invoices transferred through specially dedicated software from the issuer to the recipient of electronic invoices. Whether in paper or electronic form, an invoice is a document that is of great importance in everyday business both for the participants and for the tax authorities to calculate and collect taxes, for courts in litigations, and public enforcement offices in enforcement proceedings, i.e., the compulsory collection of claims. The latter is perhaps the most significant since the Act explicitly prescribes that the e-invoice is a credible document based on which authorities can initiate enforcement. The issuer or an intermediary (a legal entity licensed by the Ministry of Finance and registered in the competent register of intermediaries) must send the invoice to the recipient through a specifically designed system of electronic invoices.

In 2023, electronic invoices will therefore be used in transactions between:

public sector entities (including state-owned enterprises as sui generiscompanies),
VAT payers as private sector entities, and
public sector entities on the one side, and private sector VAT taxpayers, on the other.
Tax proxies of foreign-based entities in transactions with entities of both the public and private sectors must also issue e-invoices. Additionally, the Act creates the necessary preconditions and defines the parameters for the electronic invoicing system to be applicable and sustainable. It is essential to point out that within the private sector, electronic invoicing is mandatory only for VAT payers, which will significantly enhance complete and efficient control over VAT calculation and collection, and reduce the possibility of tax evasion, fraud, and other illegal actions.

For other legal entities that are not in the VAT system and self-employment income taxpayers, electronic invoices are only an option and not a legal obligation. Thus, self-employed taxpayers within the meaning of the Personal Income Tax Act and the taxpayers of corporate income tax in terms of the Corporate Income Tax Act can apply and use the system of electronic invoices at their discretion.

The introduction of electronic invoices consequently influenced changes to other relevant regulations. Accordingly, the Act on deadlines for settling monetary obligations in commercial transactions was also amended. The amendments state the existence of electronic invoices (in addition to regular invoices), and economic entities are obliged by this law to deal with e-invoices.

To summarize, the final implementation phase of the electronic invoice system starts on January 1, 2023, when the complete application of the Act to private sector VAT taxpayers officially begins. Bear in mind that for non-compliance with the above (e.g., the company does not issue an electronic invoice, does not electronically report VAT, refuses to receive an e-invoice, etc.), the company may be fined for a misdemeanor between RSD 200,000 to 2,000,000.

By Danica Misojcic, Senior Associate, Gecic Law

Moravcevic Vojnovic and Partners in cooperation with Schoenherr has advised MaxBet on its agreement with CT Gaming Group member Bargame to acquire the El Dorado Slot Clubs in Serbia.

The transaction remains contingent on regulatory approval.

MaxBet is a gaming and betting company in Southeast Europe with operations in Serbia, Montenegro, Bosnia and Herzegovina, and North Macedonia. CT Gaming is a gaming company with installations in more than 50 jurisdictions.

The Schoenherr team was led by Partner Luka Lopicic and included Partner Srdjana Petronijevic, Attorneys-at-Law Pavle Eric, Dorde Trifunovic, and Zoran Soljaga, and Associate Milos Jokic.

Schoenherr did not respond to our inquiry on the matter.