NKO Partners has advised CTP on its acquisition of almost 33 hectares of land in Simanovci, near Belgrade, from EBP Development. The SOG Law Firm advised EBP Development.
According to NKO, the land, intended for industrial development, comprises more than 60 cadastral lots and covers an area of almost 33 hectares.
NKO’s team was led by Senior Associate Luka Aleksic.
The SOG team included Partner Milos Gledovic and Senior Associate Nemanja Providzalo.
Harrisons has advised the EBRD on a EUR 25 million loan to the MK Group.
According to Harrisons, the MK Group is the largest Serbian producer and trader of agricultural commodities, with companies engaged in sugar production, farming, and meat processing. “The proceeds of the loan will be used to finance investment in MK Group’s farming and sugar operations, giving the group a boost during the current food security crisis and helping it to develop its agribusiness division. The funds will also be used to expand the digitalization of agricultural processes.”
In 2020, Harrisons advised the EBRD on a EUR 25 million loan to MK Group subsidiary Sojaprotein (as reported by CEE Legal Matters on November 5, 2020).
Harrisons’ team was led by Principal Mark Harrison and Consultant Ines Matijevic-Papulin and included Associate Mina Markovic.
The Government of the Republic of Serbia adopted the Decision on the amount of the minimum wage for the period January-December 2023, by which the minimum wage in Serbia was increased from net 201.22 RSD per working hour to net 230 RSD in 2023.
The minimum net monthly wage varies depending on the number of working hours in the respective month and for the current year, it is from 32.195,20RSD to 37.024,48 RSD, while for the next year it will be from 36.800,00 to 42.320,00RSD, which represents an increase of 14.3%.
Minister of Finance announced that from January 1, 2023, there will be an increase in the non-taxable amount of income from 19,300 RSD to 21,712 RSD, in order to reduce the tax burden on employers and to avoid the dismissal of employees in Serbia due to the increase in the minimum wage.
By Jelena Nikolic, Partner, and Marko Ilic, Senior Associate, JPM Jankovic Popovic Mitic
The Fiscal Council of the Republic of Serbia published on 29 September 2022 the „Proposal of social and tax policy measures for reducing inequality and poverty risks in the Republic of Serbia“. One of the proposed measures of tax policy for reducing inequality is doubling the limit of non-taxable salary amount, from RSD 19,300 to RSD 40,000 and introduction of non-taxable census of RSD 20,000 per month, to be granted for each household member – dependent. In order to maintain the existing level of budgetary funds, should this proposed reform of individual income tax be adopted, i.e. in order to prevent decrease of budgetary funds due to the reform, it is necessary to increase the salary tax rate from 10% to 15% in parallel with increase of non-taxable census and introduction of non-taxable census for household members-dependents.
The proposed measures corelate with the analysis published by the Fiscal Council on 1 July 2021 under the name „Two decades of individual income tax: Possibilities and need for system reform“. In this analysis, the Fiscal Council pointed out a legit remark regarding unequal tax treatment of different types of engagement (employment relationship, engagement through a service agreement or agreement on temporary and occasional activities, and other).
On the other hand, the analysis from the year 2021 does not address the matter of flat rate taxation almost at all, since it addresses it by only one paragraph where it states that the flat rate taxation option is too wide, and that this does not correspond with the good business practice principle. The opinion of the Fiscal Council is that the tax equity principle may be compromised due to such policy, both observed in relations between citizens who pay regular taxes and contributions, and in relations among flat taxpayers who accrue significantly different levels of income.
In the analysis from the year 2021, the Fiscal Council underlines that the experts from IMF proposed, as one of the possibilities for improvement of fairness in this field, that the limit for flat rate taxation is reduced from six to two million dinars of annual turnover. Also, and in order to avoid sudden change of conditions for a large number of taxpayers who are currently in flat tax rate system, the proposal is to introduce a “semi-flat tax rate“ system for tax payers with annual turnover between two and six million dinars. Such new taxation regime would represent a sort of compromise between the current flat tax rate taxation system and regular taxation, whereby the taxpayers would be obliged to keep simplified versions of business records and tax would be calculated on the basis of simplified rules (e.g. as percentage of turnover).
Even though there are no significant general remarks to the statement that the possibilities for flat rate taxation are set too widely, the most substantial issue of flat rate taxation is represented in the fact that the basic criteria, i.e. only criteria for flat rate taxation is the income, i.e. turnover of the tax payer.
Both the Fiscal Council and the IMF fail to identify the fundamental problem, i.e. the reason due to which entrepreneurs gravitate towards flat rate taxation, whenever possible. Fundamental reason for entrepreneurs to opt for flat rate taxation is not related to the amount of their income, but lies in the manner of treatment of expenses of entrepreneurs who are not in the flat tax rate system. Namely, the income accrued by entrepreneurs through their business activity is used for two purposes: for covering of business expenses, but also for covering of personal (living) expenses, unlike the legal persons – companies who use the accrued income for covering of business expenses and realization of profit. However, the rules for recognition of expenditures are the same for entrepreneurs and for companies.
Therefore, the fundamental problem that leads to such broad application of flat rate taxation should not be searched for in the system of flat rate taxation, but in the tax treatment of entrepreneurs who do not use flat rate taxation system, i.e. in the manner and scope of their expenditures that may be recognized for the purposes of determining the tax base in cases when taxes are paid on the basis of actual (not flat rate) income. Namely, only expenses that are recognized in regard to companies are recognized to these entrepreneurs. Such treatment of expenditures of entrepreneurs is not justified. In the same manner as the Fiscal Council points out and proposes that it is not justified to pose a different tax treatment of incomes of persons engaged by the service agreement, or by other form of engagement, from the one of the employees (in employment relationship), having in mind similar nature of these engagements from the perspective of the engaged person, we may pose a remark that it is not justified to treat expenses of entrepreneurs – natural persons and of companies in the same manner, having in mind different nature of these expenditures from the perspective of the income recipient.
If this issue is well thought out, it does not seem logical that the flat rate taxation system is based on flat income determined for the entrepreneur – even though the income of each entrepreneur is known and undisputable, while the expenses that entrepreneurs bare and which may be recognized (in regard to their actual expenses in connection to both business activities and living expenses) are not known, i.e. nobody takes them into consideration.
In other words, if the position of entrepreneurs – who are natural persons, on one hand, and they conduct business activities, on the other hand – would be recognized, and if specific rules for recognition of expenses (that would include living expenses) of entrepreneurs would be introduced, many entrepreneurs would abandon flat rate taxation system themselves. For example, if we take that an average consumer basket amounts to a little over than RSD 86,000, as per the latest available data from July 2021, mere recognition of this amount as an expense would amount to a little over RSD 1,000,000 on annual level. When this amount would be applied to actual income of each entrepreneur, the entrepreneurs who accrue higher incomes would pay more taxes than the ones who accrue smaller income, while the tax relief for all of them would be obvious, thus the entrepreneurs would be motivated to leave the flat rate taxation system.
To summarize, having in mind that the income of entrepreneurs – natural persons, represents in its essence income from which the entrepreneurs cover their business expenses, as well as their living expenses, including the potential expenses of their dependents – household members, it is necessary to consider both types of these expenses when determining which expenses shall be recognized for taxation purposes.
This way, the proposal of the Fiscal Council to introduce reliefs (to natural persons) through additional non-taxable amounts for dependents – household members, could be applied to entrepreneurs as well (through additional amounts of recognized expenses), which would mean that this concept is applied fairly to all natural persons, whereby the tax discrimination of entrepreneurs, which is indisputably present in current tax policy principles, could be avoided thereof. The costs of women entrepreneurs who decide to become mothers and have costs related to child delivery and costs which arose for those women, especially in the year when delivery occurs, could also be treated in special manner. In present atmosphere of noticeable tendency of encouraging awareness of position of entrepreneurs and present policy of inciting entrepreneurship (especially in connection with IT services provided by resident natural persons to foreign customers, which, at the same time, lowers the unemployment rate), such measure of fiscal and tax policy would be the first step in this direction.
By Nikola Djordjevic, Partner, and Marija Vukcevic, Senior Associate, JPM Jankovic Popovic Mitic
The Icelandic data protection authority (Personuvernd) (“DPA”) recently held that there is a conflict of interest if a data protection officer in a company simultaneously acts as a representative, i.e., member of the same company’s management.
Investigation enforcement
The respective decision was enacted after the DPA investigated operations of an Icelandic genetic research company.
Namely, during the investigation, the DPA requested from the company to provide certain data to examine if the company’s data protection officer is compliant with provisions of Article 38 of the GDPR.
Outcome of the procedure
Having implemented the appropriate procedure, i.e., actions, the DPA concluded that there was no infringement of Article 37 of the GDPR, which refers to the obligation to appoint a data protection officer, or of the provisions of Article 38(1) and Article 38(2) of the GDPR, under which the subject person shall be timely and properly informed of all issues relating to personal data protection and have access to appropriate resources for performance of his/her duties.
However, the acting authority found that in this case the controller violated the provision of Article 38(3) of the GDPR, which refers to the independence of data protection officer, i.e., which prescribes that the controller/processor of personal data will ensure that the respective person does not receive instructions regarding the performance of his/her tasks, as well as the he/she cannot be subject to sanctions for performing these tasks, whereas the reporting on his/her work would be performed directly to the highest management level of the controller/processor.
Namely, in this case, at the time of investigation, data protection officer simultaneously performed the function of deputy CEO of the company concerned, as well as its board member, which implies the conflict of interest.
Data protection officer in domestic legislation
The status of data protection officer is regulated by Articles 56-58 of the Law on Personal Data Protection (Official Gazette of RS no. 87/2018) (“Law”).
According to the provision of Article 57, paragraph 8 of the Law, data protection officer may perform other tasks and duties, while controller/processor shall ensure that performance of such tasks/duties does not put data protection officer in the conflict of interest. Considering different organisational structures of controllers/processors, the existence of conflict of interest needs to be assessed, i.e., decided on the basis of individual circumstances of each particular case.
The Law further stipulates that controller and processor may designate a data protection officer, while they shall be obliged to do so if:
Alike the GDPR, the Law stipulates that controller and processor shall be obliged to timely and properly include the data protection officer in all activities relating to personal data protection, to enable such person to perform his/her duties by ensuring necessary resources, as well as the access to personal data and processing activities and professional training, and to ensure independence of data protection officer in performance of his/her duties. Also, controller and processor may not penalise data protection officer, or terminate his/her employment or another contract due to the performance of his/her duties in accordance with the Law.
Data protection officer is appointed based on his/her professional qualifications, notably for professional knowledge and experience in personal data protection, as well as capacity to perform the prescribed duties, whereas such person may be employed with controller or processor or may perform his/her activities on the basis of another contract. For performance of the duties prescribed by the Law, data protection officer shall be directly responsible to the manager of controller/processor.
Controller or processor shall be obliged to notify contact information of data protection officer and provide them to the Commissioner for Information of Public Importance and Personal Data Protection, which keeps records of data protection officers.
Data protection officer shall at least:
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 Lara Maksimovic, Senior Associate, PR Legal
Former Schoenherr Of Counsel Olga Sipka has joined Kinstellar as a Special Counsel and new Head of the local Competition and Compliance practice in Belgrade.
Sipka’s core practices include competition and antitrust, regulatory, and compliance. Before joining Kinstellar, Sipka spent over 12 years with Moravcevic Vojnovic i Partneri in cooperation with Schoenherr, having joined the firm as an Attorney at Law in 2010, and being appointed Of Counsel in 2014.
Sipka is followed by Aleksandra Stecuk, joining Kinstellar’s Competition and Compliance practice as an Associate.
“I am happy to welcome Olga and Aleksandra to the team,” Kinstellar Belgrade Managing Partner Branislav Maric commented. “I am confident that they will make an excellent contribution to our practice in Serbia and bolster our full-service offering, allowing us to meet our clients’ high demands in Serbia and the wider region.”
NKO Partners has advised the Dr. Max Group on its acquisition of two pharmacy chains in Serbia: Pancevo-based AU Kod Suncanog Sata and Veliko Gradiste-based AU Selic. Reportedly, Subotic-Homen & Partners and solo practitioner Slobodan Miljkovic advised the sellers.
The Dr. Max Group is a pharmacy chain operating in Central and Eastern Europe. According to NKO, “following the acquisition, Dr. Max boasts more than 200 pharmacies all over Serbia.”
Most recently, NKO also advised the Dr. Max Group on its acquisition of Belgrade-based K-Pharma (as reported by CEE Legal Matters on June 8, 2022). Earlier in 2022, the firm advised the Dr. Max Group on its acquisition of the Janja pharmacy chain (as reported by CEE Legal Matters on March 28, 2022) and the Zlatni Lav pharmacies (as reported on January 5, 2022).
NKO’s team included Partner Djordje Nikolic and Senior Associate Branko Jankovic.
On September 23, 2022, CEE Legal Matters reported that Zivkovic Samardzic had advised both companies on the Titan Cementara Kosjeric merger with its affiliate Stari Silo Company. CEELM reached out to Zivkovic Samardzic Partner Igor Zivkovski to learn more about the deal.
CEELM: At what stage did your team become involved in this project and how did you land the mandate?
Zivkovski: We were included in this merger from the very beginning, even during the phase of exploring and analyzing legal, tax, and commercial aspects of this transaction. Speaking of this particular mandate, it was natural for our team to provide full support on this deal since our law office has represented and advised Titan Cementara Kosjeric from the moment when it became part of the Titan Cement Group, which was more than 20 years ago.
CEELM: What was your mandate specifically? What aspects of the deal did your team advise on?
Zivkovski: We structured the transaction, prepared all documentation necessary for the implementation of this status change, and assisted with the signing and closing process as well as with the registration process with the Business Registers Agency. Our team drafted the Merger Agreement and all accompanying documents, including but not limited to corporate approvals, directors’ statements, and new Articles of Association of Titan Cementara Kosjeric. The execution of a merger is quite a complex process in Serbia, mainly due to the comprehensive set of documents that are required, but also having in mind that it can be implemented solely in two phases – the first one, which is dedicated to the protection of creditors of the merging companies and consists of publishing the draft Merger Agreement with the Business Registers Agency and sending written notices to the known creditors with individual claims amount to at least RSD 2 million, and the second one, which is the actual registration of the merger and can be implemented only after 60 days have elapsed since the first phase.
CEELM: What about within the team itself? Who took charge of what within the Zivkovic Samardzic team working on this?
Zivkovski: Since the core part of this merger consisted of corporate and commercial law matters, I was in charge of most of the work. However, I would like to express my gratitude to the directors of both companies, as they actively participated in the preparation of the merger documentation and provided us with all the necessary information in a timely manner.
CEELM: What would you say was the most complex aspect of the merger from a legal perspective?
Zivkovski: Preparing the Merger Agreement and ensuring that it contains all the necessary and relevant elements were the most challenging part from a legal perspective. A merger is a very formal process and any, even the smallest mistake in the process itself or in one of the merger documents, would lead to the merger process going back to the very beginning.
CEELM: And, looking back, what would you say ran particularly smoothly? What do you believe contributed to this?
Zivkovski: The structuring of the transaction and arranging all important details of this process with the merging companies ran very smoothly and efficiently. Since this is the most important step in the merger process, when the foundations are well-laid, the implementation itself becomes simple and fast.
I believe that the main reason lies in our long-term cooperation and excellent understanding of Titan Cementara Kosjeric. This is exactly what allowed us to create a clear and precise action plan, which we consistently adhered to, and thanks to that, we carried out this process without any difficulties.
The Government of the Republic of Serbia has passed the Decision on the Amount of the Minimum Price of Work for the Period January – December 2023, which was published in the Official Gazette of RS no. 105/2022 dated September 14, 2022, and which shall be applied as of January 1, 2023 (“Decision”).
As a reminder, pursuant to the provisions of Article 112 of the Labour Law, the minimum price of work is determined by the Social and Economic Council, considering in particular: existential and social needs of employees and their families expressed through the minimum consumer basket, employment rate growth, BDP rate growth, consumer prices changes, and changes of productivity and average salary in the Republic of Serbia. The minimum price of work is determined by the working hour, without tax and contributions, for the calendar year, and no later than September 15, whereby it is applied from January 1 of the next year.
Net amount of the minimum salary in 2023
The Decision prescribes that the minimum price of work, without tax and contributions for mandatory social insurance, for the period January – December 2023, shall amount to RSD 230.00 net per working hour.
All payments of the minimum salary up and until December 31, 2022, shall be subject to the minimum work price that was applied for 2022, i.e., in the amount of RSD 201.22 net per working hour, while to all payments made starting from January 1, 2023, the abovesaid new minimum price of work shall be applied.
Therefore, the average minimum net salary in 2023, established for the average monthly fund of 174 working hours, is RSD 40,020.00, while for 2022 it amounted to RSD 35,012.28, which means that the minimum salary for 2023 has increased by 14.3%.
Increase of the non-taxable part of income
Regarding the gross amount of minimum salary for 2023, it depends on the non-taxable amount set out in Article 15a of the Law on Personal Income Tax, as well as the rates of tax and contributions for mandatory social insurance paid at the burden of employees, in which regard the Ministry of Finance has recently announced that from January 1, 2023, the non-taxable part of income shall be increased from RSD 19,300.00 to RSD 21,712.00.
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 Lara Maksimovic, Senior Associate, PR Legal
Strong levels of corporate and M&A work were in the stars this year for the SOG Law Firm, with more to look forward to, according to Partner Milan Samardzic.
“The turn of the year saw a lot of activity, the global economy was doing pretty well, and the impacts of that have been felt in Serbia as well,” Samardzic begins. “As such, our Corporate and M&A practice has been very active over the year so far.”
Samardzic reports that 2022 launched corporate and M&A work to new heights, “even compared to an already quite vibrant 2021. We began working on even more complex and demanding work.” As some of the driving sectors of this workstream, Samardzic points to the automotive sector as well as the ever-rising tide of energy-related work. “There have been many transactions in the energy sector, in particular focusing on wind parks, solar parks, and powerplants in early development stages,” he says. “There is a global premise that accessible, safe, and renewable energy is a key driver of socio-economic development. And this has now been recognized in the Western Balkan countries, which are rapidly providing more and more favorable conditions for the development of renewable energy. Certainly, this kind of energy transition is followed by the electrification of transport, and some major players are pushing a big wave of changes in the automotive industry, too. These are very hot topics, and I expect to see even more work in these areas in the near future.”
Moreover, Samardzic reports that the SOG law firm worked on a number of large deals, including “the acquisition of the Delta City shopping mall by NPC properties (a EUR 150 million acquisition) and the acquisition of Emmezetta by the Mercury Group (an EUR 80 million acquisition).” And they often work regionally, as well. “For example, we have been advising an international asset management company on the acquisition of one of the leading banks in Montenegro, with a total asset value exceeding EUR 300 million. As for wind farms, an example is H-Planet, the company that was advised by us on the acquisition of a company that is developing the 103-megawatt Krivaca wind farm in eastern Serbia. Also, we are advising one other renewable energy company established for the purpose of the development of a 120-megawatt wind farm project in Vojvodina. In addition to these, there have also been others in the real estate sector, which has traditionally been strong in Serbia,” he reports.
All in all, “although last year was amazing for SOG in many ways,” according to Samardzic, “including a record amount of transactional work for our M&A team (we advised on more than 25 transactions with a total value of over EUR 500 million),” as 2022 is slowly closing down, he says the practice is likely “to make even more transactions by the end of the year.”
Looking ahead, Samardzic does say that the future is somewhat uncertain, overall, on account of the war in Ukraine. “I think it is likely that there will be a crisis and a crunch, but not as bad as it was in 2008/2009,” he says. “I believe that there is a limited number of industries that are significantly impacted by the war and, on the whole, the economy is in a good place from a systemic standpoint,” he explains. “This will likely translate onto M&A work by resulting in less robust activities, but I also trust that it will bring new opportunities – for example, non-performing-loan work or distressed asset transactions,” Samardzic says.
“Looking at it from a political side, the economy is heavily dependent on investments,” Samardzic says. “Most investments are coming in from the west, the EU and the US. If we don’t change our policy and align with the west, fewer of those investments will be flowing in,” he says, “which might mean more capital flowing in from the east, primarily China.” Still, he stresses that it is “very important for the country to align with the west, if anything, then from an economic standpoint – historically, much more investment has been coming in from that direction and maintaining this is crucial for the sustainability of the economy.”