The National Assembly of the Republic of Serbia adopted the Law amending the Law on Property Taxes that was published in the Official Gazette of RS, no. 144/20 of November 27, 2020 (“the Law“).
The main reason for adopting this Law is contained in the need to transfer the competence for the establishment, collection and control of inheritance and gift taxes and taxes on transfer of absolute rights from Tax Administration to local self-government units. The Law is also adopted for the purpose of alignment with the laws regulating open investment funds i.e. alternative investment funds. Also, certain provisions are amended and specified, notably in the part referring to the establishment of property tax by self-taxation.
Property tax payers
Open and alternative investment funds that do not have legal entity status shall be payers of property tax when they are owners, holders or users of real estate that is subject to such taxation.
Since the subject of taxation is ownership of land exceeding ten ares i.e. the right to use construction land exceeding ten areas, taxes for such land shall be paid whether one or several persons are holders of such right (as co-owners or joint owners). In relation thereto, it is stipulated that each of these persons shall be payer of property tax relative to their ownership ratio, even when the surface of individual shares are less than ten ares.
Establishing the average price of real estate
The period for monitoring trade in real estate for establishing the average price (as element for establishing the property tax base) has been extended from nine to twelve months. This should provide for a more realistic establishment of average prices because it also covers the last quarter of a calendar year.
When there was no relevant trade in real estate in the reference period in the most and least furnished zones and the average prices in such zones are established on basis of average prices in neighbouring zones, the average price in most furnished zone is established as the highest price in neighbouring zone, and in least furnished zone as the lowest price in neighbouring zone. This should enable for the average price and also tax base for relevant real estate in most furnished zone not to be lower than its neighbouring zones with lower level of furnishing. Also, it should provide for the average price and tax base for relevant real estate in least furnished zones not to be higher than its neighbouring zones that have a higher level of furnishing.
It is specified that the price realised in trade with compensation for relevant real estate in certain zones shall also include the fee for transfer of property right to real estate that has been awarded i.e. specified in court or other procedure, by an act that became final during a prescribed twelve-month period.
Specification of individual provisions
Since real estate are classified in groups for the purpose of establishing property tax base, the meaning of certain terms such as construction, agriculture and forest land has been specified.
Auxiliary buildings have been classified in same group of real estate with garages, which ensures more consistent taxation of such buildings according to economic capacities of payers and enables the establishment of taxes by application of average prices established in trade of such group of real estate (since auxiliary buildings are very rarely subject to individual trade, which would prevent the establishment of average price in zones only for such buildings).
Extension of the scope of taxation
The reason for adoption of this Law is also a more comprehensive scope of taxes on inheritance and gift with regard to property that may be the subject of inheritance and gift. In this sense, taxation also covers the inheritance and gift in terms of digital property that will be the subject of regulation of a special law.
Right to tax credit
For the purpose of more consistent exercising of rights by payers of tax credits for houses or apartments where they live, a requirement for exercising such right is also the registered residence in such house or apartment. If the requirements for tax credit have been fulfilled for one house or apartment on several bases, reduction is made on one basis that is most favourable for the payer (i.e. there is no accumulation of tax credits on several bases, hence tax credit cannot become tax relief).
Competence of local self-government
Since the income from tax on inheritance and gift and tax on transfer of absolute rights belongs entirely to local self-government units, starting from January 1, 2022 such taxes shall be established, collected and controlled by local self-government units – organisational units responsible for establishing, collecting and controlling their original revenue.
Therefore, tax applications for the establishment of taxes on inheritance and gifts whose subject is real estate shall be filed to tax unit of local self-government offices where the real estate inherited or received as a gift is located.
Since this law shall enter into force on January 1, 2021, its final provisions specify the manners for establishing property tax for 2021.
This article is to be considered as exclusively informative, with no intention to provide legal advice.
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