If you have ever considered an asset deal in Serbia, or may be in a position to do that in the future, then the following 10 points offer a simple and brief overview of some of the issues to keep in mind:
Federation of Bosnia and Herzegovina (“FBH”) has recently adopted the Law on Mitigation of Negative Economic Consequences (the “Corona Law“), introducing a number of measures for mitigation of negative effects of Covid-19 pandemic on the economy of FBH. The list of measures aimed to support business of commercial entities in FBH include inter alia the following:
Establishing of the Guarantee Fund of FBH with the initial capital of EUR 40,000,000. The Fund will be base for issuance of guaranties by the Development Bank of the FBH;
Subsidizing mandatory social insurances (i.e. pension and disability insurance, health insurance and insurance for unemployment) in the amount of KM 244.85 per each employee for the period of paid salaries from April 2020 until expiry of one month period upon expiry of state of accident. Basic condition for this benefit is that its user must have minimum 20% drop in turnover in comparison to the same month in 2019;
Statutory interest rate on taxes and social contributions shall not be calculated and charged for the period from the day of introduction of the state of accident up to expiry of 60 days after its termination;
Obligation for advance tax payments for the corporate income tax and personal income tax is terminated for the entire period of validity of the Corona Law;
Statute of limitation period related to all tax payments has been ceased, from the day of introduction of the state of accident up to expiry of 30 days after its termination;
Statutory default interest rate on all late payments related to sale of goods and services, will not be calculated starting with 1 March 2020 – up to one expiry of thirty days period as of termination of the state of accident;
Enforcement procedures for tax and other claims are suspended for the period from the day of introduction of the state of accident up to expiry of thirty days after its termination.
All commercial entities that want to use some of the above provided measures have to file the requests for subventions to local Tax Department up to the 10th day in a month, for the previous month.
The Corona Law started to apply in the FBH on 9 May 2020 and will be in force until expiration of 60 days period upon termination of the state of accident. In addition, according to the Article 3 of the Corona Law, in case of any discrepancy between this law and any other law applicable in the FBH, the Corona Law will be applicable. Apart from this law, several Cantons and Municipalities have provided additional subventions for business entities operating in their regions.
For the purpose of improving market liquidity in a period of general reduction of interest rates, the Federation of Bosnia and Herzegovina has enacted the new Law on Statutory Default Interest Rate (the “Law”), which has started to apply as of 14 March 2020.
As previously announced, the Law reduced the rate of the statutory default interest from 12% to 10%. Debtors who are late with their monetary payments will, beside the principal debt, have to pay the penalty interest at the rate of 10% per annum, calculated up to the day of the final payment. For calculation of statutory default interests for the periods shorter than one year the compound method will be applied.
In addition, the Law explicitly limits the amount of default interest that may be collected from a debtor, providing that the amount of the default interest cannot be higher than the amount of principal debt.
Calculation of the default interest will be done by a debtor’s commercial bank that will be entitled to charge its commission for the collected amount of the default interest.
The interest on debts originated before entry into force of the Law will be calculated according to the previously applicable legislation – with interest rate of 12% per annum. The Law applies to all debts becoming due for payment after its entry into force.