Tax Alert: New “Arm’s Length” Interest Rates Applicable for 2024
In accordance with the Law on Corporate Income Tax of the Republic of Serbia, taxpayers must disclose transfer prices in their tax balance sheets, detailing the value of transactions with related parties. These transactions must be priced under market conditions, known as the “arm’s length” principle. If revenues from transfer prices are lower than market prices or expenses are higher, taxpayers must adjust their taxable base accordingly. This principle also applies to interest rates on loans between related parties.
Key Points:
- Taxpayers must disclose the value of transactions with related parties.
- Transactions must be priced under the “arm’s length” principle.
- Taxable base adjustments are required if transfer prices differ from market prices.
- Interest rates on loans between related parties must comply with the “arm’s length” principle.
- Taxpayers can use either Ministry of Finance published rates or general methods to determine market prices.
- Once a method is chosen, it must be applied consistently to all related party loans.
New “Arm’s Length” Interest Rates for 2024
The Ministry of Finance has published the Rulebook defining the “arm’s length” interest rates for loans and credits between related parties for 2024. These rates are considered compliant with the “arm’s length” principle and are applicable as follows:
Banks and Financial Leasing Lenders
| Currency | “Arm’s Length” Interest Rates for 2024 |
|---|---|
| RSD | 5.02% for short-term loans |
| RSD | 5.16% for long-term loans |
| EUR | 4.31% for EUR loans and RSD loans indexed in EUR |
| USD | 5.02% for USD loans and RSD loans indexed in USD |
| CHF | 2.80% for CHF loans and RSD loans indexed in CHF |
| SEK | 4.19% for SEK loans and RSD loans indexed in SEK |
| GBP | 1.88% for GBP loans and RSD loans indexed in GBP |
| RUB | 2.42% for RUB loans and RSD loans indexed in RUB |
| CNY | 4.55% for CNY loans and RSD loans indexed in CNY |
Other Legal Entities
| Currency | “Arm’s Length” Interest Rates for 2024 |
|---|---|
| RSD | 7.57% for short-term loans |
| RSD | 8.30% for long-term loans |
| EUR | 6.12% for short-term EUR loans and RSD loans indexed in EUR |
| EUR | 6.23% for long-term EUR loans and RSD loans indexed in EUR |
| CHF | 7.54% for short-term CHF loans and RSD loans indexed in CHF |
| USD | 8.20% for short-term USD loans and RSD loans indexed in USD |
| USD | 4.25% for long-term USD loans and RSD loans indexed in USD |
Compliance and Implementation
Taxpayers must ensure they adhere to the disclosed “arm’s length” interest rates for all loans and credits between related parties. Consistent application of the chosen method for determining these rates is crucial for compliance with Serbian tax laws.
For a deeper discussion on how these changes might affect your business, contact Stojković Attorneys.
Contact Information
Stojković Attorneys
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Cara Dušana 55 /3, 11158 Belgrade (Stari Grad)
Tel: 011/328-1914 (Open from 07:00 to 20:00 from Monday to Friday during the whole year)
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