Serbia: Rulebook on arm’s length interest rates for 2024
Rulebook provides an increasing trend of interest rates compared to 2023
The Ministry of Finance adopted the rulebook on arm’s length interest rates for 2024. The rulebook was published in the official gazette dated 31 May 2024 and is effective 8 June 2024.
Background
According to the provisions of article 61 of the corporate income tax law, in determining arm’s length interest income or expense, taxpayers can:
- Use interest rates as prescribed by the rulebook
- Apply general OECD-based methods for assessment of arm’s length interest as prescribed by the corporate income tax law
Taxpayers may only select one of these options and must apply it consistently to all intercompany loans.
Rulebook
The rulebook prescribes separate interest rates for long-term and for short-term borrowings for all non-finance entities and a single interest rate for banks and finance leasing companies (except for RSD denominated loans when interest rate is prescribed separately for short-term and long-term loans).
KPMG observation
The rulebook provides an increasing trend of interest rates compared to 2023, which is consistent with the overall rise in borrowing costs in the real economy.
Companies exposed to significant, long-term related-party financing may want to consider applying general OECD-based methods for assessment of arm’s length interest, as that approach may be more beneficial and provide an increased level of certainty in relation to future tax treatment.