The gift tax (part 3) – arising of tax liability, tax return submission and payment deadlines

In the previous blog posts in which we wrote about inheritance and gift tax, we established that the inheritance and gift tax is regulated by the Property Tax Law.  The provisions of this Law prescribe: the subject of taxation, tax exemptions, tax base, tax rates, taxpayer, arising of tax liability, tax relief and tax credit. So far, we have tried to explain in more detail the topics regarding what is considered the subject of taxation, how the tax base is determined, who becomes the taxpayer; and there are still a few questions that are interesting when we talk about inheritance and gift tax.

Arising of gift tax liability

The Property Tax Law stipulates that tax liability for a gift arises:

– on the day of the conclusion of the Gift Agreement

– on the day of the notarization of the statement or the conclusion of a different act, on the basis of which the property is transferred without consideration

– on the day of receiving the gift, if no Gift Agreement was concluded in the written form

– when the subject of inheritance or gift is an immovable property on the basis of usufruct, tax liability arises on the earliest of the following days:

1. a) the day of the termination of that right
2. b) the day of the alienation of the immovable property

– on the day of finality of the decision on inheritance

– the day of knowledge of the competent tax authority about inheritance and gifts, in cases of untimely reporting of the subject of taxation

Inheritance and gift tax rates

The legislature has prescribed proportional inheritance and gift tax rates ranging from 1.5% to 2.5%. Given that in practice arise mostly cases where the contracting parties, the donor and the donee, are in a family relationship, the Property Tax Law, which prescribes the inheritance and gift tax rates as well, considered different rates in regard to the lines of succession among the parties in the Gift Agreements.

Taxpayers who, in relation to the testator, i.e. the donor, are in the third and further line of succession, i.e. taxpayers who are not related to the testator, i.e. the donor, pay inheritance and gift tax. The third line of succession consists of the testator’s grandparents and their descendants.

Taxpayers who, in relation to the testator, i.e. the donor, are in the second line of succession according to the legal order of inheritance, pay inheritance and gift tax at the 1.5% rate. The second line of succession consists of the testator’s spouse and parents, and their descendants (or the parent’s descendant i.e. “siblings”, or a half-brother/sister on the father’s/mother’s side).

According to the provisions of the Inheritance and Gift Law, in the first line of succession there is no obligation to pay tax, i.e. the donee in the first line of succession is not liable for inheritance and gift tax, meaning the basis for tax relief exists. The first line of succession consists of the testator’s descendants and the spouse.

Tax relief for inheritance and gift tax applies to the heir of the first line of succession, the spouse and parents of the testator, that is, the donee in the first line of succession and the spouse of the donor.

Inheritance and gift tax return

Theinheritance and gift tax taxpayer is obliged to submit a tax return, with the appropriate documentation required for determining the tax, within 30 days from the date of arising of tax liability.

The tax return for determining inheritance and gift tax is submitted on the PPI-3 form. Starting from January 1, 2018, the PPI-3 form is submitted electronically.

Exceptionally, the taxpayers – natural persons who are required to submit tax return which is not related to the performance of business activities, can submit the PPI-3 tax return in electronic form or in written form – directly or by mail.

After the taxpayer or an authorized person electronically submits the PPI-3 tax return, tax inspectors in the competent branches of the Tax Administration begin the control procedure, and issue the appropriate decision on the determined inheritance and gift tax, or on tax relief.

Please bear in mind that in order to submit an electronic tax return it is necessary to have a qualified electronic certificate for accessing the Tax Administration’s portal E-Porezi or to grant authorization to another person via the PEP form.

Inheritance and gift tax, and tax on transfer of absolute rights are determined by the decision of the tax authority, and should be paid within 15 days from the day of deliveryof the decision.

What may not seem important at first, and is related to inheritance and gift tax, refers to the establishment of a Unified Register of Payment Service Users for Remittances. The Unified Register of Payment Service Users for Remittanceshas been established sinceJune 15, 2020. Namely, the National Bank of Serbia has created this Unified Register of Payment Service Users for Remittances. This Register contains data on persons from Serbia who receive money from abroad. As well as, data on persons who send money abroad. The Register does not contain data on the amounts of money which was received i.e. sent. However, in accordance with the Law on Tax Procedure and Tax Administration (Article 30b), the Bank is required to submit data on the balance and transactions on the current accounts of natural persons at the request of the Tax Administration. Thus, the Tax Administration has the right to investigate, at any moment, your current account, RSD or foreign currency one.

For all of the questions and doubts, the Creative Finance team is at your disposal.