The subject of taxation by inheritance and gift tax
In the previous article, we have emphasized that inheritance and gift tax is regulated by the Property Tax Law, through its provisions in Articles 14 to 22. These provisions prescribe: the subject of taxation, tax exemptions, tax base, tax rates, taxpayer, arising of tax liability, tax relief and tax credit.
The subject of taxation should be properly delineated in terms of inheritance and gift tax, and property tax. The subject of taxation by the gift tax is the transfer of the right of ownership to immovable property (land, facilities), on the basis of the Gift Agreement. Along with the transfer of the right of ownership of immovable property, the subject of taxation is also the transfer of another right which is subject to property tax pursuant to Article 2 of the Law (e.g., construction land use rights), on the basis of the Gift Agreement. Given that the property right to the land in issue is exempt from property tax, the question of whether gifts of land up to 10 ares in size are liable to gift tax has arisen in reality…
Inheritance and gift tax are also paid on inherited, i.e. received as a gift:
– cash money;
– savings deposit;
– deposit in a bank;
– financial claim;
– intellectual property rights;
– the right of ownership of a used motor vehicle, a used vessel, or a used aircraft, and other movable property.
Tax exemptions
Inheritance and gift tax are not paid on:
– transfer without consideration of right of ownership on immovable property on which value added tax is paid
– income of natural persons which is subject to individual income tax
– income of legal entity which is included in the calculation of the tax base for taxation by corporate income tax
– stakes of legal entity
– securities
– money from the same entity totaling up to 100,000 dinars during a single calendar year
– vehicles which are not considered used, in regard to the Property Tax Law, etc.
Gift tax taxpayer
The gift tax taxpayer is determined by the subject of the gift itself, i.e. whether it is movable or immovable property. In the cases when the subject of the gift is immovable property located on the territory of the Republic of Serbia, the gift tax taxpayer is the donee, regardless of whether they are a resident or a non-resident of the Republic of Serbia.
In the cases when the subject of the gift is immovable property located outside of the Republic of Serbia, such gift is not subject to taxation by gift tax, regardless of whether the donee is a resident or a non-resident.
When the subject of the gift is movable property, if the donee is a resident, this person is considered a taxpayer, regardless of where the subject of the gift is located, whether it is in the Republic of Serbia or abroad. However, the Law stipulates that the resident of the Republic of Serbia who inherits, i.e. receives a gift located abroad, and on which the tax has been paid in the country on whose territory the gift is located, exercises the right to a reduction of inheritance and gift tax in the Republic of Serbia. The reduction refers to the amount of the inheritance, i.e. gift tax paid in that country, up to the amount that would be paid in the Republic of Serbia by applying the provisions of this law, to inheritance, i.e. gift.
The cases when the non-resident is the gift tax taxpayer, if the subject of the gift is located in the Republic of Serbia. The Property Tax Law specifies that for the purpose of taxation by inheritance and gift tax, and tax on transfer of absolute rights, the provisions of the Corporate Income Tax Law are applied with regard to the residency of a legal entity, and with regard to the natural persons and their residency, the provisions of the Individual Income Tax Law are applied. This means that in all of these cases, the taxpayer is the donee, not the donor.
However, it should be noted that the Law stipulates that the person to whom the absolute right was transferred, i.e. the donor, guarantees subsidiarily for the payment of tax on transfer of absolute rights, i.e. for the payment of gift tax. The person to whom the absolute right was transferred, i.e. the donor, who has contracted to pay tax on transfer of absolute rights, i.e. gift tax, guarantees jointly and severally for the payment of that tax. Therefore, the donor is a guarantor for the liability of the donee on the basis of gift tax. In the case when the donor did not contract to pay gift tax in the Gift Agreement, then the donor is a subsidiary guarantor, which means that gift tax can be collected from the donor, only if the tax could not be collected from the donee (the taxpayer), regularly or forced. When the donor contracted to pay gift tax in the Gift Agreement, then the donor is joint and several guarantors on the basis of gift tax. This means that in this case the donor is a debtor of the same order as the donee, and that tax can be collected from the donor, without the obligation to first attempt to collect it from the donee.
Tax base
The Property Tax Law in the part related to inheritance and gifts establishes that the gift tax base is the market value of the property received as a gift. The base is determined by the competent organizational unit of the Tax Administration. Therefore, gift tax is determined by the decision of the competent Tax Administration of the Republic of Serbia. The Law stipulates that in the cases of taxation by inheritance and gift tax, i.e. tax on transfer of absolute rights, inheritance and gift realized – received in a foreign currency, i.e. the transfer of absolute rights carried out with consideration in a foreign currency, are converted from foreign currency to dinars, on the date of arising of tax liability, at the exchange rate for the conversion of amounts from foreign currency into dinars, which is regulated by the Law on Tax Procedure and Tax Administration.
The Law on Tax Procedure and Tax Administration stipulates that the conversion of foreign currency transactions into dinars is carried out:
– according to the official middle exchange rate of the National Bank of Serbia, on the day the transaction was carried out, unless otherwise regulated by the Law on Tax
– at the market exchange rate based on published data on the relation between the foreign currency and the US dollar, on the day the transaction was carried out, if the National Bank of Serbia does not have the middle exchange rate of that currency against the dinar.
When someone receives cash money as a gift in a foreign currency, the gift tax base is the dinar counter value of the gift (money) according to the official exchange rate of the National Bank of Serbia on the date of arising of tax liability.
For all of the questions and doubts, the Creative Finance team is at your disposal.
