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29.11.2018

Republic of Serbia: Interest rates in accordance with the “arm’s length principle” for fiscal year 2018

Annual interest rate depends on type of loan and loan currency

Key Facts
  • Annual interest rates in accordance with the “arm’s length” principle for commercial banks and financial leasing companies highest for long-term loans with RSD as the loan currency.
  • Annual interest rates in accordance with the “arm’s length” principle for companies other than commercial banks and financial leasing companies highest for short-term loans with CHF as the loan currency.
Author
Mr. Bojan Radojicic
Managing Partner
Serbia
> View Profile

According to Article 61, Paragraph 3 of the Corporate Income Tax Law, the Ministry of Finance is entitled to specify the interest rates considered to be in accordance with the “arm’s length” principle and determine interest rates on the basis of data provided by the National Bank of Serbia. The interest rates in accordance with the “arm’s length” principle are determined individually for each fiscal year. Interest rates in accordance with the “arm’s length” principle for commercial banks and financial leasing companies for fiscal year 2018 as determined by the Ministry of Finance using the “Rulebook on interest rates in accordance with the ‘arm’s length principle’ for 2018” (Official Gazette No.18/18) are presented in the following table:

Type of loan    Loan currency   Annual interest rate
Short-term loans   RSD   3.10%
Long-term loans   RSD   4.10%
Short-term loans and long–term loans   EUR   3.19%
Short-term loans and long–term loans   USD   2.45%
Short-term loans and long–term loans   CHF   3.12%
Short-term loans and long–term loans   SEK   3.70%
Short-term loans and long–term loans   GBP   1.15%
Short-term loans and long–term loans   RUB   3.33%

 

Interest rates in accordance with the “arm’s length” principle for companies other than commercial banks and financial leasing companies for fiscal year 2018 as determined by the Ministry of Finance are presented in the following table:

Type of loan    Loan currency   Annual interest rate
Short-term loans                               RSD   5.84%
Long-term loans   RSD   5.58%
Short-term loans   EUR   3.10%
Long–term loans   EUR   3.42%
Short-term loans   CHF   12.97%
Long–term loans   CHF   8.21%
Short-term loans   USD   4.41%
Long–term loans   USD   4.16%

 

We would like to note that the application of these interest rates in preparing local transfer pricing files in Serbia is not mandatory: Taxpayers can determine interest rates in accordance with the “arm’s length” principle by following Serbian transfer pricing regulations and the OECD guidelines, i.e. by performing a full functional analysis and identifying comparable transactions.

Article published in TP Newsletter #2/2018
Current developments in the transfer pricing area in 10 countries
View publication
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