The SELA Insight report features an overview of the most important regional legislative developments recently announced in the jurisdictions of SELA coverage.
Countries covered are: Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Montenegro, North Macedonia, Serbia and Slovenia.
The Government passed Law no 13/2020 amending the Law on Foreigners
The Government has adopted Law no, Nr. 13/2020, amending provisions of the Law no. 108/2013 “On Foreigners” regarding the employment of foreign nationals, the Albanian visa, as well as certain provisions regarding residence permits and work permits.
It has been introduced the electronic visa system.
The Albanian visa shall be issued as a stamp affixed in the passport of the foreign national, or as an electronic visa that can be stamped by the foreign national and presented at the Albanian Border Police at the entry in Albania.
Based on these amendments foreign nationals can submit their C-Visa and D-Visa application in person at the Albanian consular offices, or online, through the Albanian electronic visa system.
The Law no. 13/202 lessens the restrictions set forth for the employment of foreign nationals in Albania, and broadens the category of foreign nationals who enjoy equal employment rights with Albanian nationals, being exempted from the obligation to obtain a Work Permit, and equipped instead with an Albanian Employment Certificate Declaration.
Foreign nationals legally residing in Albania can apply for an Albanian work permit independent of their purpose to reside in Albania shall be exempted from the obligation to obtain a Work Permit, the following categories of foreign nationals:
1. EU and Schengen area nationals as well as their family members who are not from these countries but that reside legally in Albania;
2. Nationals from the Western Balkan countries: Bosnia – Herzegovina, Monte-Negro, Kosovo, Serbia and North Macedonia;
3. Foreign nationals employed toward relieving the consequences of the natural calamities.
Requirement regarding publication of available job vacancies at Albanian employers have been amended. Albanian employers shall no longer required to publish their job vacancies for a 4-week term period prior to hiring foreign nationals.
Instead, it will be the task of the Albanian national employment authority to make public the existing online vacancies, within a 7-calendar day term from the registration of a request for issuing a work permit to foreign nationals, and prior to approving this request.
Moreover, the annual employment quota of 10 % previously set forth for the employment of foreign nationals has been abrogated.
The annual employment quotas shall be proposed by the minister responsible for work migration issues in cooperation with the minister responsible for the respective field of work, based on the analysis over the work force requirements and professional competences needed in the Albanian employment market, and approved by decision of the Council of Ministers.
Based on the amendments to the Law on Foreigners the terms for issuing the Albanian Work Permit it has been shortened to 10 days compared to the previous 30 days term, and the term for Renewing the Residence Permit has become 30 days compared to the previous 60 days term.
The Government has proposed the draft law “On the determination of the format, the procedure, and privatization formula of Sport Clubs”
The draft law provides for the steps and procedures to be followed for the privatization of sports clubs owned by central government institutions and local municipality units register as commercial companies with the Albanian commercial registry, within a 3-month term from the entrance into force of this law.
Assets and immovable properties of these sports clubs shall be registered as contribution in kind by the respective state institution. The use of these assets is required to remain unaltered for at least a 99-year period, independent of the privatization process, and independent the bankruptcy of commercial companies administering the sports club’s assets.
The privatization of sports clubs shall be performed through the transfer of quota/shares from the state central and local institutions to the interested investors.
The draft law introduces the privatization formula for sport’s clubs and basic requirements for the evaluation criteria and selection of investors.
The privatization formula to be implemented requires that a total of 51% up to 100% of the capital shares/quota are offered to interested investors providing sufficient financial guarantees to implement the proposed investment project. Whist the proposed investors’ evaluation criteria are the following:
- 1. Up to 30% of the evaluation criteria points shall be based on the price offered for the purchase of the sports club share/quota;
- 2. Up to 70% of the evaluation criteria points shall be based on the investment project presented by interested investors and the previous experience in financing, involvement or the management of sports clubs.
Proposed changes to the Law no. 43/2015 “On the Energy Sector”, as amended
These proposed amendments intend to lift ERE’s obligation to respect the proportionality principle when determining the regulatory payment to be made to ERE by the licensed entities for the income generated annual by the licensed activity.
For new connections, the property of connection assets added to the existing network is not any longer of the user, but remains with the network operator
The amendment proposes the development of a competitive procedure for the approval of the development of energy production capacities from hydropower plants, as a new element on which rules and procedures for the development of new production capacities shall be based.
ERE is no longer required to obtain the approval of the ministry competent for energy issues as regards the:
- Approval of the 10- year network development plan by Transmission System Operator (OST),
- Recommendation to OST in case of delays by 3 years by OST to perform investments according to the 10 – year network development plan, when deeming that said investments are necessary to be performed and possible to be financed without any negative consequences in the normal operation of the network.
Based on the proposed amendments to the Law no. 43/2015, OST is required to have full and separate decision-making rights from the integrated energy company, as regards the necessary assets for the functioning, maintenance or development of the distribution network.
With the new proposed amendments to controlling (mother) company shall be entitled to perform the economic and managerial supervision over OST as well as to set general limits as regards the debt of the controlled company.
However, the controlling (mother) company cannot issue any longer instructions regarding the day to day operational activity of OST as well as cannot resolve regarding the construction or reconstruction of distribution networks, which investment value does not exceed the thresholds of financial budgets or respective vales determined in the by-law of the company or by the Albanian legislation in force.
Under the proposed amendments OST is required to develop a conformity program containing measures to be undertaken to stop discriminatory actions. The conformity program must determine specific obligations of employees toward its implementation.
The supervision and monitoring of the conformity program of OST shall be performed by an independent individual or entity, appointed in this regard, who shall submit to ERE an annual report regarding measures undertaken by OST in the framework of the conformity program toward stopping discriminatory actions.
Draft Law on Payment Services
The Albanian Government has proposed the approval of a new Law on Payment Services (“PS Law”), partially aligning Albanian legislation to the EU Directive 2015/2366 “On payment services in the internal market”.
The draft law defines the general terms and conditions for the licensing and supervision of payment institutions, transparency requirements applicable to payment services as well as the rights and obligations of providers and recipients of payment services.
The aim of this new draft law is to reduce cash transactions and to promote the use of electronic payment means from the general public. The draft law also aims to increase transparency on payment services and create consolidated rules for consumer protection.
Payment service shall mean any of the following business activities:
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
- Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider.
- Execution of payment transactions where the funds are covered by a credit line for a payment service user.
- Issuing of payment instruments and/or acceptance of payment transactions.
- Money remittance.
- Payment initiation services.
- Account information services.
Payment service providers shall include the following:
- Second tier banks and branches of foreign banks;
- Electronic money institutions;
- Payment institutions licensed by the Bank of Albania to provide payment services in accordance with the PS Law;
- The Albanian Central Bank when not acting in its capacity as monetary authority or other public authorities;
- Central and local authorities when not acting in their capacity as public authorities.
Based on the draft law, second tier banks and electronic money institutions that have been licensed before the entry into force of the PS Law will not require licensing under the PS Law. However, they will have to adapt their activity and internal structure to the requirements of the PS Law within a term of 18 months from its entry into force.
Other nonbanking financial institutions as well as credit and savings associations that have been licensed before the entry into force of the PS Law and that provide payment services, will be allowed to continue to provide payment services after the entry into force of the PS Law.
Such institutions will however be required to provide to the Bank of Albania, within a term of 18 months from the entry into force of the PS Law, the required documentation and information evidencing that they fulfil the requirements of the PS Law. Upon fulfillment of such requirements, the Bank of Albania will update their license and they will be considered as payment institutions.
The implementation of the PS Law will require the approval of new regulations from the Bank of Albania (including licensing conditions and procedures for payment institutions) as well the amendment of the current regulations regulating the activity of nonbanking financial institutions and credit and savings associations.
The Bank of Albania is required to approve such regulations within a term of 1 year from the entry into force of the PS Law, which will enter into force 6 months following its publication with the Albanian Official Gazette.
Bosnia & Herzegovina
Amended Law on Property Rights
As of January 2020, the Amended Law on Property Rights (the „Amended Law”) applies in the Republic of Srpska (the „RS”).
The Amended Law made, amongst others, two significant changes regarding the: (i) transformation of state – social ownership; and (ii) establishment of legal unity of land and objects constructed on that land.
Transformation of State – Social Ownership
Prior to the Amended Law, the Law on Property Rights of RS (the „Law”) provided that rights to manage and/or dispose and/or use (the „Partial rights”) over all assets (both movables and immovables) in social-state ownership become ownership of persons who are holders of Partial rights in accordance with the Law.
The Amended law now narrows such transformation of Partial rights with respect to immovables.
Namely, only RS, local municipalities, public enterprises and other public services formed by either RS or local municipalities could transform its Partial rights into the ownership right. This practically means that natural persons and other legal entities cannot transform its
Partial rights over immovables into ownership right unless otherwise provided by the Law.
It is worth mentioning that similar solutions were already provided in the amendments to the Law in year 2011, published in the Official Gazette of Republika Srpska, No. 95/11 (the „2011 Amendments”).
The 2011 Amendments provided for transformation of Partial rights over immovables into ownership rights only with respect to the legal entities owned solely by Republic of Srpska.
In Year 2016, the RS Constitutional Court determined that these 2011 Amendments are contrary to the Constitution of Republic of Srpska (the Decision of the RS Constitutional Court No. U-27/14, published in the Official Gazette of RS, No. 18/16). One of the reasoning by the RS Constitutional Court for such decision was that: (i) prior to the 2011 Amendments, the Law allowed for transformation of Partial rights without any exceptions, i.e. irrespective if the holder of Partial Right was public or private person, natural person or legal entity etc; (ii) 2011 Amendments neglects already acquired ownership rights of other persons which were obtained throw transformation by the Law itself.
Legal Unity of Land and Objects constructed on that Land
Before the Law came into force it was possible that one person was owner of the land and that other person is the owner of the object constructed on that land. The Law established legal unity of land and objects constructed on that land by prescribing that owner of the object becomes the owner over the land beneath such object. In addition, the Law provided that:
- the owner of the object for which is issued the construction or use permit becomes the owner over the land that serves for regular use of such object in accordance with the respective planning document that was valid in the moment of construction of such object;
- if there was no adopted relevant planning document in the moment of construction of the object the owner of the object will obtain ownership right only over the land beneath the object.
The situation under 2. above is significantly altered by the Amended Law. Namely, when respective planning document does not determine the land that serves for regular use of the object, than such land will be determined by the competent cadastre authority.
Prior determination of such land for regular use of the object, the cadastre authority has to obtain consent from the competent municipal authority for urban planning.
Combating money laundering: obligations and deadlines
The State Agency for National Security (SANS) has recently published the results of the National Risk Assessment (NRA).
The obliged entities must align their internal rules with the NRA by 09 July 2020.
This means that the internal rules must reflect the risks identified by SANS and referred to in the NRA.
The obliged entities must also have their own internal risk assessment identifying the specific risks related to the activities of the entity and its customers.
The obliged entities according to the Measures Against Money Laundering Act (MAMLA) include various categories such as financial institutions, insurers, wholesalers, investment intermediaries, auditors, accountants, lawyers, real estate brokers, some non-profit legal entities, etc.
With а view to the above, to be compliant with the Bulgarian AML legislation, every obliged entity should:
- Have internal rules against money-laundering aligned with the NRA;
- Have its own risk assessment based on the NRA;
- Apply AML measures to its customers in the way specified in the internal rules and in accordance with the risk assessment.
If SANS investigates an obliged entity and finds out that its internal rules are not aligned with the NRA or the sample internal rules, SANS should give instructions to the company (and not directly sanction the company).
However, if SANS finds that the company is among the obliged entities (for example in its capacity as a wholesaler) and does not have internal rules or internal risk assessment, or does not apply AML measures to its customers, a sanction could be imposed. Its amount is between BGN 1,000 and 10,000 (EUR 500 and 5,000).
The sanction may also be imposed when SANS provides instructions on the content of the internal rules, but these instructions are not fulfilled within the specified term.
Amendments regarding the commissioning of constructions
On November 15, 2019 the amendments to Ordinance No 2 of 2003 on Commissioning of constructions in the Republic of Bulgaria and minimum warranty periods for completed construction and installation works, facilities and construction sites (the “Ordinance”) entered into force. The adopted amendments aim at standardizing the administrative services for the commissioning of fourth and fifth category constructions.
The constructions under these two categories include medium- and low-rise residential and mixed-use buildings; reconstructions, restructuring, major repairs and change of designation of fourth and fifth category constructions; buildings and facilities for public servicing with a gross floor area of up to 1000 or 5000 square meters; production buildings with capacity of up to 50 working places and the facilities with them, etc.
The amendments provide for the introduction of a uniform application form for the registration and issuance of a certificate of commissioning of fourth and fifth category constructions which is to be used by all municipal administrations. A uniform format of the Certificate of commissioning of fourth and fifth category constructions will also be introduced.
Another significant amendment to the Ordinance is related to the warranty liability of the contractors after completion and commissioning of the sites. The scope of warranty liability has been extended while also extending the warranty periods for certain types of construction works. The minimum warranty periods have been extended from 1 to 3 years depending on the specific construction and installation works, facilities and construction sites.
According to an explicit new provision in the Ordinance, the defined minimum warranty periods shall not apply to technological equipment – machines and/or equipment that are subject to commercial transaction and have а warranty card.
The warranty periods of the manufacturer or of its authorized representative who are responsible for the release onto the market shall apply for that equipment, and for the contractor who installed it – the warranty period of the site where it is installed.
Reform of the Croatian Tax system continues with amendments to the General Tax Act, Value Added Tax Act, Income Tax Act and Corporate Income Tax Act.
The amendments entered into force on 1 January 2020.
First, General Tax Act Amendments introduce restrictions on use of tax benefits contrary to the purpose of the Act.
It is unacceptable for the entrepreneur to make permanent changes to the organizational form when a different organizational form with a lower tax rate is used for each contracted business.
The use of non-compliant benefits also occurs if an entrepreneur, for the sole purpose of using a lower tax rate, avoids paying taxes or reduces his tax liability by using affiliated companies.
Furthermore, contracts and business relationships between affiliated companies will be tax deductible only if other entities that are not affiliated would enter the same contracts or business relationships under the similar conditions.
Regarding the Income Tax Act, basic personal monthly deduction has been raised to HRK 4.000,00.
Furthermore, individuals under 26 years of age receive 100% deduction to their employment income tax and surtax. Individuals over 26 but under 30 receive 50% deduction to their employment income tax.
The premiums for supplementary health insurance paid by the employer for the benefit of the employee up to the prescribed amount become non-taxable receipts to which neither taxes nor contributions are paid.
The new Corporate Income Tax Act transposes a number of directives into Croatian legal system: Directive (EU) 2015/121 of 27 January 2015 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market and Directive (EU) 2017/952 amending Directive (EU) 2016/1164 as regards to hybrid mismatches with third countries.
Significant amendments are as follows. The limit of annual corporate income of HRK 3.000.000,00 which was taxed with 12% tax rate is now raised to HRK 7.500.000,00.
Annual corporate income above HRK 7.500.000,00 is taxed with 18% tax rate. Self-employed natural person with an annual income of HRK 7.500.000,00 or more is ex lege subject to the corporate tax instead of income tax.
Former criteria included value of property, annual income and number of employees.
With the Amendments to the Value Added Tax Act, Directive (EU) 2018/1910 as regards the harmonization and simplification of certain rules in the value added tax system for the taxation of trade between Member States and Directive (EU) 2019/475 as regards the inclusion of the Italian municipality of Campione d’Italia and the Italian waters of Lake Lugano in the customs territory of the Union and in the territorial application of Directive 2008/118/EC, are implemented in the Croatian legal system.
Amendments relate to the transfer of the taxpayer’s goods that are part of his business assets to another Member State based on a transfer arrangement, in such a way that such transfer is not considered to be a supply of goods.
Main reason for Amendments of the Act on Open-Ended Investment Funds with a Public Offering and the Alternative Investment Funds Act is harmonization with the European acquis and other Acts in Croatian legal system. Stated amendments entered into force on 1 January 2020.
Amendments to the Act on Open-Ended Investment Funds with a Public Offering implement Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).
If authorized, management Companies of the Open-Ended Investment Funds with a Public Offering can now perform tasks of a servicer, i.e. they can actively manage the portfolio involved in securitization.
They also have additional obligations in order to carry out the process of assessing the impact of securitization exposures on investor interests.
Furthermore, the conditions for appointment to the Supervisory Board of the Management Company are changed in a way that enables appointment of professors, experts and persons with experience in the management or supervisory board of large enterprises.
The conditions to appointment to the Management Board of the Management company are changed so that is no longer necessary to pass the investment advisor exam.
Finally, pursuant to Alternative Investment Funds Act, the Management Company must invest at least a minimum amount of regulatory capital in liquid assets or assets that can easily be converted into money in short term and that should not be intended for speculative trading.
Directive 2011/61/EU on Alternative Investment Fund Managers is implemented in the Croatian Legal System with the recent Amendments of Alternative Investment Funds Act.
The new Act defines securitization, servicer and distribution. If authorized, the Management Company of the Alternative Investment Fund can now perform tasks of a servicer, i.e. they can actively manage the portfolio involved in securitization.
In that case they also have additional obligations in order to carry out the process of assessing the impact of securitization exposures on investor interests.
The same requirements now apply for appointment to the Management and Supervisory Board of the Management Companies as for the appointment to other financial institutions pursuant to the Capital Market Act.
With the new Amendments it is now possible for the alternative investment funds to use a subsidiary of a financial institution from a member state as a depository which enables that investment of the fund in assets for which the credit institutions in Croatia do not offer custody services, such as cryptocurrencies.
Finally, the Management Company of the Alternative Investment Fund can now also manage Open-Ended Investment Funds with a Public Offering if the approval from the Croatian Financial Services Supervisory Agency (HANFA) is obtained.
Capital Markets Act
Due to the need for further harmonization of the capital market regulatory framework with EU regulations the Amendments of the new Capital Market Act entered into force on 22 February 2020.
The Amendments further regulate business operations of persons authorized to preform transactions in financial instruments, detail requirements for trading in financial instruments, and the requirements for trading in commodity derivatives, emission allowances or derivatives thereof.
A position of data reporting services provider is introduced with the goal of increasing transparency and reduction of fragmented statistics.
Investor protection has been enhanced with the aim of strengthening the framework for investment advisory and portfolio management services, as well as improving the quality of information provided to clients.
New regulatory requirements are being introduced with respect to technology and market developments i.e. new trading platforms and high-frequency and algorithmic trading.
Non-materialized securities, structure and authorities of central securities depository, CCP and the stock exchange, the rights and obligations of participants in the capital market are additionally regulated, especially in the areas of prohibition of insider trading, unlawful discloser of inside information and attempting to engage in market manipulation. In order to improve transparency, reporting obligations to the European Securities and Markets Authority (ESMA) have been increased.
Sanctions that can be imposed against the participants in the capital market have been strengthened.
Most notable amendments are:
- Prospectus will have to be published for of HRK 8 million or more, which raises the bar for HRK 3 million when compared with previous legislation;
- For issuance of securities between HRK 4 million and 8 million, information document will have to prepared instead of prospectus;
- Individual traders can now act as intermediaries on the capital markets, with reduced staff and organizational requirements;
- Croatian Financial Market Supervisor (HANFA) is not expressly allowed to request information related to the code of corporate governance from the issuers.
New Labor Law
On 23 December 2019, the Assembly of the Republic of Montenegro adopted the new Labor Law (Zakon o radu, “Official Gazette of Montenegro”, no. 74/2019) (hereinafter the “Law”).
The need for adoption of the new Law arose from the obligation to comply with regulations of the European Union (14 Directive) as well as with the regulations of the International Labor Organization.
One of the most significant novelties of the Law is regulating employment agreements outside the premises of the employer: remote work, working from home and work in the household, as a special type of employment agreement.
The Law prescribes the mandatory content of an employment agreement outside the premises of the employer.
Further, the Law extends the duration of the employment agreement on a definite-term to 36 months, instead of the previous 24 months.
The Law contains a number of new provisions that further protect employees’ rights. Firstly, the Law stipulates that annual leave cannot be replaced by financial compensation.
Further, the Law regulates the mutual agreement on employment termination by stipulating that it will only have legal effect when certified by the competent authority (public notary, court or local authority).
This rule seeks to eradicate the current practice of certain employers who have conditioned their employees to simultaneously sign the termination of employment by mutual agreement (the so-called blank termination) when concluding an employment agreement.
Also, the Law protects employees from termination of employment on a definite term during the period of pregnancy and maternity leave. According to the Law, payment of earnings will be possible to be made exclusively through a bank account.
The Law stipulates that the statute of limitation for pecuniary claims deriving from work is four years from the date of occurrence of the obligation, and there is no statute of limitation for claims relating to the obligation to pay contributions for pension and disability insurance.
An important novelty is that in the event of termination of employment due to the voluntary liquidation of the company, the employer is obliged to pay the severance pay in the amount of two of employee’s monthly average salary without taxes and contributions in the previous six months, i.e. two average salaries without taxes and contributions in Montenegro, if that is more favorable to the employee.
The Law also provides that employers with more than ten employees are obliged to adopt an act on internal organization and job classification within six months from the day this Law enters into force, i.e. no later than 7 July 2020.
Application of the Law
The Law has entered into force on 7 January 2020. However, there are two exceptions relating to the application provided by the Law. Firstly, the provision of the Law relating to temporary and periodical jobs will apply from 8 July 2020.
The second exception is the application of the provision concerning the prohibition of discrimination against professional social security systems as well as the provision governing the right on payment of additional pension contributions and disability insurance and family pension contributions.
Application of these provisions is deferred until the day of Montenegro’s accession to the European Union.
New Law on Private International Law
In February 2020 a new Law on Private International Law was adopted by the Assembly of the Republic of North Macedonia.
The new Law on Private International Law is foreseen in the Strategy for Reforms of the Judicial Sector for the period 2017-2022 and it will enter into force on 18 February 2021.
The purpose for adoption of this Law is determined by the strategic goal of the Republic of North Macedonia for membership in the European Union and the need for fulfillment of the undertaken obligations for implementation of reforms that incorporate European standards in the national legislation. This Law harmonizes the following regulations:
- Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters;
- Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II);
- Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I);
- Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000;
- Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations;
- Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation; and
- Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession.
The main purpose of the Law is to simplify and increase the efficiency of international legal aid cases, as well as to improve inter-institutional and international cooperation.
The Law clearly defines the basic principles of international cooperation, the types of international cooperation, the manner of communication, both between the institutions in the country and in foreign countries, with foreseen solutions for membership in international organizations, with specified deadlines.
The Law defines the types and manners of action for each type of international cooperation, removing the deficiencies found in the previous Law.
New Law on Energy Efficiency
The long awaited Law on Energy Efficiency was adopted this February and entered into force on 18 February 2020.
This Law fully implements EU’s energy efficiency regulations and is expected to enable the realization of the investments and measures that were necessary in this area following the positive examples from the EU countries and the region.
With the adoption of this Law, the energy auditors and companies licensed to perform energy audits will finally be able to start operating and thereby actively participate in improving energy efficiency in the country.
The Law, inter alia, stipulates: obligations for reconstruction of the buildings in the public sector; energy consumption and savings obligations of the municipalities and other public sector entities; as well as energy efficiency obligations in power transmission, distribution and supply.
Additionally, in order to enable the achievement of the objectives and support of the energy efficiency policies prescribed in it, this Law envisions an establishment of an Energy Efficiency Fund as an independent legal entity.
The funds will be used to finance energy efficiency projects and measures, following examples from other European Union countries. The detailed conditions and the manner of operation of the Fund shall be regulated by a separate law.
It is expected that this Law will enable the achievement of the goals of sustainable energy development by reducing energy consumption with applying energy efficiency measures and reducing the negative impact on the environment and efficiency in energy production, transmission and distribution, as well as increasing energy efficiency in the environment, the public sector, large traders, the transport sector and energy-using products and by utilizing renewable energy sources.
Returning of the 10% flat tax with the Amendments to the Law on Personal Income TaxWith the amendments to the Law on Personal Income Tax adopted at the end of December 2019, the Assembly provided returning of the 10% flat personal income tax for the years of 2020, 2021 and 2022.
Namely, the initial text of the Law on Personal Income Tax that was adopted in 2018 introduced a tax reform, replacing the 10% flat tax with progressive rates of 15% and 18%. However, the amendments froze such progressive rates and returned the 10% flat tax for the period of the next three years.
New Law on Inspection SupervisionThe new Law on Inspection Supervision entered into force on 30 November 2019 for the purpose of removing inconsistencies, weaknesses and omissions in the practical application of the provisions of the previous law on inspection supervision.
The main difference between this Law with the previous one is the introduction of a new concept of inspection supervision through annual planning of inspections based on risk assessment (low, medium and high) and uniform inspection conduct, thus the idea is to achieve greater transparency, predictability and legal certainty for entities subject to supervision.
The risk assessment is made during the preparation of the annual inspection plan of the inspection service and depends on identifying the risks and assessing the severity of the harmful consequences and the likelihood of their occurrence.
On the basis of the annual inspection plan, the inspection service prepares a monthly plan as well, and submits them both to the Inspection Council electronically.
The electronic system should harmonize planned inspections by different departments and minimize the harassment of entities.
Particularly important are the provisions on the manner and procedure of inspection supervision. Inspection can be regular (announced 3 days in advance, except in exceptional cases), extraordinary (unannounced) and controlled (to check for the removal of irregularities). The novelty is the introduction of mandatory inspection checklists during regular inspection for the relevant areas of competence, which are published on the website of the inspection service that enables greater predictability and transparency of the inspection.
Another novelty is the emphasizing of preventive action during inspection, by introducing a warning as a primary inspection measure, which enables the entity subject of inspection to gain a specified period of time in which will be able to remove the identified irregularities without being fined with a monetary fine.
With regard to the rights and obligations of the subject of inspection, the entity shall have the right to propose and submit evidence relevant to establishing the factual situation, to refuse to sign the minutes if it does not agree with the facts stated in the minutes or if is deprived of the right to make a remark thereon, to make a note with an explanation of the minutes, to report in writing on the subject and duration of the regular inspection, accompanied by a checklist, to be aware of his rights and duties and the legal basis for carrying out the inspection, to warn the inspector of the confidentiality of the information made available to him, to accompany the inspector(s) during the inspection carried out in the premises of the entity and obtain a copy of each checklist to be used during inspection.
Specific actions in the inspection procedure include the taking of samples, the temporary seizure of items for the purpose of providing evidence and the temporary prohibition on doing business.
In terms of misdemeanor provisions, the amount of fines have been reduced by half compared to the previous law on inspection supervision.
Law on Agency Employment – adoption of long-awaited legal framework regarding staff leasing
Although staff leasing has been tolerated in practice despite lack of the legal framework, this unregulated area was source of a significant legal uncertainty.
Finally, on 6 December 2019, the National Assembly of the Republic of Serbia adopted the long-awaited Law on Agency Employment (“Official Gazette of the RS”, no. 86/2019) (the “Law”).
Concept of Agency Employment
Agency employment involves a three-way legal relationship between an employee, a temporary employment agency (the “Agency”) and a beneficiary employer.
The employee establishes employment relationship with the Agency, but does not perform work there. The Agency assigns the employee to the beneficiary employer, based on a special agreement concluded by the Agency and the beneficiary employer.
The relationship between the assigned employee and the beneficiary employer is therefore indirect and depends on the employment agreement concluded between the Agency and the employee, as well as the agreement on assigning the employee concluded between the Agency and the beneficiary employer.
Establishment of the Agency
The Agency can be established in different legal forms of companies, as well as in entrepreneurial form. Once established, the Agency must obtain the permit for assigning the employees issued by the Ministry of Labor, Employment, Veteran and Social Matters. The permit is issued for the period of five years and can be renewed an unlimited number of times.
Contractual Relations Regarding Assignment of Employees
The contractual relations arising from the employee assignment are determined by two agreements: employment agreement concluded between the Agency and the employee, and agreement on employee assignment concluded between the Agency and the beneficiary employer.
Limitation of number of assigned employees
One of the most important novelties is the limitation of number of assigned employees. Namely, the total number of assigned employees employed for a definite term with the beneficiary employer cannot exceed 10% of the total number of the beneficiary employer’s employees. On the other hand, this limitation does not apply if the employees are employed by the Agency for indefinite period of time.
Working Conditions of Assigned Employees
The equality of assigned employees with other employees within the same employer is the central point of defining the working conditions of the assigned employees. The Law stipulates that assigned employee will be entitled to the same working conditions as the comparable employee of the beneficiary employer, including the salary.
Termination of employment agreement for the reasons arising at the beneficiary employer is regulated by the Law. Since the Agency is the employer, it is the only one who can terminate the employment agreement of the assigned employee. What makes the whole process specific is the fact that the termination reason can occur with both the beneficiary employer and the Agency.
Standard Contractual Clauses Issued by the Commissioner
The Commissioner for Information of Public Importance and Personal Data Protection (Poverenik za informacije od javnog značaja i zaštitu podataka o ličnosti) (the “Commissioner”) has adopted the Decision on Determining Standard Contractual Clauses, which was published in the “Official Gazette of the Republic of Serbia” no. 5/2020 on 22 January 2020.
The Decision established the Standard Contractual Clauses, which further regulate the legal relationship between the controller and the processor in accordance with Article 45 of the Law on Personal Data Protection (Zakon o zaštiti podataka o ličnosti, “Official Gazette of RS”, no. 87/2018) (the “LPDP”).
The main purpose of Standard Contractual Clauses is to ensure adequate protection of personal data that is being transferred abroad.
If the contracting parties do not apply in whole or choose to amend any of the provisions of the Standard Contractual Clauses, such clauses will not be deemed to represent standard contractual clauses within the meaning of Articles 45 and 65 of the LPDP. Standard Contractual Clauses have to be concluded in writing, including electronic form.
According to Article 65 paragraph 1 of the LPDP, if personal data is being transferred to another country, to a part of its territory, or to one or more sectors of certain activities in that country or to an international organization for which the Serbian Government did not determine the existence of an adequate level of protection, such transfer is possible only if the controller or processor has provided appropriate safeguards of this data and if the data subject is provided with the option to exercise his or her rights and is afforded effective legal protection.
Appropriate safeguards can be provided, without special approval from the Commissioner, inter alia, through the application of standard contractual clauses issued by the Commissioner.
Therefore, Standard Contractual Clauses should be incorporated into every contract between the controller and the processor if the personal data is being transferred to another country, to a part of its territory, or to one or more sectors of certain activities in that country or to an international organization that according to the Government’s Decision on the List of Countries, Parts of Their Territories or One or More Sectors of Certain Activities in Those Countries and International Organizations Where it is Considered That an Adequate Level of Protection of Personal Data is Ensured does not ensure an adequate level of protection for personal data.
Changed taxation when disposing own shares or interests to the company
Until now, the transactions with own business shares were treated as capital gain. It is now explicitly stipulated that the disposal of own shares or interests is not considered a disposal of capital under the chapter governing capital gains.
The change in legislation is the result of many tax evasions in the past, when in some events legal transactions of the sale of business shares were used as hidden profit distribution. The Financial Administration of the Republic of Slovenia has raised this issue already in 2018.
Following the amendment of the Personal Income Tax Act (ZDoh-2), which has been in force since 1 January 2020, the income in cases of the disposal of shares or interests in the context of the acquisition of own shares or interests of a company is taxed as a dividend.
This tax will now be raised to 27.5% (until this change the rate of taxation, when disposing own shares or interests to the company, ranged from 0% to 25%, depending on the ownership period). The exception to the above is when a company acquires own shares in a stock market.
Taxation of capital gains in 2020
Along with the package of amendments to the Personal Income Tax Act (Zdoh-2V), which has been in force since 1 January 2020, it is important to point out also the changed rate of income tax on capital gains, depending on the length of the holding period.
Personal income tax on capital gains shall now be paid in the rate of 27,5%. In the case of completed five years of holding period it shall be paid at the rate of 20% (so far at the rate of 15%), in the case of completed ten years of holding period at the rate of 15% (so far at the rate of 10%) and in the case of completed fifteen years of holding period at the rate 10% (5% so far).
The Legislature implemented the change as one of the measures, which would replace the loss of income due to unburdening of labor income.
It is expected that the Zdoh-2V changes will strengthen the competitiveness of the business environment, which is believe to consequently have an impact on sustainable economic growth and increase of Slovenia’s global competitiveness. In addition, the Zdoh-2V measures are also expected to provide stable and predictable fiscal revenues.