When it comes to reporting obligation to the National Bank of Serbia (“NBS”), what first comes to mind is the reporting regulated by the Decision on reporting on foreign credit transactions (Official Gazette of RS no. 56/2013, 4/2015 and 42/2020), which is done through commercial banks of reporting obligors.
However, this does not exhaust the obligations of residents to the NBS with regard to reporting and obligors often overlook such other obligations, e.g. reporting on direct investments. The control of exercising of such other obligations has not been subject to control for a long time (at least not under significant control), but the NBS has recently intensified the control and invited payers to provide reports for all reporting periods omitted in the past. It remains to be seen whether it will also institute misdemeanour procedures for failure to meet this obligation.
Under Article 37 of the Law on Foreign Exchange Operations (Official Gazette of RS no. 62/2006, 31/2011, 119/2012, 139/2014 and 30/2018), the NBS specifies the obligation of residents to report on payment, collection and transfer with regard to payment transactions from Art. 32 and 34 of the law, and based on information from such reports the NBS makes a projection of the Republic’s balance of payments as an analytical basis for determining monetary policy aims and tasks and monitors the achievement of such projection.
In accordance with the indicated authority, the NBS passed the following acts:
- Decision on mandatory reporting on foreign transactions (Official Gazette of RS no. 87/2009 and 40/2015 – other decision) and
- Instructions for implementing the Decision on mandatory reporting on foreign transactions (Official Gazette of RS no. 87/2009 and 40/2015 – other decision) (“Instructions”).
Bases of reporting and types of reports
Residents, as reporting obligors, shall be obliged to report on the following bases:
- Direct investments of non-residents in the country;
- Direct investments of residents abroad;
- Investment (construction) works performed by non-residents in the country;
- Investment (construction) works performed by residents abroad;
- Balance and turnover on the accounts of residents abroad;
- Balance and turnover on correspondent accounts kept for foreign transactions;
- Other activities necessary for creation of the balance of payments.
Accordingly, the Instructions stipulate the following reports:
- Report on foreign direct investments of non-residents in the country (balance and transactions) – Form DI-1;
- Report on foreign direct investments of residents abroad (balance and transactions) – Form DI-2;
- Report on transactions of residents with non-residents on basis of performance of investment (construction) works – Form GRU;
- Report on balance and turnover on residents’ accounts abroad and correspondent accounts – Form RN.
In terms of the Law on Foreign Exchange Operations, direct investments are considered as residents’ investment abroad and non-residents’ investment in the Republic in a legal entity with the aim of being included in the management of such entity’s operations. Investment shall particularly include: incorporation of a legal entity, branch or representative office, purchase of stake or shares in the capital of a legal entity, recapitalisation of a legal entity, and any other form of investment whereby the investor acquires more than a 10% stake in share capital, and/or more than 10% of voting rights, in a period not longer than one year following the first investment into that legal entity in the event of successive investments (for the purpose of reaching the 10% threshold), as well as credits and loans with a maturity of five years or longer provided they have the characteristics of subordinated claims (subordinated credits and loans).
During reporting, one should consider the increase of initial capital, however the Instructions also foresee for reporting on additional payments of the founders whereby the initial capital is not increased.
Deadlines and manner of reporting
The forms can be downloaded in electronic form from the NBS website. For each type of report, the NBS published a user manual for filling-in and submitting (Form DI-1, Form DI-2, Form GRU, Form RN).
The user manuals for forms DI-1 and DI-2 indicate that final version of these reports for fourth quarter shall be submitted no later than 31 March of the current year for the preceding year, so that the information would be harmonised with the information from the final statement. It should be noted that the report for the fourth quarter should by all means be submitted in the prescribed deadline i.e. by 10 January of the subsequent year, whereas by 31 March it will be only possible to submit the amendments for harmonisation with the submitted financial statement.
Reporting on foreign exchange operations is a continuous obligation that is periodically executed. This is particularly important when it comes to the reporting obligation on foreign direct investments of non-residents in the country and foreign direct investments of residents abroad, considering that the reporting obligation applies both to transactions exercised in the reporting period and to the status of direct investments, which can be unchanged in the given period. Therefore, these reports are filed even if there were no changes in the particular quarter.
Omission of reporting obligation in foreign exchange transactions represents a misdemeanour under the Law on Foreign Exchange Operations that may be subject to fine from RSD 100,000.00 to 2,000,000.00 for a legal entity and from RSD 5,000.00 to 150,000.00 for a responsible person in a legal entity, and RSD 10,000.00 to 500,000.00 for an entrepreneur.
It should be noted that the Law on Misdemeanours (Official Gazette of RS no. 65/2013, 13/2016, 98/2016 – decision of the CC, 91/2019 and 91/2019 – other law) prescribes that a court may relieve of fine the perpetrator subject to fine, if after the misdemeanour and prior to learning about the conviction, they eliminate the consequences of the deed or compensate for the damages done by the misdemeanour. In the particular case, this would mean the submission of all omitted reports prior to the receipt of motion for misdemeanour procedure.
This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.
By Ivana Ruzicic, Managing Partner, PR Legal