Member Article

On 20 April 2018, the amendments to the Law on Foreign Exchange (the “Law”) were adopted and will enter into force on 28 April 2018. Exceptionally, the application of certain provisions related to the assuming of competencies over foreign exchange control by the National Bank of Serbia is delayed until 1 January 2019.

The main reasons behind the amendments to the Law are the harmonisation of the obligations that the Republic of Serbia undertook under the Stabilisation and Association Agreement and an alignment with international standards in the area of the prevention of money laundering and terrorism financing. These amendments contribute to the further evolution of the digital and IT sector in Serbia - in accordance with the activities that the Serbian Government directed towards the development of this field.

The main amendments to the Law are the following:

• The list of issuers of long-term securities in which the residents may freely invest has been expanded – residents may now invest in long-term securities issued by the European Union and in legal entities registered within EU territory. Banks remain free to invest in long-term securities;
• The capital flow based on short-term portfolio investments is liberalised –residents and banks may perform the sale and purchase of short-term securities of certain issuers, while non-residents from the EU may sell and purchase short-term securities in the Republic of Serbia in accordance with the law regulating the capital market;
• It is clarified that the creditor’s consent is required in cases of permitted debt assignment, which is a correction stipulated for the purposes of harmonisation with the general rules on obligations;
• Entering into certain cross-border credit transactions in electronic form has been enabled;
• Short-term borrowing by natural persons and branches is enabled – the resident natural persons may take loans/credits from non-residents from the EU with a repayment term of up to one year, while branches may take a loan/credit from a non-resident founder from the EU under the same conditions;

• The approval of financial loans by a resident legal entity to a non-resident is liberalised, as well as the granting of sureties and other security instruments under credit transactions between non-residents – the National Bank of Serbia is expected to adopt a bylaw which will prescribe the conditions and the manner under which these transactions will be carried out, whereby the restrictions prescribed by this bylaw will be exclusively for the purposes of preserving public interest and financial stability. The same bylaw should further regulate the conditions under which a resident legal entity will grant sureties and other security instruments under credit transactions between residents and non-residents;

• The scope of transactions based on which a resident legal entity may obtain a guarantee and surety from a non-resident has been extended – the resident legal entities now may obtain guarantees and sureties from non-residents also for transactions concerning the import of goods and services, as well as for investment works by non-residents in Serbia;

• All residents (as opposed to natural persons only) may execute cross-border payment transactions via payment institutions and public postal operators;

• Charity organisations may receive charity donations from abroad through electronic money issuers as well;

• The sale and purchase of digital products in foreign currencies in Serbia is permitted under certain conditions - (i) that the payment is made using a payment card or electronic money through a local payment service provider, and (ii) that these products are delivered exclusively through telecommunications, digital or IT devices;

• The National Bank of Serbia assumes the competencies over foreign exchange control from the Tax Administration as of 1 January 2019 - The National Bank of Serbia will assume the competencies of the Ministry of Finance, Tax Administration over the issuance and revocation of authorisations and certificates for the conduction of currency exchange operations and the supervision over currency exchange operations and the foreign exchange operations of residents and non-residents.