The Law on Amendments and Supplements to the Law on Tax Procedure and Tax Administration (“Official Gazette of RS” No. 86/2019) amended Article 20 of the Law on Tax Procedure and Tax Administration, including the addition of new paragraph 5 which reads as follows: “In the case of bankruptcy proceedings of a taxpayer conducted through reorganization, the manner of settlement of tax claims and the measures for implementing the reorganization plan or pre-prepared reorganization plan cannot be contrary to the provisions of this Law and other tax regulations.”

By the amended provisions of the Law on Tax Procedure and Tax Administration (ZPPPA), which contrary to bankruptcy regulations were put into practice by granting preferential status to the tax authority through the formation of a special class, the fundamental principles of equal treatment of creditors have been violated, significantly complicating the implementation of the Bankruptcy Law (ZOS). This provision essentially ties into the prohibition of writing off principal debt and interest by more than 50% and sets repayment terms for tax debts up to 60 months, as prescribed by tax regulations. Consequently, a reorganization plan cannot practically be approved without the consent of the tax authority, regardless of the amount of the claim and the proportion held by other creditors, with restrictions on the number of installment payments and debt write-offs.

Court opinions on this matter were initially inconsistent upon the initial application of the amended provisions, but currently tend to support bankruptcy regulations as lex specialis in relation to tax legislation.

Due to the direct conflict between the provisions of the current ZOS and ZPPPA, which apply to the same legal situation, it is necessary to resolve the issue of conflict between these two laws.

* The information in this text does not constitute legal advice and is provided for informational purposes only.

Published: 3rd July 2024.