PayPal not licensed for foreign exchange payments within Serbia - Tax Administration supervising transactions

PayPal can be used by Serbian legal and natural persons to perform only international payment transactions, for which it is licensed by the National bank of Serbia, but to conduct mutual payments in the Serbian payments system, as it has not filed an application with the NBS to be licensed as an electronic money institution so far, the NBS reported in response to media queries about the operations of foreign electronic money institutions in Serbia.

– Article 10 of the Law on Payment Services clearly states which financial institutions are authorized to provide payment services in Serbia (payments between residents). The list includes electronic money institutions which have obtained a license from the NBS to issue electronic money (a domestic electronic money institution), but not foreign electronic money institutions, which, under the Law on Foreign Exchange Operations, may provide to residents only cross-border payments services – the report says.

In other words, for residents to be allowed to engage in payment operations through, for instance, PayPal or Skrill, these companies would have to be licensed with the NBS as electronic money institutions.

To date, PayPal has not filed an application with the NBS to be licensed as an electronic money institution. Hence, the report specifies, for the time being, Serbian legal and natural persons can use PayPal to perform only international payment transactions and not to conduct mutual payments in the Serbian payments system.

Provision of payment services is an activity subject to licensing across the world. if Serbia were to allow these transactions to be performed between residents by a company without the NBS licence, a paradoxical situation would arise whereby foreign electronic money institutions, established in a country where no regulatory requirements are imposed would be in a far more advantageous position than domestic electronic money institutions which comply with regime equivalent to that of the EU, the NBS says.

As regards the country of residence of PayPal users or users of services of other foreign electronic money institutions, the NBS underlines that the Serbian Tax Administration authority supervises the compliance with the Law on Foreign Exchange Operations of legal persons.

The Tax Administration, in accordance with the Law on Tax Procedure and Tax Administration, has the requisite legal and factual mechanisms to determine whether a given PayPal payment was executed between residents, and accordingly, to file a request to initiate an appropriate procedure.

The central bank reminds that, under current regulations governing foreign exchange operations, there are no obstacles for domestic companies and Serbian citizens to either receive or collect payments (receipt of electronic money) through a foreign electronic money institution; they may buy the electronic money earned in such transactions and transfer it to their foreign exchange account with a bank in Serbia.

PayPal Pte. Palo Alto, California, USA

Narodna banka Srbije Beograd

Poreska uprava Srbije

PayPal

international payment transactions

mutual payment transactions

National Bank of Serbia

NBS

domestic payment transactions

electronic money

Law on Payment Services

Payment Services in Serbia

Law of Foreign Exchange Operations

Skrill