Former owner of the company “Bemax” Veselin Kovačević filed a lawsuit to terminate the purchase agreement, by which he sold the company in July 2022 Ivan Ubović for 750.000 euros. He did this after receiving a decision from the Tax Administration that he should pay 28,5 million euros in capital gains tax arising from this contract.
In his appeal against this tax ruling, Kovačević states that at the time of signing the contract, he was not aware that the Income Tax Law would be amended and would be applied retroactively. He also believes that the administrative procedure for determining the tax liability should now be suspended until the Basic Court decides on his lawsuit to annul the contract.
Based on a report from a certified expert, the Tax Administration determined Kovačević's tax liability in the amount of 23,7 million euros because he sold the company in July 2022, worth 158,2 million euros. Ivan Ubović for 750 thousand euros. The decision also determined the corresponding interest of 4,7 million euros from the date of the tax liability until the decision was issued on February 20 of this year.
This was stated in the part of the documentation that "Vijesti" had access to.
Kovačević appealed this decision to the Ministry of Finance, but the appeal does not postpone the decision. “Vijesti” could not obtain confirmation whether Kovačević paid the amount of the established tax liability or whether the Tax Administration initiated a forced collection procedure. Following the decision of the Ministry of Finance, Kovačević can file a lawsuit with the Administrative Court.
According to the Personal Income Tax Law, the person liable for capital gains tax is the person who sold a share in a legal entity, and the tax is calculated on the difference between the capital contribution to that company and the amount for which it was sold.
In October 2022, "Vijesti" published an article stating that Kovačević sold Ubović a 750% stake in 'Bemax' for 2021 thousand euros, although at the end of 142, according to financial reports, the company's total capital was worth 141 million euros, and it had undistributed profit of 0,5 million euros in its accounts. In other words, Kovačević voluntarily sold his company for only XNUMX percent of its value.
The purchase agreement states that Kovačević founded the company with an initial investment of only 12 thousand euros in January 2007, and that he subsequently paid an additional investment of 300 thousand euros and transferred non-cash assets of 437,8 thousand euros to it. So his invested money and assets in the company were worth 749,8 thousand euros, meaning that after 15 years of managing the company and its dizzying growth in value, Kovačević earned only 200 euros on the sales price, on which he would pay tax at a rate of 15 percent.
After the article in "Vijesti", the Ministry of Finance, headed by Aleksandar Damjanović, initiated amendments to the Personal Income Tax Law, i.e. the section was added “If the sales value of a share in a legal entity is lower than the market value, the sales value shall be determined by the competent tax authority in accordance with the law governing tax procedures”. The amendments to the law also established the public interest in its retroactive application from 1 January 2018, as well as the obligation for the tax authority to check all contracts for the sale of shares in companies for that period.
In its explanation of the amendments to the law from December 2022, the Ministry of Finance stated that this would prevent abuses and that the Montenegrin budget would generate additional revenue.
"The current legal solution stipulates that capital gain from a share in a legal entity represents the difference between the sales and purchase value of the share, without specifying protective norms in the case when the sales value is unrealistically stated. For this reason, the Ministry of Finance proposes that if the sales value is lower than the market value, in that case the sales value is determined by the competent tax authority in accordance with the law governing the tax procedure," the explanation states.
The amendments to the law entered into force in January 2023, but since then the actual tax liability regarding the sale of "Bemax" has not been determined. Deputy Prime Minister Momo Koprivica submitted an initiative to the Tax Administration on June 17, 2024 to verify the tax liability in this case. The Tax Administration conducted an inspection and made a report on it on January 16 of this year. A decision was issued on February 20, determining the tax liability of Veselin Kovačević for capital gains tax based on the sale of shares in the company “Bemax”.
It was determined that Kovačević has a tax liability for the period 2022, where his tax base was determined in the amount of 158.257.765,29 euros (the value of the company) and that a tax rate of 15% was applied to it. This determined an unpaid tax liability in the amount of 23.738.664,79 euros, on which statutory interest was calculated at a rate of 0,03% per day, which at the time of writing the decision amounted to a total of 4.707.377,23 euros.
Ivan Ubović is the son of a businessman Ranko Ubović, whom Kovačević said on the show "Načisto" in November 2021 that he had been an informal co-owner of "Bemax" from the beginning, although his name was never mentioned in the company's documentation.
Kovačević complains about retroactivity, asks to wait for the Constitutional Court
Kovačević stated in his appeal that the Tax Administration's decision was made in an illegal procedure, that it was based on evidence on which the decision cannot be based, and that the only goal of the procedure was to cause him damage. He disputes that the application of this law can be retroactive because the contract was signed in July and the law was adopted in December. He believes that retroactivity cannot be valid because the disputed article on its determination was adopted at the proposal of a group of deputies, not the Government.
He states that a procedure was filed with the Constitutional Court to determine the constitutionality of two articles of the law on which the decision is based, and that the determination of the tax liability should therefore have been suspended.
Bonus video:
