SIGNIFICANCE AND TAX TREATMENT OF REVERSE FACTORING AS AN INSTRUMENT FOR FINANCING SMALL AND MEDIUM-SIZED ENTERPRISES IN THE REPUBLIC OF SERBIA

Abstract

In modern market circumstances, when competition is becoming more and more ruthless, especially in the period of the continuing immanent duration of the effects of the world economic crisis, which has a vertical depth effect (both those who have significant funds and those who do not have free funds, i.e. they are not liquid, feel it) when fresh capital is getting harder and harder, only those companies can survive that have a constant and regular inflow of fresh capital. In an economic situation in which the dominant role is played by large capital (multinational corporations or regional corporations), where acquisition is increasingly sought, the pressure on small companies becomes more pronounced and stronger. For companies that are organized as small or medium, the inflow of fresh capital is a luxury for the reason that the right to claim is exercised over a longer period of time (30-90 days) with the risk of being unable to collect the claim. It should be emphasized that: a) lack of fresh working capital; b) the frequent absence of own funds (reserve funds) and c) the impossibility of obtaining favorable loans in the current circumstances, inevitably implies that small and medium-sized companies are finding it increasingly difficult to survive. In addition to the fact that globalization has negative effects on the micro-economy, it should be emphasized that the development of the market economy continuously and permanently affects the creation of new and the evolution of existing financial instruments for financing production. Factoring is one of the modern financial instruments that is gaining more and more importance both at the macro and micro level (primarily referring to the countries that belonged to the Eastern Bloc market), and which belongs to the group of parabanking operations. Factoring as a parabanking business in export-oriented economies appears as one of the indispensable financial instruments for financing small and medium-sized companies. One of the specific forms of factoring that has evolved in modern business practice caused by the COVID pandemic is reverse factoring. Reverse factoring as a special type of factoring is contracted between the factor and the debtor from the contract for the sale of goods or the provision of services in the country and abroad, on the basis of which the factor, by taking over invoices from the debtor, assumes his obligation to pay towards the creditors, and has the right to collect from the debtor within from the agreement for the sale of goods or the provision of services in the country and abroad. The legal validity of the reverse factoring deal depends on securing the creditor’s consent. The debtor is obliged to secure the creditor’s consent, otherwise the reverse factoring contract cannot be concluded. The paper will also pay special attention to the tax treatment of income generated on the basis of factoring business in accordance with the positive legal regulations of the Republic of Serbia.