Qs & As on the Implementation of the Foreign Exchange Law which were given by National Bank of Serbia

(for more please see http://www.nbs.yu/english/index.htm)

Q: Is a commercial bank allowed to purchase foreign exchange from its clients in case it already possesses a long postition in that particular currency?

A: In case a particular bank's forex risk indicator exceeds 30% relative to the bank's capital, and additionally it has a long position in a particular currency, the bank is not allowed to puchase either foreign exchange on the forex market nor foreign currency banknotes in that particular currency. Exceptionally, such a bank may purchase foreign exchange and foreign currency banknotes from its clients on condition that by the closing time, it sells it to another client thus neutralizing the efffect of the purchase on its forex risk indicators.

Q: Is a non-resident allowed to deposit foreign currency cash with a bank without a certificate on the intake of money into the coutry?

A: A non-resident may deposit foreign currency banknotes on a foreign exchange account with a bank supported by a certificate issued by the Customs Office on the intake of the foreign currency funds into the FR Yugoslavia, a certificate on the withdrawal of foreign currency cash from a savings account, or unused business trip funds withdrawn from a company's account.

Q: May the payments from the non-resident's account (both juridical persons and individuals) held with domestic banks be considered payments from abroad?

A: Yes, payments from non-residents held with domestic banks should indeed be understood as payments from abraod.

Q: Do the branches of foreign companies (registered with the Minstry of Foreign Economic Relations) enjoy the status of residents or non-residents?

A: In line with art. 2, para. 1 under 2) of the Foreign Exchange Law, branches of foreign companies enjoy the resident status. Pursuant to art. 23 of the Law, both juridical persons and enterprenours may deposit foreign exchange funds with commercial banks. Nevertheless, art. 41 stipulates that branches of foreign companies do not enjoy the status of juridical persons, meaning that they are not allowed to conclude contract on foreign trade, so that both foreign exchange and dinar account of the branch office is opened in the name of its foreign legal person. Nevertheless, the branch office or appointed person is free to manage the funds on the account only upon authorization by the non-resident (foreign juridical person).

Q: Is the transfer of the right to a claim under the transfer contract between a resident and a non-resident allowed?

The Foreign Exchange Law does not prohibit the transfer of claims on the basis of a  contract, on condition that the resident repatriates the foreign exchange funds on terms stipulated by the Law.

Q: How are cash payment operations with Montenegro and Kosovo-Metohija regulated in the Law?

A: Cash payments arising from transactions with the Republic of Montenegro and the Authonomous Province of Kosovo-Metohija are regulated in Point 4 of the Instruction on the Manner of Temporary Performance of Payment Operations on the Territory of the FR Yugoslavia (Official Gazette of the FRY, no. 11/2001).

Q: If a hotel offering accomodation to non-residents in the FR Yugoslavia failed to collect a payment for services rendered in line with art. 4 of the Law, is it allowed to invocie the service in foreign exchange and collect payment in foreign exchange. In the same line, is it allowed to accept a cheque from a non-resident and collect it in an authorized bank with authomatic crediting of the collected funds to the hotel’s foreign exchange account?

A: A hotel-owning company offering hotel accommodation to non-residents in the FR Yugoslavia is allowed to invoice its services in foreign exchange denomination. It is understandable that the non-residents may settle their obligations making use of all payment instruments applied in external payment operations, which, naturally includes cheques.

Q: Does liberalization of cash withdrawals from foreign exchange accounts applies also to juridical persons and if so, under what conditions?

A: Individuals, indeed, may withdraw cash for their personal needs from their foreign exchange accounts or forex savings accounts, but juridical persons and entrepreneurs may draw cash from their forex accounts only for the purpose of covering business trip costs and up to EUR 2,000.

Q: Are commercial banks allowed to open foreign exchange accounts to real estate agencies for the purpose of depositing foreign currency cash collected from their clients purchasing real estate and also, are the agencies allowed to draw foreign currency cash in order to settle their obligations towards sellers of real estate?

A: The real estate agencies are not allowed to accept foreign currency cash arising from the purchasing and selling of real estate. The Foreign Exchange Law stipulates that such payments may be effected in foreign exchange through the foreign exchange accounts with authorized banks, or otherwise in dinars.

In the case when a purchasing party is an individual and selling party is a juridical person, payments arising from the purchase of real estate may be effected by transferring funds from a foreign exchange (or otherwise savings) account of an individual and crediting the foreign exchange account of a juridical person. Such an operation is closely described in the Decision on the means and conditions of collecting claims and transferring funds in current and capital transactions in both dinars and foreign exchange (Official Gazette of FRY, no.25/2002.