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Incentive audit for a foreign production shot in Serbia
Situation
A foreign production company shot in Serbia for eight weeks through a local service producer, with qualifying expenditure of several million euros. The claim to the Film Center of Serbia required an expenditure report verified by a licensed auditor, and the foreign co-producer wanted the report in English, in a format their financial controller could follow.
Challenge
- Over 2,000 individual costs in three currencies, across suppliers, fees and per diems.
- Some costs were paid in advance of project approval, so eligibility had to be established.
- Fees of foreign crew — not qualifying — were mixed with domestic ones on the same payroll runs.
- Deadline: the report had to be ready within 30 days of wrap to meet the payment schedule.
What we did
- Set up the ledger before shooting. We agreed a cost structure by Decree categories with the production, so every cost was tagged qualifying or non-qualifying from day one.
- Interim review after week four. We reviewed half the spend during the shoot and closed documentation gaps while suppliers were still reachable.
- Separated domestic and foreign fees and documented the basis for each, including tax treatment.
- Final audit and bilingual report. Auditor's report in Serbian for the Film Center and in English for the co-producer, with identical figures and an explanation of classification differences.
Result
The claim was filed on time and approved without further questions. The production knew in advance exactly how much would be refunded, because non-qualifying costs were separated during the shoot rather than afterwards. The same production engaged us for its next project in Serbia.
Lesson: an auditor who joins before the shoot saves more money than one who arrives after it, because ledger errors are fixed while the supplier can still issue a corrected invoice.
Transfer pricing for a group with four related entities
Situation
The owner had built four companies over the years: manufacturing, distribution, a property company leasing to the others, and a holding providing management services. Goods, rent, management fees and loans flowed between them at "house" prices. Transfer pricing documentation had been superficial, and one entity received a Tax Administration notice.
Challenge
- Six transaction types between four entities, some without written agreements.
- Rent charged by the property company to the manufacturer was well below market, shifting profit to the entity using a tax credit.
- An interest-free loan from the owner to the holding.
- Management fees with no evidence of services actually rendered.
What we did
- Mapped all transactions and selected a method for each: CUP for rent and interest, cost plus for management services, TNMM for distribution.
- Gathered comparables: market rents for industrial space in the municipality, prescribed arm's-length interest rates, and margins of comparable distributors from a database.
- Prepared a full study for each entity, with tax base adjustments where deviations were material — before the Tax Administration assessed them.
- Restructured the agreements going forward: new lease, loan and management service agreements at arm's-length prices with evidence of services, so the next year needs no adjustments.
Result
The audit closed without an additional assessment, because the entity self-reported the adjustment with a study supporting it. The group's total tax burden did not rise: an adjustment in one entity was matched by a lower base in another, properly documented. The annual update now takes two weeks instead of six.
Lesson: transfer pricing is not a study at year end but an agreement at the start. When intercompany prices are set at market, documentation becomes a formality rather than a defence.
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