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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 6/1/2013

Serbia: VAT essentials 

Essential information regarding VAT as it applies in Serbia.


Scope and Rates

What supplies are liable to VAT?


Value-added tax (VAT) is due on any supply of goods or services made for a consideration in Serbia, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply includes all forms of supply.


Certain actions carried out for no consideration are deemed to be supplies; for example, giving business gifts, if gifts' value exceeds certain amount, private use of business assets, as well as any supply of services without consideration.


What is the standard rate of VAT?


The standard rate of VAT is 20 percent.


Are there any reduced rates, zero rates, or exemptions?


Yes. There is a reduced rate of 8 percent for certain goods and services, including:


  • basic foodstuffs (bread, milk, flour, sugar, cooking oil, honey, fresh or frozen fruits, vegetables, meat, fish, and eggs)
  • drinking water, except of bottled water
  • cereals, sunflower, soybean, sugar beet and rapeseed
  • medicines, including the ones used in veterinary medicine
  • orthotic and prosthetic devices as well as implants
  • dialysis materials
  • agricultural fertilizers, pesticides, seed stock, nursery stock, feeding mixtures, livestock
  • textbooks
  • daily newspapers
  • hotel, motel, rest home, and holiday camp accommodation
  • public utility services
  • natural gas
  • first transfer of ownership over residential buildings
  • personal computers and its components
  • entrance fees for cinema, theatre, trade fair, circus, amusement park, music events, exhibition, sport events, museums and art gallery, botanical garden, and zoo admission tickets, if they are not VAT exempt.

Special rate under the farmer's flat rate scheme amounts to 5 percent.


There is an extensive list of zero-rate supplies, including:


  • exports
  • supply of goods in free zones and transportation and other services in relation to the supply of goods into the free zone
  • transportation and other services in direct relation to import of goods, if value of these services is included in the taxable amount for the import of goods
  • transportation and other services in direct relation to the export of goods, transit, and temporary import of goods
  • international air and river transport of passengers, where the non-resident company is exempted under the condition of reciprocity
  • services performed on movables obtained by a foreign user of the service in Serbia or imported for the purpose of inward processing, repairing, or incorporating and then exported
  • supplies of goods and services in relation to donation agreements concluded with the Republic of Serbia that state that tax is not to be paid from donation funds
  • supplies of goods and services carried out in line with credit and/or loan agreements concluded between Serbia and an international financial organization or another state or agreements between a third party and international financial organization or other states, where Serbia is the guarantor or counter-guarantor if agreements state that tax will not be covered from the obtained funds
  • supplies of goods and services carried out in line with the international agreements, other than once mentioned above, if agreements state tax exemption
  • supplies of goods and services to diplomatic and consular missions and their foreign staff under the reciprocity rule as well as to international organizations and their foreign personnel if it is provided by the international agreement
  • services supplied by intermediary where the underlying transaction is zero-rated.

The list of exemptions includes:


  • official postal services
  • health and welfare
  • education
  • religious services
  • cultural, scientific, and sport services rendered by non-profit organizations
  • insurance and reinsurance
  • financial and banking services
  • supplies of land as well as renting of land
  • transfer of buildings, except first transfer
  • lease of immovable property for residential purposes
  • games of chance.

Note: it is generally not possible to recover VAT incurred in making exempt supplies.


What are the other local indirect taxes beside VAT?


Excise duties, customs duties, transfer tax payable on transfer of immovable that is not subject to VAT, insurance premium tax.

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Registration

Who is required to register for Serbian VAT?


Serbian Entities


If a business’ turnover in the previous 12 months or predicted turnover for the following 12 months is above RSD8 million, then you are required to register and account for Serbian VAT. Voluntary registration is possible if turnover is between RSD2 million and RSD4 million.


Non-Serbian Entities


Non-Serbian entity that does not have a seat or a permanent business unit in Serbia (registered branch) cannot be registered for VAT in Serbia. Branch offices of non-Serbian entities are required to register for Serbian VAT under the rules that apply to Serbian entities.


Are there penalties for not registering or late registration?


Failure to register for VAT promptly may result in the imposition of a fine ranging from RSD100,000 to RSD1 million.


Is voluntary VAT registration possible for an overseas company?


N/A.


Input VAT deduction is allowed in proportion to the supplies made.


Are there any simplifications that could avoid the need for an overseas company to register for VAT?


N/A.


Does an overseas company need to appoint a fiscal representative?


According to the VAT Law, there is no obligation for an overseas company to appoint a fiscal representative. However, according to the Law on Tax Procedure and Tax Administration fiscal representative might be required depending on the transaction.

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VAT grouping

Is VAT grouping possible?


No.


Can an overseas company be included in a VAT group?


N/A.

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Returns

How frequently are VAT returns submitted?


Serbian taxpayers are required to submit VAT returns on a monthly basis if their turnover in the previous 12 months or forecasted turnover for the following 12 months exceeds RSD50 million. Taxpayers who applies VAT cash accounting scheme must submit VAT returns on a monthly basis. If turnover is less than RSD50 million, a tax return should be filed quarterly.


Are there any other returns that need to be submitted?


In general, no. Note that certain supplementary forms prescribed for some specific supplies (such as, supplies of goods in Kosovo, zero-rated supplies of goods and services to diplomatic and consular missions and international organizations, zero-rated supplies carried on the basis of international agreements) should be filed along with the tax return.


In addition, if a taxpayer has the status of an exporting company (companies which value of exports of goods exceeds 50 percent of the total value of their turnover or if the value of exports of goods exceeds EUR10 million) which qualifies him/her to obtain VAT refund within the shorter refund period of 15 days (general VAT refund period is 45 days) it should file along with the tax return a certain supplementary form.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central bank’s exchange rate applicable on the date of the invoice)


The medium exchange rate published by the National Bank of Serbia valid at the day when VAT liability became due (at the moment when supply is performed or at the moment when advance payment is received) should be applied.

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VAT recovery

Can a business recover VAT if it is not registered?


Non-registered entities generally cannot recover Serbian VAT.


However, there is exception for foreign entities with no business seat or registered branch in Serbia that exhibit at trade fairs in Serbia. Such entities are entitled to claim a refund of Serbian VAT incurred on certain expenses in relation to exhibiting on trade fairs.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


Yes, reciprocity rule is applied.


Are there any items that businesses cannot recover VAT on?


Yes. There are certain items that businesses cannot recover VAT on. For example:


  • Exempt supplies: where VAT relates to both taxable and exempt supplies, you need to make an apportionment.
  • Non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required.
  • Motor cars (excluding commercial vehicles):VAT is non-deductible on purchase or lease of motor cars as well as busses, motorcycles, watercraft and aircraft, including purchases of goods and services related to their use (spare parts, fuel, maintaining, repairing, etc.). VAT is deductible if motor cars and other means of transport mentioned above are used exclusively for performing of following business activities: sale, rent, passenger transport or training drivers.
  • Business entertainment: VAT is not deductible on entertainment costs.
  • The acquisition or import of carpets, electric household appliances, television and radio receivers, works of fine and applied arts as well as other decorative items used for furbishing office premises.

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International Supplies of Goods and Services

How are exports of goods and services treated?


Goods


If a business exports goods to a customer (business or private) outside of Serbia, then it does not need to charge VAT; but it should make sure that in all cases that the proof required by the VAT legislation of dispatch/delivery to support the zero rating are kept.


Services


Serbian VAT legislation is not harmonized with the last changes of EU VAT Directive with regards to the place of supply of services.


If you supply services to a customer (business or private) outside Serbia, then the place of supply is at the place where the recipient has its business domicile or business establishment for which the service is provided, provided the service falls within one of the following categories:


  • the transfer, assignment, and placing at disposal copyrights, patents, licenses, trademarks, and similar rights
  • advertising services
  • the services of consultants, engineers, lawyers, auditors, and other similar services
  • data processing and the transfer of information
  • telecommunication services
  • obligations to refrain from pursuing or exercising, in whole or in part, a business activity or a right referred to above
  • the supply of staff
  • banking, finance, and insurance, including re-insurance services, with the exception of the renting out of safes
  • electronically supplied services, as well as radio and television broadcasting services
  • the hiring out of movable tangible property with the exception of rent-a-car services
  • intermediation services in relation to abovementioned services.

Furthermore, businesses should not charge Serbian VAT on the following types of services (if these services are performed outside the territory of Serbia):


  • cultural, artistic, sporting, scientific, educational, entertainment/show business and similar services, including the activities of the organizers of such activities and related services
  • ancillary transport activities such as loading, handling, and similar activities
  • valuations of movable tangible property
  • work on movable tangible property.

Note that transportation services are taxable where the transport takes place.


In addition, Serbian VAT should not be charged on services directly related to immovable located outside the Serbia (regardless where those services are actually performed).


How are goods dealt with on importation?


When goods are imported into Serbia, import VAT and customs duties may be due. Import VAT is to be assessed by the Serbian Customs Authorities at the point of importation.


How are services which are brought in from abroad treated for VAT purposes?


If a company buys in services which are taxable in Serbia from outside Serbia, it will be required to apply the reverse charge if supplier has not appointed a fiscal representative (if fiscal representative is appointed than he/she would be obliged to apply reverse charge).


Under the reverse charge businesses are required to account for a national amount of VAT as output tax on their VAT return. Most businesses should be able to recover this as input tax on the same tax return (subject to limitation of input VAT recovery as a result of exempt supplies, if applicable).


If a business is able to recover all of its VAT the reverse charge has no cost effect and it is a VAT compliance matter only. However, a partly exempt entrepreneur is likely to bear a VAT cost depending on the level of recovery allowed.


The reverse charge applies to all services which place of supply is in Serbia, including for example:


  • the transfer, assignment and placing at disposal copyrights, patents, licenses, trademarks, and similar rights
  • advertising services
  • the services of consultants, engineers, lawyers, auditors, and other similar services
  • data processing and the transfer of information
  • telecommunication services
  • obligations to refrain from pursuing or exercising, in whole or in part, a business activity or a right referred to above
  • the supply of staff
  • electronically supplied services, as well as radio and television broadcasting services
  • the hiring out of movable tangible property with the exception of rent-a-car services
  • intermediation services in relation to abovementioned services.

The following services are treated as supplied where physically performed and are subject to the reverse charge if performed in Serbia and if the supplier is a foreign entity without seat or registered branch in Serbia:


  • cultural, artistic, sporting, scientific, educational, entertainment/show business, and similar services, including the activities of the organizers of such activities and related services
  • ancillary transport activities such as loading, handling, and similar activities
  • valuations of movable tangible property
  • work on movable tangible property

In addition, reverse charge should be applied on services related to immovable located in Serbia as well as transportation services carried out in Serbia if supplier is foreign entity without seat or registered branch in Serbia.

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Invoices

Is a business required to issue tax invoices?


Yes, VAT invoice is required for supplies performed by taxable person to another taxable person.


A taxable person does not have to issue a VAT invoice for the following supplies:


  • • Supplies of goods and services performed for individuals who are not registered for VAT
  • Supplies of goods and services that are VAT exempt
  • Free-of-charge supplies of goods and services
  • Supplies that are outside the scope of VAT.

What do businesses have to show on a tax invoice?


If a business is required to issue a tax invoice it should contain the following data:


  • Name, address, and tax identification number of supplier
  • The date and place the invoice was issued
  • The sequential number of the invoice
  • Name, address and tax identification number of customer
  • The quantity and nature of the goods supplied
  • The extent and nature of the services rendered
  • The date of supply of goods/service
  • Taxable amount per tax rate and relevant tax exemption
  • Amount of VAT
  • VAT rate applied
  • Amount of advance payments, if any (net amount and VAT)
  • Reference to the article of the VAT Law which supports the non charging of VAT in a particular scenario;
  • Note that the VAT cash accounting scheme is applied

Can businesses issue invoices electronically?


The VAT Law does not provide rules with respect to issuing electronic invoices. General rules provided by the Law on Electronic Documents and the Law on Electronic Signatures should be followed.


Is it possible to operate self-billing?


Yes.


Can a business issue VAT invoices denominated in a foreign currency?


Yes, if the invoice is issued to non-resident customer. If the invoice is issued to Serbian customer, the Serbian currency should be applied but it is possible to show both the foreign and the Serbian currency.

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Transfers of Business

Is there a relief from VAT for the sale of a business as a going concern?


Yes. If a company sells its business as a going concern then VAT may not be due. There are certain conditions to satisfy.

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Options to Tax

Are there any options to tax transactions?


Yes, an option to tax is applicable to supplies of buildings and economically divisible parts thereof under condition that following requirements are met:


  • Both supplier and the customer are registered for VAT in Serbia
  • A sale and purchase agreement concluded between supplier and the customer provides that option to tax will be applied
  • The customer has the right to fully deduct input VAT.

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Head Office and Branch transactions

How are transactions between head office and branch treated?


Transactions between a Serbian head office and its local branch are out of the scope of VAT in Serbia.


The VAT Law is silent with respect to transactions between foreign head office and local branch (and vice versa). From a legal point of view, supplies between a branch and its foreign head office should be considered as supplies within the same legal entity. However, the current position of the Serbian tax authority is that supplies of goods/services between the foreign head office and its Serbian branch are subject to VAT according to the rules on cross-border supplies.

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Bad Debt

Are businesses able to claim relief for bad debts?


Businesses may claim VAT relief for bad debts only on the basis of the effective court decision on the conclusion of bankruptcy proceedings or on the basis of the court settlement.


If the company subsequently receives payment for the supply then it will have to refund the VAT to the tax authorities.

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Anti-Avoidance

Is there a general anti-avoidance provision under VAT law?


There are no general anti-avoidance provisions under the Serbian VAT Law. However, the Serbian Law on Tax Procedures and Tax Administration provides the general anti-avoidance rule (substance over form rule) applicable to all taxes, including VAT.

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Penalty Regime

What is the penalty and interest regime like?


The VAT Law provides that penalties can be assessed in the range from RSD100,000 to RSD1 million for compliance failures.


In addition, the responsible person in the company may be fined from RSD10,000 to RSD50,000.


Late payment penalty interest is equal to the key police rate of the central bank increased by 10 percentage points, using a simple interest method.

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Tax authorities

Tax audits


How often do tax audits take place?


There is no any specific rule. Usually the first request for refund triggers a VAT audit.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


No.


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


A request for ruling could be filed and rulings issued after 30 May 2013 are binding.


Are rulings and decisions issued by the tax authorities publicly available in your country?


Yes.

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Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes. For example, a foreing company without a legal presence in Serbia cannot register for VAT.


Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


Yes. For example: VAT refunds for the purchase of a first apartment (dwelling), VAT refunds granted to traditional churches, VAT refunds for purchases of baby food and eqipment up to a certain amount.

 

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