The beginning of autumn in Serbia has been very eventful in the field of taxes, bringing many changes - the most significant one being the major remodelling of the VAT Law.
The most important novelties in the VAT Law are the following:
- A mandatory VAT registration and the appointment of a tax representative have been introduced for foreign entities supplying goods and services in Serbia (except for the services provided electronically and for bus passenger transport). Still, we think that this should be treated just as a possibility for a foreign entity to register for VAT, for two reasons - the reverse charge requirement for the customer and the practical inability to fine such foreign entity for its failure to appoint a tax representative.The tax representative must fulfill certain criteria (it must have a seat or a place of residence in Serbia, be a registered VAT taxpayer for 12 months at least, it cannot have any outstanding tax liabilities or be previously sentenced for tax evasion). Upon appointment, a tax representative undertakes to meet all VAT-related requirements on behalf of the foreign entity (return filing, VAT payment, issuing invoices, etc.) and assumes joint and several tax liability.
- The reduced 10% rate now applies to accommodation services provided by all hospitality facilities regulated by the Law on Tourism.
- The reverse charge mechanism has been introduced for the supply of electricity and natural gas intended for resale, supply of goods and services subject to enforcement and transfer of pledged or mortgaged assets in the enforcement proceedings. The reverse charge mechanism in the construction industry was extended beyond the investor-contractor relationship to any supply of construction services between two VAT taxpayers.
- The place of supply for electricity, natural gas, energy for cooling and heating delivered via transmission or distribution grids and intended for resale is the place where the recipient has its seat or a permanent establishment.
- The place of supplying information on business practices and know-how is the place where the recipient performs its business activities and has its permanent establishment which receives the services, or place where the recipient has its seat or a place of residence.
- The same place of supply applies to services of enabling access to a natural gas/electricity/heating/cooling network, transmission and distribution via these networks, as well as other related services, like enabling participation on the organized electricity market. VAT exemption has been introduced for import of electricity, natural gas and heating/cooling energy, supplied trough portable, transmission or distribution network.
- Employers can no longer deduct input VAT on employee meals and transportation expenses.
- The taxable moment for transferring, assigning or granting the use of intellectual property rights is also the time of invoicing.
- A VAT correction is now mandatory for the supplier only if the tax base subsequently increases, while, for the recipient, the input VAT correction is mandatory only if the tax base subsequently decreases.
- If the VAT payable for the transfer of ownership on used cars, artwork, collectors' items and antiquities is lower than the tax liability calculated in accordance with the Property Tax Law, only the latter is applied.
- An input VAT deduction is allowed for certain goods used for equipping and decorating business premises (carpets, electrical household appliances, TVs, radios and other artistic and decorative items).
- If within three years after the VAT exempt transfer of a going concern, the transferee ceases to fulfil the conditions for such VAT exemption, it is required to charge VAT on such supply, except in cases when a mandatory input VAT correction is required instead.
- A requirement for a VAT taxpayer to submit a report on supplies from farmers and suppliers of secondary raw materials, which are not VAT registered taxpayers, is now extended to all supplies, regardless of their value.
- The deadline for filing a monthly VAT return for quarterly taxpayers will be 15th day of the month for the previous quarter.
- The taxpayers will also be required to file a VAT calculation summary, along with the VAT return.
All of the changes are applicable from 15 October, except for the change in the VAT return filing deadline - applicable from 1 January 2016, and the VAT calculation summary requirement - applicable from 1 January 2017.
Many of these changes are further regulated in several rulebooks recently issued by the Ministry of Finance. Still, their implementation has already raised several issues in practice and it remains to be seen how will these issues be resolved.