Value Added Tax (VAT) Guidelines: Serbia

Generally, VAT is based on the principle that VAT paid on input can be used as a deduction for the purposes of calculation of a taxpayer’s VAT liability. The output VAT is triggered by supply of goods and services or collec­tion of payment, whichever event comes first. The taxpayer is obliged to pay the difference between output and input VAT.  

 

Certain actions carried out for no consideration are deemed to be supplies; for example: The giving of business gifts and the private use of business assets. 

 

Certain transactions are not subject to Serbian VAT, for example: The assumption of a debt as a form of pay­ment and genuine compensation payments (damages), transfer of a business as a going concern, supplies between the head office and a branch (important note: only if head office and the branch are on the territory of Serbia). 

 

The standard VAT rate is 20 percent, the reduced VAT rate is 10 percent. 

 

The taxpayer is entitled to the refund of the excess of input VAT over output VAT. The deadline for refund is 45 days from the deadline for the submission of the tax return. 

 

There are some rules for VAT exemptions as well. It will be distinguished between VAT exemptions with input VAT recovery and VAT exemption without an input VAT deduction: 

 

Taxpayers selling VAT exempt goods or providing VAT exempt services neither can charge VAT nor can deduct the VAT paid on their purchases. In such cases input VAT is considered as costs of a taxpayer. 

 

As mentioned earlier as not member of EU, intra-Community rules are not in place so if a business exports goods to a customer (business or private) if does not need to charge VAT. Where goods are imported to Serbia, they are subject to import VAT in Serbia.

 

As a rule, supplies of services provided to a business for business purposes (so-called B2B services) are made where the recipient of the service is established. As an exception, if such services are provided to a fixed esta­blishment of the recipient, the place of such fixed establishment is the place of supply. 

 

As a further rule, the place of supply of services to customers/supplier who do not receive such services for their business (so-called B2C services) is where the business providing the services is established. As an exception, if such services are provided from a fixed establishment of the business providing the service, the place of such fixed establishment is the place of supply. 

 

The place of supply of services by an intermediary in the case of B2C services is the place where the underlying transaction is supplied. 

 

If the customer is not Serbian resident the place of supply of certain B2C services is where the customer is resident or domiciled. 

Registration is compulsory if the business entity performs or intends to perform taxable activities in Serbia. The threshold for VAT registration is RSD 8,000,000 (approx. EUR 65,000). 

 

The registration rules which apply to Serbian entities also apply to non-Serbian entities providing taxable supplies in Serbia. Fiscal representation is possible for foreign taxable persons who want to recover Serbian input VAT. 

 

There are some simplification rules to avoid a registration for VAT purposes in Serbia:

 

An oversee company does not need to appoint a fiscal representative but may if decided so. The procedure is relatively straightforward at the HQ of Serbian tax authorities. 

 

Rödl & Partner in Serbia also provides VAT compliance/declaration services for foreign companies which deci­ded to register for VAT in Serbia. 

VAT calculation period is one calendar month. VAT taxpayers are obliged to submit the return and pay VAT within the period from the 1st to the 15th of the month following the expiry of tax period. The difference between total amount of output and input VAT calculated in tax period represents the amount of VAT liability for payment or the amount of VAT refund. 

 

Submission of VAT return is electronically. VAT returns are available on the tax authority’s website. Prompt and correctly completed returns are the best way to avoid any potential issues with tax authorities. Non-compliance with the obligation to properly file VAT return may result in a penalty of up to RSD 2,000,000 (approx. EUR 16,400), furthermore late-filing penalties are possible.

 

There are no penalties for failing to register for VAT in time. However, a business may incur late-payment or penalties (50 percent of unpaid amount of VAT), late-filing penalties (up to RSD 2,000,000) and interest on any outstanding VAT. 

 

The Serbian tax law does not involve any reasonable excuses, but penalties could be avoided as an exception and via application if the individual circumstances lead to that. 

 

If a business is registered for VAT purposes in Serbia, it is possible to declare and deduct Serbian input VAT within the VAT return on the regular tax procedure and some preconditions. The same apply if you have fiscal representative in Serbia.

 

The Directives concerning application for special VAT refund are not implemented in Serbia as non EU Member State. Persons registered for VAT in another and not established or registered in Republic of Serbia may apply for VAT refund under the condition of reciprocity.

 

There are certain items that you cannot recover input VAT on, for example: exempt supplies (without credit) where VAT relating to both taxable and exempt supplies must be apportioned or non-business (including private) activities where VAT relates to both business and non-business activities, VAT is not recoverable. 

 

Input VAT on certain employee expenses:

There are formal invoicing requirements according to the Serbian VAT law regarding the right to deduct Serbian input VAT.

  

For certain exempt services (such as, services in the banking or insurance sector) there is no obligation to issue invoices from a VAT point of view. 

 

If invoices do not content all of the necessary requirements or if some indications are not correct, it is possible to amend these invoices via different ways, for example via cancellation and new issuing or amendment with an additional document and respective references to the original invoices. 

 

From mid-2022, electronic submission of invoices will be obligatory on domestic market, while exchange of hard copies with companies abroad will still exist. Regarding exchange of invoices on domestic market, idea is that submission of invoices will be the same as submission of VAT returns nowadays – state will provide dedi­cate server on which invoices can be exchange.

 

Credit notes are acceptable in some cases (return of the goods, discounts). To operate via self-billing is not possible.