On May 23, 2016, the Serbian Ministry of Finance announced its clarifying opinion on the tax representation of a non-resident entity for the purpose of implementing the Law on Value Added Tax and the obligation to register for VAT.
Although the concept of tax representatives for non-residents existed in previous versions of the VAT Law, the latest amendments to the Act, adopted in October 2015, define conditions that VAT representatives should fulfill. It also allows non-residents providing goods and services in the Republic of Serbia to register for VAT via a proxy. Instructions on the process of registration were further described in the opinion issued by the finance ministry on May 23.
The criteria that tax representatives must fulfil includes mandatory registration in Serbia, having a VAT taxpayer status for at least the last 12 months, no tax arrears, and no convictions for a criminal tax offense. The decision on eligibility is issued by the Tax Administration within 15 days after completing the VAT representative registration process on the tax authority's website.
Today, only a limited number of companies are registered as VAT tax representatives for foreign entities. This is most likely because of the joint and severe responsibility for all obligations of the foreign entity that arises for VAT representatives. In addition, even though the rulebook and opinion explain most of topics, some practical aspects are still left unclear – including details about procedures for payments and VAT refunds.
Having all this in mind and considering that registration is not mandatory, but rather on a voluntary basis, it remains to be seen whether this new facility will be increasingly used by non-resident entities and their resident associates, or whether the VAT burden will remain with the domestic recipients of goods and services.
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