On September 28 2015, the Serbian Parliament adopted a set of amendments to the Serbian VAT Act. The amendments introduced were published in the Official Gazette of the Republic of Serbia No. 83/2015 on October 3 2015.
The main reasons for the amendments of the VAT Act are:
- further harmonisation of the Serbian laws with EU laws;
- creation of a more favourable business environment;
- prevention of the abuse of law; and
- improvement of VAT audits.
The amendments to the VAT Act enable the Serbian authorities to register foreign taxable persons (who have not established their business in Serbia) who supply goods and services in Serbia. Such persons will have to appoint a Serbian tax representative to calculate and pay VAT on their behalf. In this way, all persons who operate in Serbia will have equal rights and obligations and the non-taxation of supplies between foreign persons in Serbia will be prevented.
The amendments also update the provisions governing taxation of the energy sector, also introducing more detailed regulations. Specifically, the supply of cooling energy is defined as supply of goods, and changes concerning the place and time of supply of electrical, heating, cooling energy gas have been introduced, depending on whether the energy is purchased for final consumption or further sale. Amendments to the VAT exemptions for the import of energy and gas have also been included.
The changes eliminate the restriction for the deduction of input VAT charged on home appliances, TV and radio devices, pieces of art and applied art and other decorations used in an administrative space.
The amendments will also affect the real estate industry. With the changes, VAT will be paid by the recipient of goods and services when the construction goods and services are supplied among taxable persons or to the republic or state authority, irrespective of whether or not the supplier is a construction company or the recipient is an investor on record.
The changes that will affect the energy sector include an application of a reverse charge mechanism to the supply of electrical energy and gas for further sale.
Pursuant to the changes, reverse charges will also apply on the transfer of real estate in the course of a mortgage activation, on the transfer of goods in the course of a pledge activation and on the transfer of goods and services subject to an enforcement procedure. Reverse charges will also apply to acquirers of a going concern in a business transfer in cases where the conditions under which the going concern was transferred cease to exist.
Additionally, the reduced 10% VAT rate will apply to accommodation in all types of touristic venues (not only in hotels, motels, camps and so on), and to all types of transportation of persons and luggage in Serbia and not only on city and suburban transportation, as was the case until now.
As a means of abuse prevention, the amendments provide for the obligation of the taxable persons to submit an overview of the calculated VAT with their VAT return.
Some of the changes are aimed at more precise definitions of already applicable rules. Specifically,VAT on acquisition of food and transport by an employer for its employees is not deductible. Moreover, the employer has no obligation to calculate VAT on supply of food and transportation services to its employees, while entertainment expenses are more precisely defined.
Other changes are aimed at adjusting the taxable base, input VAT deduction, definition of the total turnover, VAT period and VAT refund to foreign companies.
The amendments imply that most of the new solutions will be applicable as of October 15 2015.
In summary, the most novel feature of the new VAT Act is that all foreign taxable persons who supply goods and services in the territory of Serbia will have to register for VAT and appoint a tax representative. Accordingly, every transaction undertaken by multinational corporations which involves Serbia will have to be reviewed, and an assessment made regarding whether the foreign taxable person requires a VAT registration and tax representative in Serbia.
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