Worldwide VAT, GST and Sales Tax Guide
Non-established businesses. A “non-established business” is a business that does not have a registered establishment in Serbia. A foreign entity that supplies goods or services in Serbia is obliged to appoint a tax representative and register as a taxable person (only one tax representative can be appointed, either an individual or a legal entity). Foreign entities that make taxable supplies of goods and services provided exclusively to Serbian taxable persons, the State, government departments and similar bodies are not obliged to appoint a tax representative and register for VAT purposes, since in such cases the “reverse-charge” mechanism is applied.
A non-established business that does not make any supplies of goods or services in Serbia may claim a VAT refund, under prescribed conditions.
Tax representatives. A tax representative appointed in the Republic of Serbia by a foreign entity that does not have a legal presence in the Republic of Serbia is a tax debtor for VAT purposes. The tax representative is jointly and severally liable for all liabilities of the foreign entity. If the foreign entity fails to appoint a tax representative, the recipient of the goods/services will be considered as a tax debtor for VAT purposes. A VAT representative must be resident in Serbia and have been registered for VAT for at least 12 months before applying to be a tax representative. The tax representative should comply with all the foreign entity’s VAT obligations, including accounting for VAT liabilities and dealing with VAT recovery on behalf of the foreign entity.
Reverse charge. According to Serbian tax legislation, the reverse-charge mechanism is applied for services supplied by a non-established business to a business that is established and registered for VAT in Serbia, i.e., a business-to-business (B2B) supply, for which the place of supply is Serbia, if the foreign services provider does not appoint a tax representative in Serbia.
Domestic reverse charge. A domestic reverse charge also applies on the sale of secondary raw materials and services that are directly related to these goods provided by another VAT taxable person. Secondary raw materials are defined as the by-product of goods that have undergone a manufacturing process, such as metal, wood, plastic, paper and glass. Services that are directly related to secondary raw materials are sorting, cutting, partitioning, cleaning, polishing and pressing of such materials.
In addition, reverse charge applies in some specific situations of construction services (if the value of the respective services exceeds RSD500,000) and transfer of real estate. Finally, in accordance with the amended VAT law, reverse charge also applies in some specific situations of electric power and natural gas supplied through transport grids and distribution networks, where the buyer has acquired these supplies for further sale.
Digital economy. Specific rules apply to electronically provided services. In general, the place of supply of electronically provided services by an overseas business to both businesses and private individuals in Serbia is deemed to be the place where the recipient of services has its seat or a permanent branch office, i.e., Serbia.
Additionally, guidelines are in place in Serbia, defining the criteria and assumptions for determining the place of establishment, permanent establishment, permanent residence or residence of the recipient of telecommunication services, radio and television broadcasting services and services supplied electronically.
Nonresident providers of electronically supplied services for business-to-consumer (B2C) supplies would be required to register and account for VAT in Serbia.
Nonresident providers of electronically supplied services for B2B supplies are not required to register and account for VAT on supplies in Serbia. Instead, the customer is required to selfaccount for the VAT due by way of the reverse-charge mechanism (see the Reverse charge subsection above).
If an overseas business has not appointed a VAT representative, VAT with respect to electronically provided services should be calculated by the service recipient by reverse charge. However, if there is a collection agent in Serbia that charges the individuals (or other nontaxable persons) on behalf of an overseas service provider, such collection agent is obliged to calculate and pay VAT.
Note that if permanent and temporary residence of the provider or recipient of services are not the same place, the place of supply of the service is determined according to the place of temporary residence.
There are no other specific e-commerce rules for imported goods in Serbia.
Online marketplaces and platforms. Online markets are regulated by Serbian electronic trade law. Freedom to provide cross-border services is prescribed and the conditions under which it can be restricted. Cross-border service provision is the provision of services in Serbia or the EU, where the service provider is not established or is not resident in the territory of the country where the service is provided. In particular, the freedom to provide cross-border services enables domestic providers registered in Serbia to provide information society services in EU Member States to beneficiaries established/residing in the EU, under the same conditions as EU service providers would. At the same time, it enables EU providers to provide information society services in the Republic of Serbia.
Vouchers. As of 1 January 2020, the concept of a voucher is introduced. A voucher is defined as an instrument for which there is an obligation to be accepted as a fee or part of the fee for the goods/services provided, under condition that the following is stated on the voucher or related document: type of goods/services provided; identity of the supplier of the goods/services; terms of use of the voucher.
The VAT law distinguishes between single-purpose (SPV) and multipurpose vouchers (MPV). The essence of distinguishing between SPV and MPV is reflected precisely in the tax treatment of issuing and transferring these vouchers. Namely, in the case of transfer of SPV, any transfer made by the VAT taxable person on its own behalf is considered as a turnover of goods or services to which the voucher relates, while the delivery of goods or services to the voucher holder is not considered as a separate transaction. On the other hand, the transfer of an MPV is not considered as a turnover of goods and services, but the delivery of goods, that is, the provision of services for which a fee is paid by a voucher is regarded as a taxable event.
Registration procedures. A registration form (EPPDV) is filed by the taxable person. After conducting the appropriate procedure, the tax authorities will issue a certificate of VAT registration. The VAT registration form EPPDV must be submitted to the tax authorities electronically via the tax authorities’ portal. A taxable person whose taxable turnover exceeds RSD8 million in the previous 12 months is obliged to submit a registration form for VAT to the tax authorities no later than the end of the first period for submitting a VAT return.
Deregistration. A VAT taxable person whose taxable turnover is below RSD8 million in the previous 12 months may submit a request for VAT deregistration. This request must contain information about the date when the taxable person ceased to perform VAT activities, and it should be submitted to tax authorities within the calendar month in which said cessation has occurred. Request for deregistration is submitted on a ZBPDV form electronically via the tax authorities’ portal. Along with the ZBPDV form, the taxable person must also submit a census list in PDF form, which must contain the following information:
• Capital assets used within the taxable person’s business, that are held on the date of VAT deregistration activity, for which there is an obligation to correct the previous input tax deduction claim
Reverse-charge services. There are no special time of supply rules in Serbia for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above).
Leased assets. The Serbian VAT law does not explicitly distinguish between financial and operating leasing. However, there are separate guidelines that set out the conditions that must be fulfilled for a lease to be regarded as a sale of goods. If a lease is regarded as a sale of goods, the time of supply is when the goods are handed over, i.e., the leasing provider issues an invoice containing the total amount of VAT base and the total amount of the calculated VAT. On the other hand, if a lease is regarded as a service, the time of supply is when the leasing provider issues an invoice for each individual lease installment in which the amount of the lease installment and the amount of VAT (calculated on the lease installment) is disclosed.
Imported goods. VAT upon importation is due once the goods are placed in Serbian customs territory unless the goods are placed in some of the suspension customs regimes.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services supplied to the person for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.
Input tax includes VAT charged on goods and services supplied in Serbia, VAT paid on imports of goods and VAT applied to reverse-charge services.
The time limit for a taxable person to reclaim input tax in Serbia is five years. A taxable person may exercise the right to recover input tax within five years from the day when the statute of limitations began to run, i.e., from the first day of the year following the year in which taxable person acquired the right for reclaiming input tax.
Nondeductible input tax. Effectively, any expenditure that is not business related is nondeductible from an input tax perspective.
Examples
of
items
for
which input tax is nondeductible
• In many cases, expenditures related to acquisition and import of cars, boats, yachts, motorcycles, aircraft, fuel and spare parts, as well as goods and services related to their maintenance and storage
• Expenditure related to business entertainment, including catering, gifts, sporting events, recreation and other costs incurred in favor of business partners, potential business partners, representatives of business partners and other individuals, for which there is no legal obligation
• Expenditure related to meals and transportation of employees or other persons engaged in work, to or from the work
Examples of items for which input tax is deductible (if related to a taxable business use)
• Accommodation
• Employee expenses
• Car hire
• Business maintenance costs
Partial exemption. If acquired goods or services are used partly for purposes of taxable supplies and partly for exempt supplies, the taxable person may not deduct input tax totally. This situation is known as “partial exemption.” The taxable person should divide that part of the input tax relating to taxable supplies and that which does not relate to taxable supplies, based on the economic background of supply. If this is not possible, then the calculation of the amount of input tax that may be recovered is made on a pro rata basis by using the following formula:
Amount of deductible input tax x taxable turnover + exports
Taxable turnover + exports + exempt supplies
Total turnover, which is the divisor in the above equation, is the turnover executed from 1 January of the current year until the end of the tax period for which the VAT return is submitted.
The taxable person is not obliged to perform division of the input tax if the established percentage of proportional VAT deduction is at least 98%.
Approval from the tax authorities is not required to use the partial exemption standard method in Serbia. Special methods are not allowed in Serbia.
Capital goods. Capital goods are facilities and equipment that are used in a business over several years. Input tax is generally deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of acquisition. However, the amount of input tax recovered for capital goods must be adjusted if the taxable person’s partial exemption recovery percentage changes in the period of 5 years from the first usage of the equipment, 10 years from the first usage of the facilities and 10 years from finishing the investment in the facilities.
A capital goods adjustment applies for a period represented in the difference between the aforementioned periods (5/10 years) and the period in which the taxable person had the right to deduct input tax. Exceptionally, the taxable person does not have an obligation to adjust input tax on the capital goods in the case of disposal of the equipment and facilities that may be considered as a functional unit.
Refunds. If the input tax is higher than the output tax, the taxable person has a right to obtain a refund or to use this amount as a tax credit. The input tax credit can be carried forward to future tax periods to offset output tax.
In order to claim the input tax refund, the taxable person must tick the box in its VAT return or by submitting a subsequent request to the tax authorities for the input tax refund.
The refund should be performed, at the latest, 45 days after the deadline for submission of the tax return for the current period (or 15 days after the deadline for the taxable persons who mostly perform supply of goods abroad, i.e., a predominant exporter). The tax administration is liable to pay interest on delayed tax reimbursements at the same rate of penalty interest that applies to taxable persons for late payments of VAT (this is the annual reference rate of the National Bank of Serbia, plus 10 percentage points).
Pre-registration costs. This occurs in the tax period in which the supply of goods with the right to deduct input tax was performed.
The taxable person may deduct input tax for the goods purchased within 12 months before starting to carry out taxable activities and that are in its possession on said day under fulfilling prescribed conditions.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) can be recovered in Serbia. The taxable person may claim the bad debt relief on the price that has not been paid by the customer. This is only allowed if they have received a final binding court decision on the completed bankruptcy proceedings and/or on the ground of a certified minutes on compulsory settlement with debtors. No other documentation is required.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Serbia.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses that are not registered for VAT in Serbia is recoverable. Non-established businesses may obtain refunds of VAT incurred in Serbia solely if
• That sender, recipient, time and place of sending and receiving can be determined from the saved electronic message
• Technologies and procedures are applied to sufficiently secure against alteration or erasure of data or other reliable means of guaranteeing the invariability of data or messages, as well as backup database at another location
Hence, both the e-invoice and the email message should be achieved on the computer. Also, note that if the original document is in paper form and then digitized and authenticated in accordance with the law regarding electronic documentation, such document gives the probative power of the original (paper) document, but the authentication of the digitized document does not mean that the original document can be destroyed. In this case, according to the regulations currently in force, the paper original must be kept.
I. Returns and payments
Periodic returns. The tax period is a calendar month or a quarter depending on the total turnover of the taxable person in the last 12 months (if turnover exceeds RSD50 million).
Both monthly and quarterly taxable persons must submit the tax return within 15 days after the expiration of the tax period.
The obligation to file the VAT calculation breakdown along with the VAT return has been initially postponed due to the fact that the first version of VAT calculation breakdown was too burdensome from the perspective of both taxable persons and tax authorities.
Taxable persons are also obliged to file a POPDV form along with the VAT return (see Supplementary filings below).
Periodic payments. The deadline for VAT payment is the same as the deadline for the filing of VAT returns, i.e., within 15 days after the expiration of the tax period. Upon submitting the VAT return electronically via the portal, e-porezi, the taxable person pays the VAT liability by transferring funds to the prescribed public revenue account. The VAT payable by a taxable person for a tax period equals the VAT on the total taxable value of supplies made during the tax period minus any input tax allowed as a deduction.
Electronic filing. Electronic filing is mandatory in Serbia for all taxable persons. The submission of a VAT return, as well as the submission of an amended VAT return, is completed electronically. The return is submitted on the prescribed PPPDV form. Taxable persons must use the “ETaxes portal.” It collects electronic services for the Serbian tax administration, enables all taxable persons to submit online tax forms with digital signatures, provides follow up on the status of submitted applications with insight into the taxable person’s tax card and provides faster and simpler fulfillment of obligations toward tax administration. This system meets high security standards that enable safe and uncompromised electronic data transfer.
Payments on account. Payments on account are not required in Serbia.
Special schemes. Cash accounting. Small and medium-sized enterprises with an annual turnover of less than RSD50 million may opt to pay VAT after they have received payment.
Collection system. The taxable person whose total turnover in the previous 12 months is not more than RSD50 million may opt for reporting and paying the VAT once the receivables are collected (whereby input tax is also reported once the payables are settled). VAT is also due if the payment is not received within six months after the supply was performed. Certain types of supplies prescribed by the law are exempt of the application of this “collection system.”
Investment gold. Generally, VAT is not calculated on the supply of investment gold. The taxable person who performs the mentioned supply has the right to deduct VAT for that supply. Exceptionally, the taxable person may, under certain conditions, opt for VAT calculation for investment gold supply.
Small taxable persons. Small taxable persons do not charge VAT for performed trade of goods and services, do not have the right to indicate the VAT in invoices and are not entitled to deduct input tax. Also, they are not required to keep records prescribed by VAT law.
Tour operator’s scheme. Tourist services provided by a tourist agency are considered as a single service. The place of trade of a single tourist service is the place where the service provider has its head office or a permanent establishment if the trade of service is carried out from a permanent establishment that is not in the place where the provider has its head office. The tax base of the single tourist service provided by a tourist agency is the amount representing the difference between total price paid by a passenger and actual expenses paid by the tourist agency for preliminary tourist services, after deducting the VAT that is included in that difference.
Works of art, secondhand goods, antique goods Taxable persons engaged in trade of used goods, including secondhand motor vehicles, fine art works, collector’s goods and antiques, deter mine tax base as a difference between the sale price and the purchase price of the goods by deducting the VAT that is included in that difference.
Annual returns. Annual returns are not required in Serbia.
Supplementary filings. Pregled obracuna PDV (POPDV). Taxable persons are also obliged to file a Pregled obracuna PDV (POPDV) form along with the VAT return. POPDV is the official name of the form and in English would be “Form and Content of the Overview of VAT Calculation.” The form provides an overview of the VAT calculations that support the VAT return figures. If the taxable person fails to file the VAT calculation breakdown on the POPDV form along with the VAT return, it will be deemed as if the VAT return was not filed at all.
Correcting errors in previous returns. If the taxable person finds that the tax return submitted to the tax administration contains an error that results in an incorrectly determined amount of tax liability, or an omission of another type, it is obliged to immediately and no later than the expiration of the statute of limitations, file a tax return in which the error or omission has been rectified. If the taxable person acts in the stated manner, it shall be considered that no criminal offense or misdemeanor has been committed in the original tax return.
The taxable person may change the submitted tax return no more than twice by submitting the amended tax return.
Digital tax administration. There are no transactional reporting requirements in Serbia.
J. Penalties
Penalties for late registration. If a taxable person who is a legal entity fails to register for VAT, a fine ranging from RSD100,000 to RSD2 million will apply. Also, a responsible person within the legal entity will be fined in the amount from RSD10,000 to RSD100,000 in the case of a relevant offense. If a legal entity submits the registration form after the prescribed deadline, penalties of RSD100,000 may be imposed. Also, a responsible person within the legal entity will be fined in the amount of RSD10,000 for said offense.
Penalties for late payment and filings. For late payment and filing of a return, a monetary penalty of RSD100,000 is prescribed for the legal entity and RSD10,000 for the responsible person.
Penalties for errors. If the taxable person establishes that the tax return, which it submitted to the tax administration contains an error that results in a wrongly determined amount of tax liability, or omission of another kind, he is obliged to immediately file, and no later than the expiration of the expiration date, a tax return in which the error is, or omission is, remedied. The taxable person may amend the tax return no more than twice by filing the amended tax return.
Incorrect VAT reporting may lead to a penalty of 30% of the difference between the correct VAT amount that should have been reported and the unreported/incorrectly reported VAT amount, but