Indirect tax - Serbia

Value Added Tax (VAT) is the main type of indirect taxation in Serbia.

It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply, ie the sale.

A business registered for VAT will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each tax period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.

A transaction is within the scope of Serbian VAT if the following conditions are met:

• it must be a supply of goods or services
• it must be made by the taxpayer (taxpayer is the person or entity which is registered for VAT in Serbia – that is person, including person which has not seat or place of residence in Serbia, that makes supply of goods and services independently in the scope of its business)
• the transaction should take place in Serbia
• the transaction must be taxable supply
• the transaction must be performed within the framework of the business activity.

There are three rates of VAT that are applied to goods and services in Serbia: the standard rate of 20%, the reduced rate of 10% and the zero rate. In addition, some goods and services are exempted from VAT. Businesses that make exempt supplies are unable to claim all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost.

Most goods imported into Serbia are subject to VAT. The tax is calculated by the competent customs authority, while have to be paid by the importer at the time of importation. If the importation is for business purposes, the importer is registered for VAT and VAT charged by customs is paid, the importer is entitled to claim import VAT.

It is also important to note the interaction between VAT and Customs duty. Customs duty is levied at the place where goods are imported into Serbia. It is levied in order to bring the cost of goods produced outside the country up to the same level as those produced within it. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market.

Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer. It therefore represents a bottom line cost to the importing business if it cannot be passed on in higher prices. It is therefore very important to ensure that the correct rate of duty is applied. VAT is charged on the value of the importation, including any custom duty.

A ‘person’ who either makes or intends to make taxable supplies of goods or services in the course of its business must register for VAT, from the moment when total supplies for the previous 12 month exceeds a threshold of 8 million RSD (approximately €68,000). When calculating the threshold, it must be considered total amount of all taxable supplies and those exempt with the right to input tax deduction (except amount of supply of equipment and facilities for the business purpose), which have been made by the taxpayer during the previous 12 month period.

For these purposes, a ‘person’ includes any entity, which fulfils the conditions imposed by the definition of taxpayer.

A business can be also registered on a voluntary basis, even if the registration limit has not been reached.

A penalty may be imposed by the tax authority if a business does not register or fails to register for VAT within the prescribed deadline. Penalties in this case range from 100,000 RSD to 2,000,000 RSD.

The VAT registration limit does not apply to businesses not established in Serbia. The businesses not established in Serbia shall register as soon as they start to make supply of goods and services in Serbia, except in cases they perform taxable supplies to:

• VAT payers,
• entities performing public administration services or
• entities performing passenger transportation services by busses.

There are a certain provisions of local VAT regulation which deal with this matter, such as:

1. In the case non-resident entity makes supply of goods and services to non-taxable persons in Serbia, while considerations for this supply are collected by the taxable person on behalf and for the account of non-resident entity, tax debtor for this supply is taxable person which collects the consideration
2. The tax base does not include amounts collected by the taxable person on behalf and for the account of another taxable person (for example non-resident supplying electronically/digital services), if it is transferring this amount to the person on behalf and for the account of which the taxable person has collected the payment
3. There is obligation for non-established business to register for VAT and appoint a fiscal representative in case this entity performs supply of electronically services to private consumers in Serbia. 

An entity which makes supply of goods and services in Serbia, but has not an established business in Serbia, is obliged to appoint a fiscal representative in all cases when the registration is needed. Therefore, there is no obligation for non-established business to appoint a fiscal representative only in case this entity performs taxable supply in Serbia to:

• VAT payers
• entities performing public administration services
• entities performing passenger's transportation services by bus.

Fiscal representative will act on behalf and for the account of this entity while complying with the VAT rules (registering for VAT, calculation and payment of VAT, submitting VAT return etc.).

Tax period is a calendar month for the taxpayers which total turnover for the previous 12 month period exceeded 50 million RSD (approximately €425,000), for the tax debtors which are not registered for VAT and for the entities which begin business activity in the current year.

Tax period is a quarter for the taxpayers which total turnover for the previous 12-month period does not exceed 50 million RSD (approximately €425,000).

Taxpayers shall submit VAT return and make the related payment by the 15th of the calendar month following the end of tax period. Exceptions are tax debtors which are not registered for VAT, for which deadline for submission and payment of VAT liability is 10th day of calendar month following the end of tax period.

A wide range of penalties are imposed by the tax authority if VAT returns are not submitted on time and/or the related VAT liability is not calculated and/or is not paid by the due date.

Penalties range from 10% to 100% of due tax determined during the tax control procedure, but at least from 200,000 RSD to 500,000 RSD for legal entities.

Along with tax return, VAT payers are obliged to submit to competent tax authority VAT calculation overview, on the prescribed Form POPDV.

Additionally, in certain circumstances supporting declarations are also required to be submitted, such as in case of supply of goods and services intended for:

• official needs of diplomatic and consular missions
• official needs of international organisations, if so provided by the international agreements
• personal needs of foreign staff of diplomatic and consular missions including their family members
• personal needs of foreign staff of international organisations including their family members, if so provided by the international agreements.
• supply of goods and services in accordance with donation agreements, under prescribed conditions
• supply of goods and services in accordance with credit and/or loan agreements, under certain conditions
• supply of goods and services in accordance with international agreements, under certain conditions.

A range of penalties can be imposed where businesses do not comply with the VAT rules.

Some of the penalty taxes are as follows:

• penalties for errors and omissions in tax return – 30% of the difference between calculated VAT and amount have to be determined in accordance with the VAT rules
• penalties for not submitting additional declarations and other prescribed documentation – from 100,000 RSD to 2,000,000 RSD
• penalties for not maintaining appropriate records and accounting evidence – from 100,000 RSD to 2,000,000 RSD.

Criminal proceedings may be brought in the case of more serious matters. For example, it could be brought for submission of incorrect tax return in order to achieve the right for ungrounded tax refund or tax credit.

It may be possible for non-resident entities not registered for VAT in Serbia to reclaim the VAT incurred. The reimbursement of VAT is allowed in certain circumstances and is provided under reciprocity.

The reimbursement of VAT will be performed to a foreign taxpayer upon his request, for the supply of moveable goods and services in the Republic of Serbia, under the following conditions:

• VAT for the supply of goods and services must be stated on the invoice and the invoice must be paid
• the amount of VAT to be reimbursed must exceed €200 in dinar value at the official middle exchange rate of National Bank of Serbia
• the conditions, under which a taxable person is entitled to a deduction of input tax for this goods and services, are fulfilled
• foreign taxpayer does not make supply of goods and services in Serbia, except:
  • services of transportation of goods which are exempt from VAT in accordance with domestic rules
  • services of transportation of passengers which are according to domestic rules subject to individual taxation
  • supply of goods or services for which tax debtor is VAT tax payer – the recipient of goods and services.

A VAT invoice must show the following information:

• an invoice number which is unique and sequential
• the place and date of issuing the invoice
• the seller’s name, address and tax identification number
• the customer’s name, address and tax identification number
• the time of supply (also known as tax point) and the amount of advance payments (if any)
• a description sufficient to identify the goods or services supplied to the customer (type of goods/services and the quantity of goods/extent of services)
• the amount of tax base
• applicable tax rate
• the amount of VAT chargednotification that there is no VAT payable and reference to the relevant provision (in case of exempt supply or zero supply)
• notification if billing system (charging and payment of VAT on a cash basis) is applied.

VAT invoices can be issued, received and stored in electronic format and there is no need to inform the tax authority.

Electronic invoicing has recently been introduced in Serbia, so that invoices are mostly issued and received through the Electronic Invoicing System, which is connected with the Serbian tax administration. Content of electronic invoices is prescribed by Law on Electronic Invoicing and is very similar to the ones in paper form (above stated as VAT invoice).