VAT, GST and Sales Tax in Serbia

Summary

Name of the tax Value-added tax (VAT)
Local name Porez na dodatu vrednost (PDV)
Date introduced 1-Jan-05
Trading bloc membership Central European Free Trade Agreement (CEFTA) Member State
Administered by Poreska Uprava Republike Srbije
VAT rates
Standard 20%
Reduced 10%
Other Zero-rated and exempt
VAT number format 123456789 (9 digits)
VAT return periods Monthly or quarterly
Registration thresholds
Supply of domestic goods Annual turnover of RSD8 million; voluntary registration for turnover below RSD8 million
Exporters and importers Same as for domestic supply
Recovery of VAT by non-established businesses Only if non-established businesses do not perform any supply of goods or services in Serbia, except for international transportation services

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods and services performed by taxpayers in Serbia against consideration while performing their regular business activity
  • Importation of goods into Serbia, regardless of the status of the importer
  • Services purchased by taxpayer in Serbia from service provid­ers whose place of business is outside Serbia, with Serbia regarded as the place of supply (subject to the “reverse-charge” mechanism)

Who is liable

Any person (entity or individual) who supplies goods and/or services, and on that account generates revenues in this regard, in the course of the person’s independent business activity is liable for VAT. The obligation to register for VAT purposes and to cal­culate VAT is triggered when total turnover, except for the supply of VAT-exempt services, in the previous 12 months exceeds RSD8 million. A taxpayer whose VAT-able 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.

An option is available for small taxpayers and farmers (annual turnover below RSD8 million) to register for VAT by submitting a registration VAT form to the tax authorities, thereby acquiring the rights and obligations to compute and deduct VAT. The obli­gation for computing and paying VAT is effective for at least two years.

Group registration. Not applicable.

Non-established businesses. A “non-established business” is a business that does not have a registered establishment in Serbia. In accordance with the amended VAT law, starting from 15 October 2015, a foreign entity that supplies goods or services in Serbia is obliged to appoint a tax representative and register as a VAT payer (only one tax representative can be appointed, either an individual or a legal entity). Exceptionally, effective 1 January 2017, foreign entities that make taxable supplies of goods and services provided exclusively to Serbian VAT payers, 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. This exception applies also to passenger bus transportation services.

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. According to Serbian tax regulations, 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 considered to be a tax debtor for VAT purposes. The tax representative is jointly and severally liable for all liabilities of the foreign entity. In case 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 of 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 rendered by a foreign services provider for which the place of supply is Serbia, if the foreign services provider does not appoint a tax representative in Serbia.

Further, reverse charge applies on the sale of secondary raw materials and services that are directly related to these goods provided by another VAT taxpayer.

In addition, reverse charge applies in some specific situations of construction services and transfer of real estates.

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.

Registration procedures. A registration form is filed by the tax­payer. After conducting the appropriate procedure, tax authorities will issue a certificate of VAT registration. The VAT registration form cannot be filed electronically.

Late-registration penalties. If a taxpayer’s VAT-able turnover exceeds RSD8 million in the previous 12 months, the taxpayer is obliged to submit a VAT registration form no later than the end of the first period (i.e., month) for submitting a VAT return.

If a taxpayer who is a legal entity fails to submit the registration form, 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 case of relevant offense. If 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 in case of said offense.

Digital economy. Specific rules apply to electronically provided services, defined in more details in the separate Rulebook. 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 of the services recipient, i.e., Serbia. If any 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 non-VAT payers) on behalf of an overseas service pro­vider, such collection agent is obliged to calculate and pay VAT.

Deregistration. A VAT taxpayer whose VAT-able turnover is below RSD8 million in the previous 12 months may submit a request for VAT de-registration. This request must contain infor­mation about the date when the taxpayer 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. After conducting the appropriate procedure, and if the taxpayer’s prior obligations arising from VAT are settled, tax authorities issue a certificate of VAT deregistration on a PBPDV form.

New place of supply rules. Effective 1 April 2017, in order to harmonize Serbia’s VAT rules with EU legislation, the place of supply rules for supplies services has undergone significant changes. The aim of the amendment is to set a general rule for determining the place of supply of services as the place of the services recipient.

For this purpose, the VAT law has defined how to determine who is a taxpayer recipient of a supply of services. This definition applies solely for the purposes of applying the new place of sup­ply rules.

Based on the new law, when the service is provided by a VAT payer, a taxpayer recipient of a supply of services is considered to be:

  • Any entity that conducts its business activity as a permanent activity, regardless of the goal of conducting such activity
  • Legal entities, government departments and local govern­ment entities with their head office in Serbia
  • Foreign legal entities, government departments and local government entities registered for payment of consumption taxes in a foreign country

Furthermore, for services provided by a foreign entity that is not registered for VAT in Serbia, a taxpayer recipient of the services is considered to be:

  • Any entity conducting its business activity as a permanent activity, regardless of the goal of conducting such activity
  • Legal entities, government departments and local govern­ment entities

The place of supply is further determined depending on whether the service was provided to a taxpayer or not:

  • If the services are provided to a taxpayer recipient of ser­vices, the place of supply is considered to be the place where the recipient has a head office or permanent establishment.
  • If the services are provided to a recipient of services who is not a taxpayer, the place of supply is considered to be the place where the provider of such services has a head office or permanent business unit.

In addition to the general rule, several exceptions still apply to the place of supply for some specific services.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices except for exempt supplies.

The use of goods or services purchased or produced in the course of a business activity for private purposes constitutes a taxable supply.

Serbia’s VAT rates are as follows:

  • Standard rate: 20%
  • Reduced rate: 10%
  • Zero rate (0%)

The standard rate (20%) applies to all supplies of goods and services unless a specific provision allows for a reduced rate, zero rate or exemption.

The reduced rate of 10% applies to the supply of medicines and medical care devices (e.g., prosthesis), and to the supply of a wide range of food products and other goods and services.

The zero rate applies to exported goods, international transporta­tion services and related supplies, as well as to supplies of goods and services relating to aircrafts and ships used in international traffic and to other goods and services.

The term “exempt supplies” refers to supplies of goods and ser­vices that are not subject to VAT and that do not give rise to an input VAT deduction.

Examples of exempt goods and services

  • Properties (except for first-time transfer of ownership)
  • Land
  • Supply of goods for which acquirer did not have the right to deduct input VAT
  • Rental of flats if used for housing
  • Financial services
  • Insurance services
  • Postal services
  • Education services
  • Religious services
  • Printing and sale of publications
  • Public broadcasting services (except those with commercial character)

Option to tax for exempt supplies. The second and every other transfer of ownership of buildings and building units is not sub­ject to VAT but to non-recoverable transfer tax. However, it is possible that the buyer and the seller (as registered VAT taxpay­ers) instead opt for application of VAT, provided that the buyer is entitled to fully recover VAT deriving from that supply.

Time of supply

A supply of goods is considered to be performed on the date when the dispatch or transport of goods starts or on the date when ownership of goods is transferred to the buyer, if transport is not included. Time of supply of imported goods is considered to be the date on which the goods arrive in Serbian customs territory.

Services are considered to be provided on the date when the provision of the individual service is finished or when the legal basis for the provision of time limited or time unlimited service is finished. Apart from this, if periodical invoices are issued for the service, supply of that service is considered finished on the last day of the tax period for which that invoice relates. If the payment is made before the delivery of goods or services, the moment of supply is the moment when the payment is made. Special rules apply to construction companies.

Cash accounting. Since 1 January 2013, small- and medium-sized enterprises with an annual turnover of less than RSD50 million may opt to pay VAT after they have received payment.

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.

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.

Nondeductible input tax. The following list provides examples of items of expenditure for which input tax is not deductible (this list is not exhaustive):

  • 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

Partial exemption. If acquired goods or services are used partly for purposes of taxable supplies and partly for VAT-exempt supplies, the taxable person may not deduct input VAT totally. This situation is known as “partial exemption.” The taxpayer should divide that part of the input VAT 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 VAT 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.

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 taxpayer’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 taxpayer’s partial exemption recovery percentage changes in the period of five years from the first usage of the equipment, ten years from the first usage of the facilities and ten years from finishing the investment in the facilities.

A capital goods adjustment applies for a period represented in the difference between the aforementioned periods (five/ten years) and the period in which the taxpayer had the right to deduct input VAT. Exceptionally, the taxpayer does not have an obligation to adjust input VAT 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 VAT is higher than the output VAT, the tax­payer has a right to obtain a refund or to use this amount as a tax credit.

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 taxpayers who mostly per­form supply of goods abroad). The tax administration is liable to pay interest on delayed tax reimbursements at the same rate of penalty interest that applies to taxpayers for late payments of VAT (see section on VAT returns and payments).

Preregistration costs. This occurs in the tax period in which the supply of goods with the right to deduct input VAT was per­formed.

The VAT payer may deduct input VAT for the goods purchased within 12 months before starting to performing VAT-able activi­ties and which are in its possession on said day, under fulfilling prescribed conditions.

Recovery of VAT by non-established businesses

Non-established businesses may obtain refunds of VAT incurred in Serbia solely if they do not perform any supply of goods or services in Serbia, except for international transportation servic­es, and under the terms of reciprocity. The refund request is submitted annually, and the deadline for submission is 30 June for the purchases made in previous year.

Invoicing

VAT invoices and credit notes. A taxpayer must provide a VAT invoice for all taxable supplies made, including exports. The invoice must comply with the requirements set out in the VAT law. A VAT credit note may be used to reduce the VAT charged on a supply of goods or services – provided the buyer is a VAT taxpayer and has confirmed that the input VAT has been cor­rected; a debit note may be used to increase the amount of VAT. Tax credit and debit notes must be cross-referenced to the origi­nal VAT invoice.

Proof of exports. An export declaration with confirmation that the goods have left Serbian territory is required.

Foreign-currency invoices. A Serbian VAT invoice for domestic supplies must be issued in Serbian dinars (RSD). If an invoice is received in a foreign currency, the amounts must be converted into RSD. The exchange rate used for imports is determined by customs, while the exchange rate for domestic VAT supplies is the middle exchange rate published by the National Bank of Serbia or the agreed exchange rate applicable on the date when the tax obligation takes place.

VAT returns and payments

VAT returns. The tax period is a calendar month or a quarter depending on the total turnover of the particular taxpayer in the last 12 months (if turnover exceeds RSD50 million).

Starting from 1 January 2016, both monthly and quarterly VAT payers 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 postponed until 1 January 2018. If the VAT payer fails to file the VAT calculation breakdown along with the VAT return, it will be deemed as if the VAT return was not filed at all.

The deadline for VAT payment is the same as the deadline for the filing of VAT returns. The VAT payable by a taxpayer for a tax period equals the VAT on the total taxable value of supplies made during the tax period minus any input VAT allowed as a deduction.

Special schemes. The VAT payer 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 VAT 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.”

Electronic filing and archiving. Since 1 January 2014, the submis­sion of a VAT tax return, as well as the submission of an amend­ed VAT return, is completed electronically. The return is submitted on the prescribed PPPDV form.

Annual returns. Not applicable.

Penalties

Tax offenses are regulated within the Law on Tax Procedure and Tax Administration. For VAT relevant offenses, the following penalties may be applied:

  • Penalties range from 10% to 100% of the unpaid VAT or at least RSD250,000 to RSD500,000 for legal entities and RSD50,000 to RSD100,000 for entrepreneurs.
  • Penalties in fixed nominal amounts range from RSD100,000 to RSD200,000 for legal entities and RSD100,000 to RSD500,000 for entrepreneurs.
  • Penalties range from RSD10,000 to RSD100,000 for the responsible person within a legal entity.
  • Penalties for a nonresident legal entity conducting taxable sup­plies in Serbia, that does not have a head office or a fixed busi­ness unit in Serbia, failing to comply with the obligation to appoint a VAT representative ranges from RSD100,000 to RSD2 million.
  • Penalties for a nonresident individual conducting taxable sup­plies in Serbia failing to comply with the obligation to appoint a VAT representative amounts to RSD50,000.