Answer ... Value added tax (VAT): VAT is payable only in specific legally prescribed situations. The law provides that when transferring property rights to real estate, VAT is paid where the taxpayer (seller) is a person who independently conducts trade in goods and services within the scope of performing activities. In practice, this means that when buying an apartment from an investor (ie, a person whose main activity is real estate), VAT will be paid at a rate of 10% for the purchase of new constructions. However, VAT may also be payable on the sale of existing buildings if the seller is professionally engaged in the purchase, renovation and sale of real estate.
Tax on the transfer of absolute rights: The tax on the transfer of absolute rights is payable on the transfer with compensation of the property rights to real estate. The tax is levied at a rate of 2.5%.
The tax liability arises on the day that the contract is concluded for the transfer of ownership of the real estate. If the building is still under construction, the tax liability arises on the day of handover or taking possession of the real estate in question.
The law stipulates that the taxpayer is the seller of the real estate. However, in practice, it is usually agreed that the buyer will pay this tax and the seller will give the buyer a power of attorney so that he or she can submit a tax return to the tax administration instead and pay the tax in full once the tax administration has issued a decision.
The tax on the transfer of absolute rights is calculated on the price that is agreed in the contract for the sale of real estate, if this it is not lower than the market value of the real estate. If the agreed price is lower than the market price, the tax administration may determine the tax base based on the market price.
Tax relief is available under the law, so this tax is not payable on the transfer of ownership of an apartment if this represents the first purchase by a natural person of his or her own apartment with an area of up to 40 square metres for the buyer and up to 15 square metres for each member of his or her household.
VAT and the tax on the transfer of absolute rights are mutually exclusive, so there is no situation in which a person will pay both taxes on the same basis.
Capital gains tax: Capital gains tax is levied where a natural person – including an entrepreneur – sells his or her real estate. The seller makes a capital gain when he or she sells real estate for a price that is higher than the price at which he or she acquired it.
The tax base is the difference between the sale and purchase price of the real estate in question (ie, tax base = sale price - purchase price).
Capital gains tax is levied at a rate of 15%.
Liability for capital gains tax arises on the day of the sale of the real estate. The law obliges a person who has made a capital gain to submit a tax return to the competent branch of the tax administration within 30 days of the date on which the contract is concluded. The tax administration will then issue a decision on the basis of the tax return, which will determine the tax. Capital gains tax is due within 15 days of the date of delivery of this decision to the taxpayer.
A capital loss in the sense of this law is not considered to be the difference caused by the transfer where:
- the property is acquired by inheritance in the first hereditary order;
- the transfer is made between spouses or blood relatives in a direct line;
- the transfer is made between divorced spouses and is directly related to the divorce;
- the transfer involves the transfer of debt securities issued by Serbia, an autonomous province, a unit of local self-government or the National Bank of Serbia; or
- the obligor has transferred rights, shares or securities that he or she owned continuously for at least 10 years before the transfer.
If the taxpayer invests the funds obtained from the sale of real estate in resolving his or her housing issue and that of his or her family members within 90 days of the date of sale, he or she will be exempt from profit tax. If the funds are invested in resolving the housing issue within 12 months of the date of sale, a refund of the tax that was previously duly paid can be made.
If the taxpayer invests only part of the funds in resolving his or her housing issue and that of his or her family members, his or her tax liability will be reduced proportionally.
Property tax: Property tax is levied on a natural or legal person, whether resident or non-resident in Serbia (a ‘resident’ is a person residing in Serbia), who has the right to own real estate located in the territory of Serbia
The Law on Property Taxes also envisages special tax relief which reduces the determined property tax for the real estate in which the taxpayer lives by 50%; however, this reduction cannot be higher than RSD 20,000. Therefore, in order for a person to avail of this tax relief, after the purchase of the real estate, the residence should be changed to the address of the purchased real estate and then a request should be submitted to the tax administration to determine the property tax. The notary public must submit a request to determine the property tax for the purchased real estate on behalf of the buyer within 24 hours of verification of the purchase agreement. As the buyer can change the residence to the address of the purchased real estate only after verification of the contract, the buyer will make the change after verification of the contract and subsequently submit proof to the competent tax administration (to complete the documentation) to obtain this tax relief.
Property tax for the period before the conclusion of the contract for the sale of real estate is paid by the seller. It is recommended that before its conclusion, the buyer submit a certificate of payment of property tax for the tax liability incurred before the conclusion of the contract.