On December 28th, 2016, the Serbian Parliament adopted the Law
on Amendments to the Law on VAT (Official Gazette of RS, No.
108/2016). The Law came into force on January 1st, 2017, and the
greatest impact of this law will be felt by companies trading
The most significant change is the amendment of the criteria for
determining the supply of services, as result of further
harmonization to EU regulations and the avoidance of double
taxation or non-taxation of certain services between resident and
non-resident legal entities. Essentially, with the changes, the
rules will differ depending on whether the service is provided to
VAT payers or to entities which are not VAT payers and this
provision will be applied as of April 1st, 2017.
Another very important change is the postponement of the
obligation to submit overviews of calculation along with VAT tax
return until January 1st, 2018. This has been deemed to be the most
optimal solution, considering that the solution offered by the new
Rulebook (Official Gazette of RS, No. 80/2016) caused a stormy
reaction from the professionals due to the overwhelming reporting
The Law also amended provisions related to the determination of
the tax debtor for turnover carried out by foreign entities, and
their obligation to determine the VAT representative and register
in the VAT system. The new provisions stipulate that the tax debtor
with obligation to calculate VAT for such supply is the recipient
of goods and services provided in Serbia by a foreign entity which
is not registered for VAT.
If a foreign entity is performing taxable supply of goods and
services in Serbia, it must appoint tax representative and register
in the VAT system, irrespective of the amount of turnover. This
obligation is waived if the turnover is performed exclusively to
VAT taxpayers, public administration entities, or entities that
provide services of passenger transport by bus.
The implementation of the provisions on representatives and
registration for VAT for foreigners is now supported with amendment
of the Law on Tax Procedure and Tax Administration, which provides
for penalties ranging from 100,000 to 2,000,000 RSD for
The definition of permanent establishment, in sense of the Law
on VAT, is specified as being any organizational unit of a legal
entity which can perform commercial activity, meaning that the
foreign entity and its permanent establishment may be treated as
two separate tax payers.
There has also been a change regarding the requirements for
deducting input tax, in the sense that the recipient does not need
to have an invoice to exercise the right to deduct input tax in the
following cases: supply of goods and services in the construction
industry, supply of electricity and natural gas through networks
for further selling, supply of secondary raw materials and related
services, and supply of buildings.
Finally, the time of supply of electricity, natural gas, and
energy for heating through networks to other entities for further
selling is determined to be the date of the reading / measurement
for calculation purposes, and the application of a special rate of
10% for firewood is extended to wood briquettes, pellets, and other
similar products from biomass.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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