The Ministry of Finance of the Republic of Serbia adopted the Rulebook on Value Added Tax (“Rulebook“), which entered into force on 21 April 2021, and has been applied as of 1 July 2021.
The Rulebook has replaced 27 previous rulebooks, which were in force until 30 June 2021.
The purpose of adopting the Rulebook
The purpose of adopting the Rulebook is to integrate the matter on VAT within one rulebook and enable all stakeholders to get acquainted with their tax obligations in a simpler way. The unsystematic and disperse regulations from 27 rulebooks, in addition to the Law on Value Added Tax (“Law“), have been systematized by adopting the new Rulebook, and it is important to highlight that, on top of being comprehensive, the Rulebook introduced some significant new solutions.
Therefore, as of 1 July 2021, the entire subject matter on VAT has been reduced to 5 documents:
- Law on Value Added Tax;
- Rulebook on Value Added Tax;
- Decree on the amount of expenditures on which no value added tax is paid;
- Decree on the criteria based on which it is determined what is, in terms of the Law, considered to be the predominant trade of goods abroad;
- Decree on the implementation of the Law on the territory of the Autonomous Province of Kosovo and Metohija during the validity of the UN Security Council Resolution No. 1244.
The Rulebook also adopted certain new solutions, including:
- Specification and concretization of existing concepts,
- Implementation of the opinions of the Ministry of Finance into the Rulebook,
- Change of the existing rules.
Some of the most significant changes concern the turnover in the field of construction, the transfer of the business unit, the turnover of goods without compensation, the replacement of goods within the warranty period, etc.
Turnover in the field of construction
The Rulebook prescribes in Article 25 that certain activities will not fall under the notion of turnover in the field of construction. These activities are:
- Repair of equipment that is an integral part of the facility, including the repair of parts of that equipment,
- Repair of installations and parts of installations referred to in Article 24, paragraph 1, item 12 of this Rulebook (water supply, heating, sewage, and air conditioning installations),
- Delivery with installation, i.e. installation of elements for the kitchen (sink, worktop, hanging elements, etc.), bathroom and other furniture,
- Delivery and installation of heating and cooling devices,
- Delivery and installation of watering and irrigation systems,
- Delivery of goods and provision of services in the field of landscape design.
A novelty is also introduced in terms of the main and secondary turnover, where the principle of accessoriness is applied. Thus, everything that applies to the main turnover and services also applies to the secondary turnover. If the main turnover of goods and services is in the field of construction, and the secondary turnover is the turnover of goods and services that are not in the field of construction – it will be considered that only the turnover of goods and services in the field of construction is performed.
On the other hand, if in addition to the main turnover of goods and services which is not considered the turnover of goods and services in the field of construction, there is a secondary turnover of goods and services which is considered the turnover of goods and services in the field of construction – it will be considered that the turnover of goods and services which are not in the field of construction is performed.
Trade in goods without compensation
In accordance with the Rulebook, any other turnover of goods without compensation referred to in Article 4, Paragraph 4, Item 2 of the Law does not include the free distribution of flyers, brochures, catalogs and similar goods intended to inform potential buyers about the activities of taxpayers.
Replacement of goods within the warranty period
Replacement of goods within the warranty period is regulated by Article 6 of the Law. The replacement of goods within the warranty period, without compensation, in accordance with the conditions of the warranty, does not constitute a turnover, and therefore no VAT is paid. The replacement of spare parts and the like within the repair or servicing of goods is not considered to be the replacement of goods within the warranty period referred to in Article 6 of the Law. If the holder of the guarantee is getting goods replaced within the warranty period with the obligation to pay a part of the fee, then the VAT payer is obliged to calculate VAT on that part of the fee.
The taxpayer is obliged to issue an invoice for each turnover of goods and services. In the case of time-limited or unlimited services whose duration is longer than one year, the taxpayer is obliged to issue a periodical invoice, provided that the period for which the invoice is issued may not be longer than one year. The taxpayer is obliged to issue an invoice even if he has collected the fee or part of the fee before the turnover of goods or services occurred (e.g. advance payments), but in the final invoice the advance payments containing VAT are deducted.
The VAT payer is not obliged to issue an invoice referred to in Article 42 of the Law for:
- Turnover of goods and services involving natural persons, with the exception of entrepreneurs, who are not VAT payers. Therefore, the obligation to issue an invoice is not obligatory if the invoice is issued to a natural person who is not a VAT payer, nor is he an entrepreneur. However, if the person is not a VAT payer, but is an entrepreneur, there will be an obligation to issue an invoice referred to in Article 42 of the Law,
- Turnover of goods and services for which the Law (Article 25) prescribes the tax exemption without the right to deduction, unless otherwise provided by the Rulebook. A wide range of turnover in goods and services is prescribed by Article 25 of the Law (lending operations including mediation as well as cash loans, cultural services and directly related turnover of goods and services, insurance and reinsurance services, apartment rental services, if used for housing needs, services provided by doctors, dentists, etc.),
- Lucrative trade in goods and services (without compensation).
Additional simplifications concerning invoicing:
If the invoice is issued on the day when the turnover of goods or services was performed, the invoice for that turnover does not have to contain information on the date of the turnover of goods or services.
When the fee for a turnover changes after the turnover of goods and services took place, the VAT payer shall issue a document on the increase or decrease of that fee, i.e. a document on the increase or decrease of the base, which in particular contains the data specified in Article 182 of this Rulebook.
The invoice issued by a travel agency for unique tourist services, instead of the data from Article 42, shall state the data on the total amount of the fee for those services along with the note that the invoice does not show VAT in accordance with Article 35 of the Law.
If the fee for the turnover of goods or services is charged in a foreign currency, the amount of the base and the amount of VAT, or the amount of fee for individual transactions of goods and services may be denominated in the foreign currency, and the data on the total amount of the base and the total amount of VAT, i.e. on the total amount of the fee, must be denominated in dinars.
The introduction of the integrated Rulebook reflects the desire of the Ministry of Finance to reform the extensive, unsystematic bylaws, bring them together under one rulebook, and thus enable taxpayers to get acquainted in a simpler and faster way with the regulations and concepts that further explain the Law on VAT. In this regard, although the idea and intention of the Ministry of Finance are good, the practice will show the scope of the real application of the Rulebook, as well as whether it would meet the expectations of both the Ministry of Finance and businesses.