Tax Highlights - April 2021
27 April 2021
NEW RULEBOOK ON VALUE ADDED TAX
In the Official Gazette no. 37/21, a new Rulebook on Value Added Tax (hereinafter: the Rulebook) was published. It is a unified rulebook that replaces 27 individual rulebooks in the field of VAT that are now in force with the introduction of certain changes, more detailed clarifications and amendments to existing provisions.
The new Rulebook on Value Added Tax entered into force on 22 April 2021, while the application of the provisions of this Rulebook was postponed until 1 July 2021.
Below is an overview of the most significant changes and additions.
TRANSFER OF PROPERTY OR PART OF THE PROPERTY
At the inception of the application of this Rulebook, an amendment is adopted which stipulates that the business unit is considered to be the unit whose transfer enables the acquirer to independently perform the activity performed by the transferor of the unit. Namely, according to the new rule for tax exemption, there is no longer a condition preventing the transferor of the property from performing that activity at the moment of transfer.
REPLACEMENT OF GOODS IN THE WARRANTY PERIOD
- Replacement of spare parts or similar replacements as part of repairs or service of a particular good is not considered to be a replacement of goods in the warranty period.
The terms normal quantity of trade samples and trade samples are defined in more detail:
- The normal amount of trade samples that are given free of charge to customers or potential customers is considered to be the amount of trade samples that are needed to acquaint customers or potential customers with the characteristics of a particular good.
- Goods that are the result of VAT payer’s activities or which are directly related to the performance of its activities, regardless of whether they are intended for trade that are given for analysis in the quantity determined by an act of a competent authority are considered trade samples.
TRADE OF ADVERTISING MATERIAL WHICH IS PROVIDED FREE OF CHARGE
- It is prescribed that any other disposal of goods without compensation is considered other trade of goods, except for:
- Brochures without VAT,
Therefore, the prescribed criteria for advertising material and gifts of less than RSD 2,000, as well as the limit of 0.25% of the total turnover in the tax period do not apply to the above-mentioned payments.
- In addition, the Rulebook stipulates that advertising material is considered to be all goods on which the logo or brand of the VAT payer is printed, which the VAT payer gives free of charge to various persons directly or through third parties. The current provisions of the relevant Rulebook do not prescribe providing advertising material through third parties.
AMENDMENTS TO THE RULES FOR DETERMING THE TAX DEBTOR FOR TRADE IN THE FIELD OF CONSTRUCTION
- The new Rulebook prescribes exceptions when certain works are not considered construction works, although in accordance with the Classification of Activities they are classified into activity codes that fall under works in the field of construction.
- Namely, in accordance with the new Rulebook and regardless of the value determined by previous amendments to the Law on VAT, the following are not considered to be construction works:
- Repair of equipment;
- Repair of installations;
- Delivery with installation, i.e., installation of elements for kitchens and bathrooms, heating and cooling devices, watering systems for green areas, cabinets, libraries, shelves, etc.
- The Rulebook stipulates that the delivery of goods and the provision of services as part of the arrangement of green areas, including the arrangement of green areas on buildings or in buildings, are not considered works in the field of construction. In addition, landscaping of existing green areas, such as planting of grass, flowers, etc.) is not considered construction works.
- It is envisaged that the delivery with the installation of water supply, sewerage heating and air conditioning systems is considered works in the field of construction, while on the other hand repairs of water supply, sewerage, heating and air conditioning systems are not considered construction works.
Accessory turnover with the main turnover in the field of construction
- It is prescribed that if, in addition to the supply of goods and services in the field of construction, a secondary supply of goods and services is performed, it is considered that one single supply of goods and services in the field of construction is rendered.
Accessory turnover with the main turnover that is not in the field of construction
- Contrary to the previously described, if in addition to the supply of goods and services that is not considered turnover in the field of construction, there is an accessory turnover of goods and services that is considered turnover in the field of construction, it is considered that only one single turnover of goods and services that is not in the field of construction is performed.
Criterion of RSD 500,000
- The Rulebook specifies that the value of turnover in the field of construction is determined on the day of turnover in the field of construction, as well as that it refers to the partial delivery of goods and services.
Various terms for machinery and other equipment that are considered an integral part of immovable property are clarified.
Machinery and other equipment are deemed to be goods that are built in property by being installed or assembled, but which cannot be separated from the property without serious damage of, a significant physical change or a change in the nature of such property.
- Provisions of the new Rulebook stipulate that the VAT base includes the packaging value (1) of non-returnable and/or single-use and (2) returnable packaging that a VAT payer charges to the recipient of goods.
- If packaging is not returned within the period specified under the contract, the Rulebook envisages that the expiration of such a period shall mean new supply of the returnable packagining, not a change in the tax base.
- The Rulebook stipulates that withholding tax is included in the VAT base regardless of whether the obligation to charge and pay withholding tax arose on the same date when the VAT liability was incurred.
Tax base estimate
- If the tax base is unknown on the date when the tax liability was incurred with regard to the supply of goods and services whose recipient is the taxpayer, the taxpayer shall determine the base according to an estimate (e.g. based on data on similar or same supply of goods and services performed in the previous period according to contract elements, etc.).
THE PLACE OF SUPPLY OF TRANSPORTATION SERVICES AND TAX EXEMPTION CONDITIONS
- The Rulebook envisages an additional explanation of the terms ‘carrier’ and ‘transportation organiser’. Therefore, in case several participants organise one transportation service, it is deemed to be several individual transportation services, and thus, the same tax treatment is applied to every supply.
RETURN OF GOODS WHOSE VALIDITY PERIOD EXPIRES
Validity period of goods
- According to the Rulebook, goods whose validity period expires are such goods whose two-thirds of the validity period have expired and two months have left until the expiration of the validity period at most.
- It is stipulated that both deadlines need to be cumulatively met.
- According to the new Rulebook, the condition envising that the return of goods has to be prescribed by a regulation or a contract has been removed.
CORRECTION OF PROPORTIONAL TAX DEDUCTION
The Rulebook brings simplification, i.e., if a proportional tax deduction is corrected by applying a percentage of at least 98% of the proportional tax deduction, the VAT payer shall correct the proportional tax deduction up to the amount of 100%.
- According to the Rulebook, if an invoice is issued on the date when goods or services are supplied, the invoice that will be issued for such supply does not have to include the date of the supply of goods and services.
- The regulation related to the supply of goods and services has been envisaged to be amended. Hence, if the fee is paid in a foreign currency, the tax base and VAT and/or the fee for the supply of goods and services may be stated in a foreign currency, whereas the total amounts of the tax base and VAT have to be expressed in RSD.
PRESCRIBED CASES WHEN DATA ARE NOT EXPRESSED IN THE POPDV FORM
The data for which there is no obligation to record in the POPDV form are presented below:
- salaries of persons employed by VAT payers;
- turnover of goods or services performed free of charge, which is not equated with turnover with compensation;
- interest on demand deposits, default interests,
- damage compensations;
- cash donations;
- costs based on invoices that do not refer to the VAT payer and other data that are not relevant for the correct calculation and payment of VAT.
- VAT payers based in the Republic of Serbia do not record data related to transactions in goods and services performed by their business units (branches and representative offices), i.e., which were performed by their business units registered outside the Republic of Serbia.
PRESCRIBED VALUE VOUCHER RECORDS
- The VAT payer transferring single-purpose, i.e., multi-purpose value vouchers is obliged to provide in its records, by type of voucher, data on:
- the total value of the voucher;
- the total number of vouchers transferred.