Tax Alert, March 2017

New Ministry of Finance Rulings

Several Ministry of Finance rulings have been published in the past period, aimed at clarifying and elaborating on the implementation of provisions of the Law on Value Added Tax (hereinafter “VAT Law”) and Law on Corporate Income Tax. Additionally, three Judgement of the Administrative Court were published, aimed at clarifying the implementation of provisions of the Law on General Administrative Procedure, Law on Tax Procedure and Tax Administration and Law on Customs.

Value added tax

The obligation to compute and pay VAT on fees for cash withdrawals from current account, payment transactions and money transfers

VAT is not computed and paid on fees for services involving current account cash withdrawals, payment transactions and money transfers that are provided by a VAT payer – electronic money institution to the account holder.

(Ministry of Finance Ruling, no. 011-00-01115/2016-04 as of January 16^th 2017)

The right to deduct input VAT on fuel purchases for public transport services

A VAT payer that purchases fuel for public transport services via busses (taxable supply of services) has the right to deduct input VAT from such purchases, if it holds an invoice of previous supply participant issued in accordance with the VAT Law. The fact that a VAT payer does not hold the approval from the Ministry of Mining and Energy for storing more than five tons of fuel, does not diminish the right of the VAT payer to deduct VAT computed and stated in the invoice of the previous supply participant as input VAT.

(Ministry of Finance Ruling, no. 011-00-01086/2016-04 as of January 23^rd 2017)

The place of supply for intermediary services involving hotel accommodation

The place of supply for intermediary services involving hotel accommodation is determined according to the place where the hotel is located, in accordance with the rules for the determination of the place of supply for services related to immovable property.

(Ministry of Finance Ruling, no. 430-00-487/2016-04 as of January 23^rd 2017)

Obligation to compute and pay the VAT on services involving the destruction of goods

VAT is computed and paid for destruction of goods for which the contract with the publisher specifies that said goods should not be sold after a certain time period (since there is no longer any demand for the goods), due to the fact that this is not treated as an expense which is not subject to VAT.

(Ministry of Finance Ruling, no. 011-00-01004/2016-04 аs of February 13^th 2017)

Corporate income tax

Tax treatment of expenses for provisions

Provisions for receivables (recorded in the ledger based on a guarantee contract) that are not related to the performance of the taxpayer activity and do not involve the realization of business activities related to the taxpayer profit realization are not recognized as an expense in the tax balance.

(Ministry of Finance Ruling, no. 011-00-11/2017-04 as of January 26^th 2017)

The absence of the obligation to submit a tax return and a tax balance sheet for representative offices

А permanent establishment that provides exclusively preparatory and auxiliary activities for the nonresident in Serbia, is not considered a permanent establishment (through which the nonresident performs its activity); thus, it is not required to submit a tax return and a tax balance sheet.

(Ministry of Finance Ruling, no. 011-00-988/2016-04 as of February 2^nd 2017)

The possibility of avoiding double taxation based on residence certificate

A resident legal entity that makes a payment to a nonresident legal entity (to whom the seller of secondary raw materials sold its receivables) based on purchase of secondary raw materials from a nonresident legal entity (the seller of secondary raw materials), is obliged to submit a tax return. The tax return needs to be filed so that the provisions of double tax treaty with the country of residence of the recipient of income may be applied, along with the residence certificate for the buyer of receivables.

(Ministry of Finance Ruling, no. 413-01-00221/2016-04as of February 2^nd 2017)

Law on Tax Procedure and Tax Administration

The burden of proof in the Tax procedure

Tax administration is not authorized to request from the taxpayer proof that a double tax treaty was concluded between the countries, particularly if the taxpayer presented proof of taxes paid in another country.

(Judgement of the Administrative Court, 9U 62/2015 as of December 29^th 2016)

Law on General Administrative Procedure

Foreign document as an evidence in the administrative procedure

A foreign document represents suitable evidence based on which the decisive facts in the administrative procedure are determined, only if it is translated into Serbian or the official language in which the procedure is conducted.

(Judgement of the Administrative Court, 9U 10527/2015 as of December 8^th 2016)

Law on customs

Determining the customs value of imported goods

When the customs value of imported goods cannot be determined based on the transaction price, the Customs authorities are obliged to determine the customs value of goods by applying the statutory valuation methods, in their hierarchical order, and to explain why certain valuation methods cannot be applied to specific case.

(Judgement of the Administrative Court, 23U 10727/2015 as of December 6^th 2016)