Tax Alert, October 2019
Amendments to the Law on Value Added Tax
We hereby wish to inform you that National Assembly of the Republic of Serbia has adopted the Law on Amendments to the Law on Value Added Tax, during its session held on October 7, 2019.
The key amendmends refer to:
· regulation of tax treatment of vouchers;
· clarification of the conditions for VAT registration of foreign entities;
· new provisions on the place of supply of food and drinks for consumption on ship, aircraft or train;
· clarification of the provisions on the tax point for services directly related to the services of transfer, assignment, and use of copyright and related rights;
· prescribing a VAT zero rate for supplies and imports of goods performed within the framework of the implementation of infrastructure projects;
· new provisions on determination of pro rata deduction;
· more detailed provisions on the possibility of correcting incorrectly computed VAT.
The overview of the aforementioned amendments will be presented in a more detailed way below. For any questions regarding the application of the amendments to the Law on Value Added Tax, please contact Pavle Kutlesic, LL.M., Manager in Tax Department (Indirect Taxes) via: email@example.com.
First of all, within these amendments introduce a differentiation between single-purpose vouchers and multi-purpose vouchers. Accordingly, a single-purpose voucher is considered to be the voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services in line with the Law, are known at the time of issue of the voucher;
Regarding this, each transfer of a single-purpose voucher made by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher accepted as consideration or part consideration by the supplier shall not be regarded as an independent transaction.
Additionally, where a transfer of a single-purpose voucher is made by a taxable person acting in the name of another taxable person, that transfer shall be regarded as a supply of the goods or services to which the voucher relates made by the other taxable person in whose name the taxable person is acting. However, where the supplier of goods or services is not the taxable person who, acting in his own name, issued the single-purpose voucher, that supplier shall however be deemed to have made the supply of the goods or services related to that voucher to that taxable person.
On the other hand, a multi-purpose value voucher is a value voucher other than a single-purpose voucher. It may be in hard copy or electronic format, and it does constitute an instrument that entitles the holder to the right to use a price coupon discount, which does not include the right to purchase goods or services, transport tickets, admission tickets, postage stamps, or similar items.
In this regard, the actual handing over of the goods or the actual provision of the services in return for a multi-purpose voucher accepted as consideration or part consideration by the supplier shall be subject to VAT in line with Law, whereas each preceding transfer of that multi-purpose voucher shall not be subject to VAT. Besides, where a transfer of a multi-purpose voucher is made by a taxable person other than the taxable person performing the actual handing over of goods or the actual provision of the services in line with the provisions proposed, any supply of services that can be identified, such as distribution or promotion services, shall be subject to VAT in line with the Law.
The above-mentioned amendment will be particularly significant to VAT payers who perform the transfer of vouchers considering the fact that precise rules for their transfer from a VAT perspective have been introduced.
VAT registration of foreign entities
The proposed amendments provide a more precise definition of supply performed by a foreign person in the Republic of Serbia, subject to an obligation to register for VAT, i.e. that this obligation exists for VAT taxable supplies and for zero-rated supplies exclusively.
The above-mentioned amendment will be particularly significant to foreign taxpayers who perform the supply of goods and services in the Republic of Serbia considering the fact that more precise definition of the registration obligation has been introduced.
Place of supply and tax point
Place of supply of goods
The proposed amendments provide that for supplies of goods performed on ships, aircraft or trains during passenger transportation, the place of supply would be the point of departure, which is in these cases considered to be the first scheduled moment of embarkation of passengers. In the case of transportation in both directions, the return transport would be considered as a separate transport.
Place of supply of services
The proposed amendments provide that for the supply of services of providing food and beverage for consumption on ships, aircraft or trains, the place of supply would be the point of ship, aircraft or train departure, which is in these cases considered to be the first scheduled time of embarkation of passengers. In the case of transportation in both directions, the return transport would be considered as a separate transport. The proposed amendments also provide that in case that permanent and temporary residence of the service provider i.e. recipient are not in the same place, the place of supply of the service should be the place of temporary residence.
In order to eliminate possible double taxation, i.e. double non-taxation, the proposed amendments will regulate the matter of determination of the place of supply of telecommunication, radio, and television broadcasting services and services provided electronically to non-VAT payers in a more detailed way via the criteria and assumptions regulated by a by-law.
Due to the introduction of the new provisions, the amendments will be particularly significant to VAT payers who perform the above-mentioned supply of goods i.e. services on ships, aircraft or trains, and to VAT payers who provide telecommunication and similar services to individuals.
The proposed amendments provide that one of the tax points would be the day of issuance for invoices for the supply of services directly related to the services of transfer, assignment and use of copyright and related rights, patent, licenses, trademarks, and other intellectual property rights, regardless of the supplier of those services. The same possibility is proposed for the supply of technical support services when using the software, hardware and other equipment for a specified period.
The aforementioned amendment will be particularly significant to suppliers of technical support services and recipients of these services when using the software, hardware, etc. considering the fact that tax liability for those services will occur on the day of invoicing.
Zero-rated supply and import of goods
The proposed amendments provide for zero-rated taxation of the supply of goods and services, and to eliminate the obligation of paying VAT on the import of goods as well, which is performed within the framework of the implementation of highway construction projects of a public interest importance established by a special law. In addition, VAT shall not be paid on the import of goods based on repair within the warranty period, and the harmonization of the Law with the provision of the Customs Law.
Additionally, the proposed amendments provide for a reduction of the total value of goods for which a foreign passenger could be entitled to the right to a VAT refund from EUR 100 in RSD equivalent at the middle exchange rate of the National Bank of Serbia to RSD 6,000 including VAT. In addition, the proposed amendments also regulate the obligation of sellers to issue documentation on the basis of which passengers can obtain a VAT refund on the request of these passengers, and the extension of the deadline for submission of evidence that the passenger has dispatched goods abroad to 12 months from the date of dispatch of goods in question.
The aforementioned amendments will be significant to VAT payers who perform supply of goods and services within the framework of infrastructure projects, to VAT payers who perform a supply of goods to foreign passengers who are dispatching goods abroad in personal luggage, due to increase in supply volume, and to those foreign passengers as well.
Pro rata deduction
The proposed amendments provide that the following should not be taken into account when determining pro rata deduction: the occasional real estate supplies, the occasional supplies of services in the field of monetary and capital transactions, and investments in facilities intended for the purpose of performing the activity for which the fee is charged. In this regard, occasional real estate supplies and occasional supplies of services shall be considered two real estate supplies at the most i.e. two supplies of the aforementioned services at the most in one calendar year.
The aforementioned amendments will be particularly significant to VAT payers who perform the business activity which involves VAT taxable supplies along with the VAT exempted supplies to a much lesser extent, since, inter alia, they will not have an obligation to divide the input tax if the determined percentage of the proportional tax deduction is at least 98%.
Correcting incorrectly computed VAT and determination of the tax debtor
The proposed amendments further regulate the procedure for correcting incorrectly stated amount of VAT in a more detailed way, which involves issuing a new invoice with a corrected amount of VAT, i.e. an invoice without stated VAT, along with the note that that invoice replaces the previously issued invoice and a document issued by recipient of the invoice as a proof that the VAT stated in the preceding invoice has not been used as an input tax.
The aforementioned amendment is particularly significant to VAT payers that issue or receive erroneous invoices, considering the fact that this amendment regulates the procedure for invoice cancellation more precisely, and at the same time clarifies persons who are not entitled to right to correct the amount of VAT stated in the invoice, which are non-VAT payers exclusively. The preceding provision involved also persons who did not perform a supply.