Draft Law on Electronic Invoicing
Tax Alert, February 2021
We hereby wish to inform you about the main provisions of the Draft Law on Electronic Invoicing (hereinafter: the Draft Law), since the public discussion on the respective Draft Law is being conducted at the moment. In that respect, an online public discussion on the Draft Law is organized by the Chamber of Commerce and Industry of Serbia, in cooperation with the Ministry of Finance in two sessions – one of them was conducted on Thursday, February 18th, 2021, and the other one will be conducted on Tuesday, February 23rd, in the period between 1:00PM and 3:00PM.
We would like to remind you that at the end of 2019, within the amendments to the Law on Terms for Settlement of Monetary Obligations in Commercial Transactions the provisions introduced stipulate the registration and delivery of electronic invoices and other withdrawal requests in electronic form, as well as recording of these invoices and other withdrawal requests in electronic form within the Central Invoice Register. In addition, we would also like to remind you that, in the middle of 2020, Rulebook on the manner and procedure of registration, recording and delivery of electronic invoices, electronic invoices form, as well as on the manner and procedure of acceptance and rejection of electronic invoices entered into force.
However, obligations in relation to electronic invoices stipulated by the aforementioned applicable regulations still exclusively pertain to the invoices issued by the creditors in commercial transactions between the public sector and business entities, or among public sector entities, whilst public sector entities are debtors.
In relation to that, and considering the general obligation of electronic invoice issuance, that is prescribed by the Accounting Law in Article 9 par 3 (and which would be applicable as of January 1st, 2022), and in line with the need on the further harmonization of the domestic legislation in this field with the acquis of the European Union, and, more precisely, with the Directive of the European Union no. 2014/55/EU (however, on electronic invoicing in public procurement), there was a need for the introduction of the separate law that regulates the field of electronic invoicing. That said, the main Draft Law provisions are presented below.
THE MAIN DRAFT LAW PROVISIONS
The Draft Law subject is issuance, transmission, reception, processing and storing of the electronic invoices in transactions between public sector entities, in transactions between private sector entities, and in transactions between public and private sector entities, as well as other questions significant for electronic invoicing. Along with defining the main terms, Draft Law also defines European and Serbian electronic invoicing standard.
We would like to emphasize that Draft Law introduces for the first time the provisions that expand the circle of the business entities that are subjects to obligation of electronic invoices issuance, and that was limited solely on those doing business with the public sector. Namely, the obligation of electronic invoices issuance, as well as the accompanying obligation to use electronic invoices system, is stipulated in case of each transaction between public and private sector entities, as well as in each transaction between legal entities or entrepreneurs in cases when both the invoice issuer and invoice recipient are VAT payers. On the other hand, issuance and reception of electronic invoices is stipulated as optional for the other private sector entities.
Additionally, the obligation of electronic recording of VAT computation in the electronic invoices system is prescribed in case of transactions against or without compensation, and in case of transactions where the obligation of electronic invoice issuance has not been already prescribed. The obligation of electronic recording of VAT computation is also prescribed for the electronic invoice recipient that is a tax debtor in case of the services provided by a foreign entity, in order to achieve transparency and control improvement in relation to the VAT computation obligation.
Draft Law additionally stipulates that electronic invoice is being issued and received in line with the Serbian electronic invoicing standard, and that invoice recipient is obliged to make a payment on that basis. However, in case of electronic invoice issuance by a foreign entity, an exception is envisaged. Namely, an invoice recipient is also obliged to receive an electronic invoice issued in line with the European electronic invoicing standard and to make a payment on that basis, if it has been issued by the foreign entity.
In addition, the mandatory elements that electronic invoice shall contain are prescribed, as well as the fact that an electronic invoice, issued through the electronic invoices system, is deemed to be an executable document.
Through access to the electronic invoices system, an invoice recipient reviews it and accepts or rejects it within 8 days as of its reception. In case that a public sector entity, the invoice recipient, does not accept and does not reject the invoice within the aforementioned period of time, it is being considered as accepted. On the other hand, in case that a private sector entity, the invoice recipient, does not accept and does not reject the invoice, issued by the other private sector entity, within the aforementioned period of time, the consequence of its passive behavior shall be the second notification that an electronic invoice has been issued. If the private sector entity stays restrained within the subsequent period of time of 3 days as of second notification reception, electronic invoice shall be considered as rejected.
An additional possibility in cases of issuance, transmission, reception and storing of electronic invoices activities, as well as electronic recording activities, of private sector entities is them to be assigned via contract to the information intermediary. However, in the respective contract cannot be stipulated the responsibility of the information intermediary for the content of electronic invoice and its supporting documentation.
Finally, the Draft Law also regulates the manner of acquiring the possibility of acting as an information intermediary, afterwards recorded in the Register of Information Intermediaries, governed by the Central Information Intermediary (competent unit of the Ministry of Finance), which manages the electronic invoices system and is responsible for its functioning.
As for the periods of time and manner of storing of electronic invoices, those issued or received by public sector entities are stored permanently in the electronic invoices system. On the other hand, those issued and received by private sector entities are stored within the period of time of 10 years as of the end of the year in which the electronic invoice was issued, in the electronic invoices system or in the engaged information intermediary system. In relation to that, and in case that bankruptcy, liquidation or compulsory liquidation proceedings are initiated against the information intermediary, the electronic invoices, stored by it, shall be transmitted to the Central Information Intermediary. Additionally, authenticity of origin and integrity of electronic invoice content is ensured as of its issuance until the expiration of the period of time in which exists an obligation of storing thereof.
Finally, a misdemeanor penalty is also envisaged for non-fulfillment of obligations such as electronic invoices issuance, using data available in the electronic invoices system for the purposes prescribed by the Draft Law, electronic invoices reception and payment based on electronic invoices in accordance with the Draft Law. In case of non-fulfillment of the aforementioned obligations, a fine for a private sector entity - legal entity or a public company is prescribed in the range from RSD 200,000 (approx. EUR 1,701) to RSD 2,000,000 (approx. EUR 17,011), and for its responsible person in the range from RSD 50,000 (approx. EUR 425) to RSD 150,000 (approx. EUR 1,276). Additionally, for a private sector entity - entrepreneur, the fine in case of non-fulfillment of the aforementioned obligations is prescribed in the range from RSD 50,000 (approx. EUR 425) to RSD 500,000 (approx. EUR 4,253).
As for the obligation of storing electronic invoices in accordance with the Draft Law, it does not apply to public companies, and in case of private sector entities - legal entities, their responsible persons and entrepreneurs, the aforementioned amounts of fines are also applicable to violation of this obligation. In addition, a fine may also be imposed on an information intermediary and its responsible person that endangers the security and functioning of the electronic invoices system by performing the aforementioned activities related to electronic invoices.
Finally, one should bear in mind that the amendments of some of the Draft Law provisions are still possible, due to the fact that this act is still in its drafting phase. Additionally, in the Draft Law it is prescribed that the Minister of Finance shall regulate the following fields in a more detailed manner:
• the manner of accessing and using the electronic invoices system, as well as the circle of entities, along with those that are already envisaged in the Draft Law, that can access the data available in the electronic invoices system;
• the cases where some of the prescribed mandatory elements of the electronic invoices can be omitted or the cases where the additional elements shall be displayed on the electronic invoices;
• the manner and procedure of registration for the access to the electronic invoices system;
• the manner and conditions for the use of the system for managing of electronic invoices; and
• the manner of Central Information Intermediary actions in performing activities stipulated by the Draft Law, as well as in the procedure of giving or withdrawing consent for acting as an information intermediary.
In addition, the Government of the Republic of Serbia shall regulate in a more detailed manner the conditions and manner of storing and presenting the electronic invoices. The aforementioned bylaws shall be introduced within 60 days as of the day when the future Law on Electronic Invoicing enters into force.
THE DATE OF APPLICATION
As of July 1st, 2021, the provisions of the Draft Law related to transactions in which one of the parties is a public sector entity shall apply. Accordingly, as of that date, technical and technological conditions for the use of the electronic invoices system will be established, and it will be possible for all those entities, for which the obligations related to electronic invoicing are not envisaged, to use it as well.
On the other hand, private sector entities will have the obligation to receive and store electronic invoices as of July 1st, 2022, however, the obligation of invoice issuance in transactions between private sector entities will apply as of January 1st, 2023. In addition, the obligation of electronic recording, whenever an obligation of VAT computation is envisaged, with an exception of transactions where one party is a public sector entity, also applies as of 1st January, 2023.
Finally, until January 1st, 2023, the possibility in case of transactions between private sector entities to issue and receive electronic invoices, in accordance with a special law regulating electronic documents, electronic identification and trust services in conducting electronic business, is certainly envisaged.
THE SIGNIFICANCE OF THE DRAFT LAW
In accordance with the aforementioned phased introduction of the electronic invoicing regime, the Draft Law will, firstly, have an impact on business entities doing business with the public sector, and, afterwards, its great significance will also be broaden, due to an expansion of the electronic invoicing obligation to all transactions between legal entities or entrepreneurs, in cases when both the invoice issuer and invoice recipient are VAT payers, to other business entities and influence their mutual business that is not related to the public sector.
Finally, this Draft Law gradually removes barriers to access to the European Union market, as well as barriers to trade while performing cross-border supplies of goods and services, due to the harmonization of legal and technical standards with the Directive of the European Union no. 2014/55/EU. It also tends to reduce administrative burdens, as well as improve transparency and legal certainty.