Tax Alert, October 2016

On September 30, 2016, the Minister of Finance adopted the Rulebook on form, contents, manner of keeping VAT records, and form and contents of the VAT calculation breakdown (“Official Gazette of RS’’ no.  80/16, hereinafter: the Rulebook), which will come into force on January 1, 2017.

The Rulebook prescribes the form, contents, manner of keeping VAT records, as well as contents of the VAT calculation breakdown, which is to be submitted together with the VAT return for every tax period. The Rulebook does not prescribe a strict form of the records (so called register of incoming and outgoing invoices), but prescribes the mandatory information that should be included.

New (expanded) VAT records

The new Rulebook stipulates a significantly more comprehensive and detailed record of transactions. Namely, the Rulebook prescribes ten groups of transactions in relation to which the VAT payer is obliged to keep records. Article 2 of the Rulebook prescribes that a VAT payer is obliged to provide the information within its VAT records regarding the supply of goods and services by and to him, accounts and other documentation, pertaining to:

1) Yero-rated supplies of goods and services;

2) VAT exempt supplies of goods and services;

3) VAT-able supplies of goods and services;

4) VAT computed for supplies made by another person;

5) Reduction or increase of consideration i.e. VAT base and computed VAT;

6) Importation of goods;

7) Purchase of goods and services from farmers;

8) Purchase of goods and services, except for those supplied by farmers;

9) Reduction or increase of consideration i.e. VAT base for purchased goods and services in Serbia, except for goods and services supplied by farmers, and the correction of the input VAT;

10) Supplies of goods and services performed abroad and other activities, i.e. income that is not subject to VAT.

One of the novelties is the request for widening the scope of VAT records. Hence, VAT payers are now obliged to keep the data:

1) Which specifies purchased goods or services in more detail (e.g. name, category, model, type, quantity, scope, etc.), which is a novelty;

2) In relation to the date on which VAT liability arises, or the date on which the conditions for zero rating / VAT exemption have been fulfilled, which is a novelty;

3) Regarding the date of the invoice or other document;

4) Regarding consideration, VAT base and value of goods or services;

5) Regarding the application of VAT rate and amount of computed VAT;

6) Regarding other data relevant for the determination of VAT liability.

A VAT payer is obliged to keep VAT records in chronological order.

New form – POPDV

As of the first tax period of 2017 a VAT payer is obliged to submit a VAT calculation breakdown on the POPDV form for every tax period to Tax Administration, together with a VAT return for that period (regular and supplementary). This means that the new form will have to be submitted together with the VAT return starting from February 2017, i.e. from April 2017 for VAT payers that submit quarterly VAT returns. The POPDV form consists of 13 different overviews based on which a VAT payer fills its VAT return.

The POPDV form encompasses the data that has so far not been included in the records prescribed by the provisions of the current Rulebook (i.e. the data about donations received, supplies and purchases of goods and services not subject to VAT, compensation for damages etc.), which the Tax Administration, however, had the right to demand in tax audits.  

In accordance with the new Rulebook, the VAT calculation breakdown contains details with respect to all VAT payer’s activities, although some transactions included in it, do not affect the VAT calculation. 

According to the provisions of Article 25 of the Rulebook, the POPDV form contains information regarding:

1) Zero-rated supplies of goods and services;

2) VAT exempt supplies of goods and services;

3) VAT-able supplies of goods and services;

4) VAT computed for supplies made by another person (reverse charge);

5) Reduction or increase of consideration, VAT base and computed VAT;

6) Special procedures of taxation;

7) Total consideration, VAT base for the supply of goods and services and computed VAT;

8) Importation of goods;

9) Purchase of goods and services from farmers;

10) Purchase of goods and services, except for goods and services supplied by farmers;

11) Reduction or increase of consideration, VAT base for purchased goods and services in Serbia, except for purchased goods and services supplied by farmers, as well as reduction or increase of input VAT;

12) Total consideration or VAT base for purchased goods and services and computed VAT;

13) Supply of goods and services performed abroad and other activities, or income that is not subject to VAT.

1. Zero-rated supplies. In part 1 of the POPDV form, in relation to the zero-rated supply of goods and services, the following data should be displayed:

-  Consideration for the export of goods,

-  Consideration for supplies made to the Autonomous Province of Kosovo and Metohija,

-  Consideration for the entry of goods in a free zone,

-  Consideration for supplies carried out in free zones,

-  Consideration for other zero-rated supplies of goods and services,

-  Consideration for supplies for which subsequently became zero-rated,

-  Advance payments,

-  Supplies made free of charge.

2. VAT exempt supplies. Part 2 of the POPDV form includes information about the consideration received in return for supplies such as:

-  Transactions concerning money and capital,

-  Supply of land and buildings, as well as renting of flats for residential purposes,

-  Supply of services for organization of games of chance,

-  Other goods and services that are VAT exempt.

Advance payments as well as free of charge supplies, are also separately stated in this part.

3. Taxable supply of goods and services carried out by a VAT payer and computed VAT. Part 3 of the POPDV form covers information regarding the taxable supply of goods and services performed by a VAT payer and the applicable VAT rate. This part encompasses, among other, information on:

-  Supplies in the field of construction,

-  Supplies of secondary raw materials, electricity, and natural gas,

-  Supplies of mortgaged real estate and of goods liened to another VAT payer,

-  Supplies of goods and services within forced sale to another VAT payer.

-  Other supplies of goods,

-  Other supplies of services.

Advance payments as well as free of charge supplies, are also separately stated in this part.

4. Computed VAT for a supply made by another person (reverse charge). Part 4 of the POPDV form relates to the data regarding the supply made by another person, such as:

-  VAT for supplies under Article 10 paragraph 2 of the VAT Law (“Official gazette” 84/04,…5/16, hereafter: VAT Law),

-  VAT for supplies of electricity and natural gas to be delivered through the transmission, transportation and distribution networks, which are purchased for resale, supplied by other VAT payers;

- VAT for supplies of secondary raw materials and services that are directly associated with them, which is carried out by another VAT payer, etc.

-  VAT for supply of mortgaged real estate and liened goods supplied by another VAT payer, and other;

5. Reduction or increase of consideration, or VAT base and computed VAT. Part 5 is filled in situations when there is a change of VAT base and this part includes, among other, data regarding:

-  VAT base and corresponding VAT in situations where there is a reduction or an increase in consideration for a zero-rated or a VAT exempt supply,

-  Reduction of the VAT base and computed VAT due to a VAT refund to a foreign VAT payer.

-  Reduction of the VAT base and computed VAT due to subsequent fulfilment of the conditions for VAT exemption with the right to deduct input VAT,

-  An increase of the VAT base and computed VAT regarding a taxable supply of goods and services.

6. VAT records with respect to special taxation procedures. Part 6 of the POPDV form includes data on special procedures of taxation related to the operations of travel agencies and supply of second-hand goods, works of art, collectors’ items and antiques.

7. VAT records on total consideration i.e. VAT base and computed VAT for the supply of goods and services should be displayed in Part 7 of the POPDV form.

8. VAT records regarding the importation of goods. Part 8 refers to data regarding the importation of goods that is zero-rated, VAT exempt, or subject to VAT.

9. VAT records in relation to purchases of goods and services from farmers. Part 9 of the POPDV form relates to data regarding the value of received and payed goods and services, and the corresponding VAT paid to a farmer, as well as the amount of VAT that can be used as input VAT.

10. VAT records on purchases of goods and services except those supplied by farmers. Part 10 of the POPDV form covers information about all other purchases of goods and services except those supplied by farmers, such as:

-  Purchases of goods and services from VAT payers in Serbia,

-  Purchases of goods and services from foreign entities that are not registered for VAT in Serbia,

-  Purchases of goods and services from persons established on the territory of Serbia which are not registered for VAT,

-  Purchases of goods and services from persons established outside Serbian territory.

11. Reduction and increase in consideration i.e. VAT base for goods and services purchased in Serbia, except for those supplied by farmers, as well as for the reduction or increase of input VAT are subject of Part 11 of the POPDV form, where the data regarding the standard and special VAT rate are separately displayed.      

12. The total consideration, i.e. VAT base for purchased goods and services and computed VAT, is displayed in Part 12 of the POPDV form.

13. Data regarding activities that are not subject to VAT are presented in Part 13 of the POPDV form. The data inserted here includes among other:

-  Amounts relating to supplies of goods and services performed abroad,

-  Amounts relating to supplies of specific type of services, such as consultancy services, services of lawyers, auditors, engineer services, marketing services, transfer, assignment and making the use of copyright and related rights, etc.,

-  Amounts relating to the replacement of goods within the warranty period,

-  Transfer of assets or a part thereof,

-  Business samples given free of charge, etc.

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In accordance with the abovementioned, the POPDV form which is to be submitted electronically along with the VAT return as of the first tax period in 2017 requires detailed records about all of the VAT payer’s activities, domestic and foreign, considering the fact that the required data should be presented in 13 breakdowns with a total of 155 positions.