Tax Alert, April 2019

Value Added Tax

Computing VAT on а free of charge supply of spare parts by the service provider to the buyer as a part of a contractual penalty

Ruling of the Ministry of Finance, no. 430-00-99/2018-04 from July 18^th, 2018

Conclusion from the Ruling: In case that the service provider performs an import of spare parts as a recipient of goods, and afterwards transfers those parts free of charge to a person in Serbia, such transfer will be considered as a taxable free of charge supply. This is regardless of the potential basis for such transfer that may exist between the recipient of goods and the third person in the form of a foreseen contractual penalty. An invoice does not have to be issued for such supply.

The above-mentioned ruling is particularly significant for taxpayers that participate or are obligated with guarantees for goods or products.

Determination of a tax debtor for the supply of goods and services in the field of construction in case of exterior building maintenance using special skills involving rope systems

Ruling of the Ministry of Finance, no. 413-00-325/2018-04 from September 4^th, 2018

Conclusion from the Ruling: Since activity code 43.99 explicitly includes specific on-demand activities that require skills of climbing and usage of equipment, i.e. maintenance of high altitude objects, the supplies that encompass these activities are considered as supplies from the field of construction.

The above-mentioned ruling is particularly significant to VAT-payers that hire suppliers for specialized construction works, such as high altitude maintenance for which skills of climbing and usage of equipment are needed, as well as for persons performing such supplies.

The VAT rate applicable to databases that are not considered monographic, i.e. serial publications

Ruling of the Ministry of Finance, no. 413-00-00125/2018-04 from September 10^th, 2018

Conclusion from Ruling: When determining the applicable VAT rate for the delivery of a database over the Internet, it is important to determine whether the specific database has all of the listed characteristics of the monographic, i.e. serial publication. In case it does not have all of the characteristics listed, that supply will be considered as a supply taxable using the standard VAT rate of 20%, instead of using the reduced VAT rate of 10%.

The above-mentioned ruling is particularly significant to VAT taxpayers who perform supply of electronic or similar publications.

The absence of obligation for VAT-payers to issue an invoice in case of taking goods for business purposes

Ruling of the Ministry of Finance, no. 430-00-163/2018-04 from September 4^th, 2018

Conclusion from the Ruling: When a business entity takes goods from its retail facility for business purposes or for the purpose of performing its business activity, VAT should not be computed on such a supply and it should not be recorded through the fiscal cash register.

The above-mentioned ruling is especially significant to VAT-payers operating in the retail sector, but also for other entities performing their operations through several facilities, since they will not have an obligation to compute VAT for that supply.

Right to deduct input VAT based on an invoice issued for the supply of services related to copyright, which had been issued before the supply was performed

Ruling of the Ministry of Finance, no. 110-00-380/2018-04 from October 5^th, 2018

Conclusion from Ruling: The right to deduct an input VAT of the VAT-payer – service recipient cannot be challenged on the basis that the date of supply was stated, in case when the issuer of an invoice for services in relation to copyrights states a date of supply (regardless of whether the stated date of supply corresponds to the actual date of supply).

This ruling is particularly significant to VAT-payers that perform or receive services related to copyrights, including software and similar licenses.

The rights and obligations of the VAT-payer in case the tax authority determines that the VAT base was not reduced

Ruling of the Ministry of Finance, no. 430-00-159/2018-04 from October 8^th, 2018

Conclusion from the Ruling: If the issued credit note is disputed by the tax authority's decision in the tax audit procedure, due to the fact that there was a reciprocal supply, then that VAT should be paid based on that decision, without the need to cancel the previously issued credit note.

The above-mentioned ruling is particularly significant to VAT-payers that issue or receive credit notes, i.e. who participate in the supply within which changes to the VAT base are made.

Computation of VAT using a recalculated tax rate in case the conditions for the application of a zero-rate are not met

Ruling of the Ministry of Finance, no. 430-00-00420/2018-044 from October 25^th, 2018

Conclusion from the Ruling: If a VAT-payer dispatches goods from the territory of the Serbia outside APKM to the territory of APKM and does not possess the prescribed evidence, VAT is computed using the recalculated tax rate of 16.6667% on the amount of the fee for supply of goods that is taxed using standard VAT rate of 20%, i.e. using the recalculated tax rate of 9.0909% on the amount of the fee for the supply of goods that is taxed using reduced VAT rate of 10%.

The above-mentioned ruling is especially significant to VAT-payers with supplies to APKM.

Determination of the VAT debtor for the supply related to the installation and deployment of an automatic device for taking samples of cereals and oilseeds from vehicles

Ruling of the Ministry of Finance, no. 430-00-457/2018-04 from October 30^th, 2018

Conclusion from Ruling: Since the equipment in question is not an integral part of the building, its installation and deployment is not deemed as a supply in the field of construction.

The above-mentioned ruling is particularly significant to VAT-payers that hire suppliers for operations on larger industrial and agricultural machinery, but also to persons performing such supplies.

Determination of the VAT debtor for supplies related to the planting of concrete pillars, and stretching of anti-hail nets and the installation of anchor – tensioners on the pillars

Ruling of the Ministry of Finance, no. 430-00-469/2018-04 from October 25^th, 2018

Conclusion from Ruling: Since these operations do not imply a permanent installation, i.e. do not imply permanent or difficult to remove changes in a facility, described activities are not deemed as a supply in the field of construction within the meaning of the VAT Law.

The above-mentioned ruling is especially significant to VAT-payers that hire suppliers for works related to establishing (temporary) facilities, but also to persons performing such supplies.

The condition under which a VAT-payer – the vendor can change (reduce) the amount of computed VAT for the performed supply of goods

Ruling of the Ministry of Finance, no. 413-00-130/2018-04 from October 10^th, 2018

Conclusion from Ruling: If the vendor grants a discount, i.e. a logistic rebate to the buyer in case when it is agreed that the vendor will deliver the goods to the central warehouse of the buyer, the amount of computed VAT may be reduced after performing the supply in question.

The above-mentioned ruling is especially significant to VAT-payers that participate in supplies regarding which the so-called logistics rebate is granted.

VAT treatment of collection of receivables based on the issued document on the delivery of equipment that designated as an interim payment certificate and which is certified by the competent authority

Ruling of the Ministry of Finance, no. 430-00-607/2018-04 from January 24^th, 2019

Conclusion from the Ruling: In case when the contractor sends a document to the purchaser, on the basis of the delivery of the equipment, designated as an interim payment certificate and is certified by the authorized body, with the aim of collecting receivables, neither the supply of goods nor the purchaser’s obligation to compute VAT occur.

The above-mentioned ruling is especially significant to VAT-payers who perform the procurement/delivery of goods whose delivery is followed by installation.

The absence of vendor’s right to deduct input VAT based on the invoice issued for repair of defects in relation to the goods returned by the buyer

Ruling of the Ministry of Finance, no. 011-00-00441/2017-04 from February 11^th, 2019

Conclusion from the Ruling: In case а buyer returns a certain quantity of goods to the vendor due to defects, without the document issued as a notification of his correction of deducted input VAT, and issues a document for time spent for repair of defects with VAT computed, the vendor is not entitled to use such VAT as an input VAT, since the document does not relate to supply of goods or services performed.

The above-mentioned ruling is especially significant to VAT-payers operating in industries that involve frequent quality complaints.

Right to deduct input VAT when no outgoing supplies have been performed

Ruling of the Ministry of Finance, no. 011-00-00955/2018-04 from February 11^th, 2019

Conclusion from the Ruling: The VAT-payer is entitled to deduct input VAT for the supply performed by other VAT-payers in line with VAT Law, regardless of the fact that within the period in question it does not realize a revenue from performing a business activity.

The above-mentioned ruling is especially significant to VAT-payers that had acquired goods and services before they started making supplies.

Determination of the VAT debtor for the sale and installation of a prefabricated container

Ruling of the Ministry of Finance, no 011-00-49/2019-04 from February 11^th, 2019

Conclusion from the Ruling: The supply between two VAT-payers which implies the sale and installation of a prefabricated container, which consists of the basic construction, floor, walls, carpentry, electrical installations, air conditioners and other elements, with installation of all elements on the concrete base, provided by purchaser, represents a supply in the field of construction.

The above-mentioned ruling is especially significant to VAT-payers who procure and supply containers and similar goods.

Determination of tax base for the computation of VAT in case when the same good is sold at the different prices by two VAT-payers

Ruling of the Ministry of Finance, no 430-00-44/2019-04 from February 11^th, 2019

Conclusion from the Ruling: If two VAT-payers sell the same good at the same or similar location, under similar conditions, but at the different prices, cannot be the basis for determination of a VAT base different from the amount which the VAT-payer receives or should receive (in cash, items or services).

The above-mentioned ruling is especially significant to VAT-payers that sell goods below market value.

The day when the tax liability is triggered for supplies where delivery and installation of goods are performed within different periods

Ruling of the Ministry of Finance, no. 430-00-510/2018-04 from February 28^th, 2019

Conclusion from the Ruling: In case when the delivery of construction material is performed within one tax period, and installation of the same is performed within another, the supply has occurred (and accordingly the tax liability was triggered) in the period within which the installation has been performed. This is regardless of the fact that within the contract separate fees for delivery and installation are determined, due to commercial reasons. Consequently, the payments performed before the moment of supply represent an advance payment in line with the VAT Law.

The above-mentioned ruling is especially significant to VAT taxpayers who perform business activity in the field of construction, as well as the contractors, considering the fact that within these contractual relations is frequently foreseen the separation of the moment of delivery and the moment of installation, and therefore, a non-compliance with requirements of VAT Law can occur.

For any questions regarding the application of the ruling in the field of Value Added Tax, you can contact Pavle Kutlesic, LL.M., Manager in Tax Department (Indirect Taxes), via email address: pkutlesic@deloittece.com.

International taxation

The existence of a permanent establishment in the case of conclusion of a sale contract with buyers of goods by a non-resident taxpayer

Ruling of the Ministry of Finance, no. 011-00-525/2018 from August 13^th, 2018

Conclusion from Ruling: Therefore, if a non-resident taxpayer performs a supply in terms of conclusion of a sale contract on the territory of Serbia with domestic and foreign buyers and on this basis realizes a revenue, it will be considered that there exists a permanent establishment of that taxpayer on the territory of Serbia, as well as the obligations that accompany existence of this establishment. On the other hand, keeping stocks of goods in the warehouse by itself should not lead to the existence of a permanent establishment.

The above-mentioned ruling is significant because it demonstrates the increasing attention that is drawn to the question of the existence of permanent establishments, which would also require from taxpayers to deal more seriously with this issue.

This ruling is particularly significant to non-residents who sell or intend to sell goods on the territory of Serbia.

Existence of an obligation to compute and pay a withholding tax on revenue on the basis of management services

Ruling of the Ministry of Finance, no. 430-00-266/2018-04 from July 13^th, 2018

Conclusion from Ruling: When a parent company abroad realizes a revenue from a resident on basis of management services, the payment of all these services will be subject to a withholding tax, regardless of the fact whether the services in question have been performed by the parent company or subcontractor.

The above-mentioned ruling is significant because it determines that when most of the services are provided through the subcontractor, this will not affect the qualification of the nature of the services, which will be considered with all circumstances involved. Moreover, the ruling is significant because it indicates that the matter of real ownership of revenue is potentially not necessary to consider in the situations described, however, only the formal recipient of the paid fee is relevant.

Ruling is particularly significant to legal entities that receive services from non-resident legal entities.

For any questions regarding the application of rulings in the field of international taxation, you can contact Slobodanka Kolundzija, LL.M, Manager in Tax Department (International Taxation) via e-mail address: skolundzija@deloittece.com.

Corporate income tax

Recognition in the tax balance sheet of expenses that include computed value added tax

Ruling of the Ministry of Finance, no. 011-00-174/2018-04 from October 17^th, 2018

Conclusion from the Ruling: If the taxpayer in his/her business records displays expenses in the amounts that include the computed value added tax, the expenses displayed in such manner should be recognized in the tax balance sheet.

The above-mentioned ruling is significant because it indicates that the fact that the taxpayer has not been entitled to right to deduct the input tax, as a result of which the value added tax was included in the value of the expenses, should not affect recognition of these expenses for the purposes of the tax balance sheet. However, we emphasize that the basic rules for recognition of expenses should still be applied (e.g. obligatory business nature of these, documentation, etc.)

The above-mentioned ruling is significant to most taxpayers of corporate income tax in Serbia.

For any questions regarding the application of the ruling in the field of corporate income tax, you can contact Vera Stanic, Manager in Tax Department (Taxation of Legal Entities) via e-mail address: vestanic@deloittece.com.

Accounting law

Electronic signing of the inventory report and accompanying documentation

Ruling of the Ministry of Finance, no. 011-00-473/2018-08, from July 2^nd, 2018

Conclusion from Ruling: Legal entities, i.e. entrepreneurs, can compile their inventory reports and its accompanying documentation in electronic form and sign it electronically.

The above-mentioned ruling is significant to legal entities and entrepreneurs who strive toward digitalization of electronic financial reporting.

Number of an invoice as an identification mark within the meaning of Accounting Law

Ruling of the Ministry of Finance, no. 011-00-557/2018-16 from July 19^th, 2018

Conclusion from Ruling: The invoice number can fill out the purpose of the identification mark, but it is needed that this option be prescribed by an internal act of a legal entity, i.e. entrepreneur.

This ruling is significant to legal entities and entrepreneurs who strive toward digitalization of the billing process.

For any questions related to the application of rulings in the field of financial reporting, you can contact Dusanka Bastaja, Manager in Tax Department (Accountancy and Accounting) at the email address: dbastaja@deloittece.com.

Law on fiscal cash registers

Eliminating an error in the fiscal cash register in case when a complaint for a good purchased in one retail facility can be made in another retail facility

Ruling of the Ministry of Finance, no. 011-00-00960/2016-04 from June 1^st, 2018

Conclusion from Ruling: There is a possibility that a buyer, on a basis of a fiscal receipt, makes a complaint for goods in different retail facilities of the same business entity, under condition that this is in line with the business policy of that business entity.

The above-mentioned ruling is particularly relevant to persons operating in the retail sector.

The absence of obligation to record through the fiscal cash register a supply performed from the sale of gift vouchers

Ruling of the Ministry of Finance, no. 430-00-00266/2017-04 from May 31^st, 2018

Conclusion from Ruling: There is no obligation to record through the fiscal cash register a supply performed from the sale of a gift voucher. If such supply is performed, it is necessary to separate the supply from selling gift cards from the supply of goods and services and keep a record of the number of vouchers indebted.

The above-mentioned ruling is particularly significant to retailers that sell gift vouchers.

For any questions regarding the application of ruling in the field of fiscalization, you can contact Pavle Kutlesic, LL.M., Manager in Tax Department (Indirect Taxes) via e-mail address: pkutlesic@deloittece.com.