Amendments to the VAT Rulebook are adopted

The Ministry of Finance of the Republic of Serbia has issued the Rulebook on Amendments and Supplements to the Rulebook on VAT (hereinafter: “the Rulebook”), which was published in the Official Gazette of the RS No. 7/23, on January 31, 2023, and which came into force on February 1, 2023.

The main reason for adoption of this Rulebook was the need to harmonize the rules for issuing of invoices with the regulations in the field of electronic invoicing.

The most important novelties are presented below.

Issuance of invoices

The most important changes in this part of the Rulebook relate to the procedure of issuing invoices, primarily in order to harmonize the VAT regulations in this area with the regulations in the field of fiscalization and electronic invoicing.

First of all, in Article 164 of the Rulebook, which refers to all cases of non-issuance of an invoice, amendments are introduced in the sense that the invoice from Article 42 of the VAT Law must still be issued to individuals who are not VAT payers, under the condition that for such supply, there is an obligation to issue a fiscal invoice in accordance with the Law on Fiscalization. The obligation to issue an invoice from Article 42 of the VAT Law for supplies for which a tax exemption is prescribed is also introduced if for such supplies there is an obligation to issue an e-invoice in accordance with the Law on E-invoicing, and an obligation to issue a fiscal invoice in accordance with the Law on Fiscalization.

Until these amendments, pursuant to Article 165 of the Rulebook, which covers the case where an advance payment and a supply of goods and services occurred in the same period, there was no obligation to issue an advance payment invoice, but only a final invoice for such supply. With the amendments, it shall now be obligatory to issue both an advance payment invoice and a final invoice in cases where an advance payment and a supply of goods and services occurred in the same period if for such transaction there is an obligation to issue a fiscal invoice in accordance with the regulations on fiscalization, or an e-invoice, in line with the regulations on e-invoicing.

Article 166 of the Rulebook prescribes that in all cases referred to in Article 10 para 2 of the VAT Law, i.e. in situations where the tax debtor is the recipient of goods and services, the recipient of the advance payment is not obliged to issue an advance invoice on that basis. The amendments to the Rulebook introduce the obligation to issue an advance payment invoice in such cases for supplies for which there is also an obligation to issue an e-invoice.

Until these amendments, pursuant to Article 181 of the Rulebook, in cases where the date of supply of goods or services is the same as the date of issuance, there was no obligation to state the date of supply separately on the invoice. With the amendments, in cases where an e-invoice is issued in line with the regulations on e-invoicing, such invoice should contain both dates (date of supply and date of issuance).

Article 182 of the Rulebook regulates situations where subsequent to the supply of goods or services the VAT base for such supply has changed (upwards or downwards), as well as the content of the document (debit or credit note) that is issued in such cases. With the amendments, a new paragraph (para 3) has been added which prescribes that in situations where an advance payment has been made (and advance payment invoice has been issued), which later ceases to be advance payment for supply of goods or services (in total or in part), the recipient of such advance payment – VAT payer, issues a document (credit note) via which it corrects the previously issued document (advance invoice) and the corresponding output VAT. There is an exception to the above rule, i.e. in situations where the charged advance payment or part thereof becomes a consideration, or a part of consideration (in which situations, and in our opinion, it would be necessary to issue an advance payment invoice, and then, when the supply is made, a final invoice).

Also, changes were made in Article 188 of the Rulebook, where it is defined that if, after the advance payment, there is a change in the tax debtor in accordance with the Law, so that the recipient of the advance payment who was considered a tax debtor is no longer considered as one, the VAT payer who made the supply issues an invoice in which it states the total amount of the base without VAT, and the recipient of goods or services computes VAT for that supply. The VAT payer has the right to cancel the previously issued advance payment invoice, as well as to correct the computed VAT if he has received a document from the recipient confirming that the recipient has corrected the deduction of input VAT or that he did not deduct VAT based on the advance payment invoice as input VAT.

Article 189 of the Rulebook defines the opposite situation. Namely, when there is a change of the tax debtor, so that the tax debtor is a person who made the supply, the tax debtor issues an invoice in which it shows the total amount of the base and corresponding VAT, and the recipient of goods and services annuls the applied reverse charge mechanism on that supply.

Finally, among the more important changes related to the issuance of invoices, Article 202a is added in the Rulebook and it states that if an attachment is submitted with an invoice, such document will not be considered as an invoice based on which a tax liability arises, nor the right to deduct input VAT.

The usage of goods and other provision of services free of charge

The amendments to the Rulebook’s section on the use of goods and other provision of services free of charge stipulate that the provision of services free of charge does not include the use of goods (which are part of business property for the personal needs of the founder, owner, employees, or other persons, or for non-business purposes of the VAT payer), thus making further distinction between these two concepts.

Furthermore, in this part, a new Article 11a was added. Said article stipulates that the use of goods and the provision of services shall not assume services performed free of charge by a non-resident entity not VAT registered in the Republic of Serbia. In such case, the tax debtor shall be obliged to compute output VAT under the prescribed VAT rate via the reverse-charge mechanism.

Supplies in the field of construction

Article 24 of the Rulebook, which defines supplies in the field of construction, has been amended in the sense that provisions regulating situations when advance payment was made for future supply in the field of construction, which later turns out not to be a supply in the field of construction (and vice versa), have been deleted.

Method of determining the VAT and amendment thereof

A new article 47a to the Rulebook was added. This article regulates in more detail the method of determining the market value, in cases where the VAT base is considered to be the market value, which are the following cases:

• if the consideration or part thereof is not paid in money, but in the form of supply of goods and services;
• in the case of supply of goods and services that constitute a contribution to a legal entity;
• for the supply of goods and services between related parties, in the sense of the provisions of Article 17b of the VAT Law.

Additionally, in Article 55 of the Rulebook which lists cases where it is considered that amendment of the VAT base specifically takes places, in part which relates to subsequent fulfillment of conditions necessary for the application of the zero VAT rate, the scope has been narrowed to several situations, i.e. shipment of goods abroad by a VAT payer or a foreign consignee (or a third party in both cases), or by a passenger who ships the goods abroad in personal luggage for non-commercial purposes.

Zero rated supplies

Amendments to the Rulebook also made changes in the part that covers zero-rated supplies. The most important amendments were made mainly with the aim of harmonizing with the regulations in the field of electronic invoicing and refer to the documentation that the VAT payer should possess in order to fulfill conditions for the application of the zero VAT rate.

VAT exempt supplies

In the section which refers to VAT exemptions, the new amendments specified what is considered as social care and protection services, child and youth protection, and services of social protection institutions on which VAT is not paid.