New Rulings of the Ministry of Finance

During the past period, several rulings of the Ministry of Finance were published, which clarify the application of the provisions of the Law on Value Added Tax, Law on Corporate Income Tax, Accounting Law and Law on Foreign Currency Operations.

For more detailed questions regarding the application of the rulings on your specific activity and circumstances, you can contact the colleagues from the Tax & Legal Department, according to the contact information listed below.

Value Added Tax

Determination of a VAT debtor for works related to remediation closure and other remediation activities of waste landfill

Ruling of the Ministry of Finance, no. 430-00-376/2019-04 as of July 10th 2019

Conclusion from the Ruling: The supply of goods or services performed within the execution of works related to remediation closure and other remediation activities of unsanitary waste landfill, is not considered as supply of goods and services in the field of construction. Exceptions are works related to the construction, i.e. rehabilitation of wells with smaller diameter which are used to measure groundwater levels, construction and erection of construction site fence and double leaf swing gate, as well as preparation of work surface for erection of degassing plants (provided that under the preparation of work surface is considered concreting, i.e. asphalting).

The above-mentioned Ruling is particularly significant for VAT-payers who perform works related to remediation, closure and other remediation activities of waste landfill as well as for VAT-payers that procure these works.

VAT treatment of modular container procurement and construction of temporary construction facilities

Ruling of the Ministry of Finance, no. 011-00-623/2019-04 as of August 12th 2019

Conclusion from the Ruling: The contractor who procures modular containers for the purpose of constructing the temporary construction facilities on the construction site, which will be used to accommodate employees and perform administrative and other tasks, is entitled to the right to deduct input tax based on procurement of the subject goods. Additionally, when the contractor provides accommodation services to employees on the construction site free of charge, he is not obliged to calculate the VAT on that basis, since these services are provided for business purposes.

The above-mentioned Ruling is particularly significant for VAT-payers that build and use temporary construction facilities as part of the construction works.

Obligation to calculate VAT for the supply of customs representation services within temporary import

Ruling of the Ministry of Finance, no. 430-00-00447/2019-04 as of October 25th 2019

Conclusion from the Ruling: A VAT payer who provides customs representation services for a temporary import procedure of goods as actions and formalities undertaken before the customs authority during the period of temporary import procedure, and whose place of supply is in Serbia, has no obligation to calculate VAT for the supply of these services if it has an invoice or other document that could be used as an invoice.

The above-mentioned Ruling is particularly significant for VAT-payers that provide customs representation services as well as for VAT-payers – recipients of these services.

VAT treatment of the supply performed free of charge for the purpose of product promotion

Ruling of the Ministry of Finance, no. 413-00-29/2019-04 as of December 23th 2019

Conclusion from the Ruling: When a coffee distributor for espresso machines, in order to promote his product, gives out free coffee capsules for espresso machines to different persons with individual market value less than 2,000 dinars, excluding VAT, considering that these are small value gifts, a VAT payer has no obligation to calculate and pay VAT on that basis up to the value determined by the bylaw.

The above-mentioned Ruling is particularly significant for VAT-payers who perform activities for promotional purposes, especially when doing activities which represent core business activities of those VAT payers. Aforementioned Ruling stipulates that giving out goods which VAT-payer usually sells, is deemed to be giving out small value gifts as well.

VAT treatment for the transfer of a single-purpose vouchers - gift cards

Ruling of the Ministry of Finance, no. 011-00-1159/2019-04 as of January 13th 2020

Conclusion from the Ruling: For the transfer of gift cards made by a VAT payer acting in his own name, in the capacity of the issuer of gift cards, whereby there is an obligation for those gift cards to be accepted as consideration or part consideration for the handing over of the goods in all its retail facilities located in Serbia and in which only goods that are sold are goods whose supply is taxed at a general tax rate of 20%, the VAT payer is obliged to calculate and pay VAT based on that transfer, since these are single-purpose vouchers.

Since a VAT payer is obliged to record the actual handing over of goods in retail outlets through the fiscal cash register in accordance with the law governing fiscal cash registers, based on that actual handing over of goods, the VAT payer is not a tax debtor in accordance with the Law on Value Added Tax, considering that the actual handing over of the goods in this case shall not be regarded as an independent transaction.

In addition, the VAT payer is obliged to provide in his records the data related to the transfer of single-purpose vouchers and the actual handing over of the goods in return for those vouchers.

The above-mentioned Ruling is particularly significant to VAT-payers who perform the transfer of single-purpose vouchers.

Right to apply VAT zero rate of the deliverer of goods which are being dispatched to the territory of APKM in case when invoice for that supply does not contain the note on the VAT zero rate application

Ruling of the Ministry of Finance, no. 430-00-00164/2020-04 as of May 12th 2020

Conclusion from the Ruling: If a deliverer of goods which are being dispatched from the territory of Serbia outside APKM to the territory of APKM, does not state, in the invoice for the supply in question, the note on the provision of the Law on Value Added Tax based on which the VAT has not been computed, that invoice shall be considered as formally incorrect, and it cannot result in the amendment of the tax treatment of the supply in question.

The above-mentioned Ruling is particularly significant to the majority of VAT-payers, since it confirms that emphasizing the provision of the law on the basis of which VAT is not calculated does not change the essence of specific supply and that it cannot lead to VAT calculation.

Determination of a tax debtor in case of performance of the complex of construction-assembling works

Ruling of the Ministry of Finance, no. 011-00-639/2019-04 as of May 11th, 2020

Conclusion from the Ruling: When a subcontractor performs the supply of goods to the contractor based on the contract on performance of the complex of construction-assembling works within the construction of lower rail structure, roads, bridges, retaining walls, noise protection walls, etc., whilst the realization of the supply in question consists of a list of activities (where some of them separately could not be considered as a supply in the field of construction), such supply is considered to be a supply in the field of construction, for which the tax debtor is the contractor – recipient of the supply.

The above-mentioned Ruling is particularly significant for VAT-payers that perform the complex of construction-assembling works, that contain several types of works, as well as the VAT-payers for whom such works are being performed.

VAT treatment of the sale of the future short-term receivable to the factor, based on recourse factoring contract

Ruling of the Ministry of Finance, no. 011-00-00915/2019-04 as of November 12th, 2019

Conclusion from the Ruling: When the service provider (with exception of a VAT-payer who applies the collection system), based on recourse factoring contract sells to the factor its future short-term receivable from the service contract and who fulfills his contractual obligation by depositing the funds on behalf of the purchase of receivables and in that way settles his contractual obligation in his own name and for his own account, such funds collected from the factor are not considered to be an advance payment. That said, the tax liability has not been triggered on that basis.

The above-mentioned Ruling is particularly significant for VAT-payers who sell their future short-term receivables for supplies which are subject to VAT.

For any questions regarding the application of the rulings 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.

Corporate Income Tax

Tax treatment of transfer of shares of a resident legal person in case when the assets of a non-resident are being transferred to another non-resident

Ruling of the Ministry of Finance, no. 430-00-491/2019-04 as of September 18th, 2019

Conclusion from the Ruling: When, within the status change performed outside the territory of Serbia, a non-resident transfers assets (which include, inter alia, a share of a resident legal person) to another non-resident legal person, the transfer of share (of the resident legal person) performed is the basis for determination of the capital gain (or loss). The revenue, which the non-resident (as a transferring company) generates via transfer of share of the resident legal person on the acquiring company, is taxable in line with Article 40 par 6 of the Law on Corporate Income Tax.

The above-mentioned Ruling is particularly significant for non-resident persons that transfer shares of a resident legal person and generate revenue on that basis.

Documenting of employees’ commuting costs 

Ruling of the Ministry of Finance, no. 011-00-528/2019 as of July 16th, 2019

Conclusion from the Ruling: The following documents shall be considered as credible accounting documents based on which the employees’ commuting costs are being recorded in the business records of legal entities and entrepreneurs:

1. By employer:

- in case of using a one's own vehicle, a conjoint invoice, that refers to the employer, would be required. It should specify every individual fuel amount purchased by the employees over the course of a month;

- in case of using a public transport, a conjoint invoice, that refers to the employer, would be required. It should specify every individual monthly subscription ticket;

- in case of using a taxi transport, a conjoint invoice, that refers to the employer, would be required. It should specify every individual taxi drive amount, used by the employees over the course of a month.

In the case of any type of transport, a supporting list of employees, who use their own vehicle/public transport/taxi transport to and from work, would be required (name and last name of an employee, number of voucher/token/card and monthly subscription ticket).

2. By employees:

- in case of using one's own vehicle, fiscal invoice(s) for the purchased fuel would be required;

- in case of using public transport, fiscal invoice(s) for the purchased monthly/daily subscription ticket(s) would be required;

- in case of using taxi transport, taxi receipt(s) would be required.

In the case of any type of transport, an additional statement of an employee, that the invoices in question refer to his/her own commuting costs, would be required.

The above-mentioned Ruling is significant for the majority corporate income taxpayers in Serbia who bear the employees’ commuting costs.

Determining interest rates, which are considered to be in accordance with the "arm's length principle", while preparing the tax balance for a business year that does not correspond to the calendar year

Ruling of the Ministry of Finance, no. 430-00-353/2019-04 as of November 18th, 2019

Conclusion from the Ruling: Since interest rates, that are considered to be in accordance with the "arm's length principle", are prescribed for the tax period corresponding to the calendar year, the interest rates in question for the tax period 1/1/2018 – 12/31/2018 are prescribed by the Rulebook on interest rates that are considered to be in accordance with the "arm's length principle" for 2018, and for the tax period 1/1/2019 – 12/31/2019 interest rates are prescribed by such Rulebook for 2019.

The above-mentioned Ruling is particularly significant for taxpayers who have loan and credit transactions with related parties in case when their amendment of business year is approved.

Absence of an obligation to pay withholding tax on the revenue generated by a non-resident from a resident, based on the interest rate swap agreement

Ruling of the Ministry of Finance, no. 413-00-33/2019-04 as of October 30th, 2019

Conclusion from the Ruling: In case when a resident legal entity executes a payment to a non-resident legal entity, based on the interest rate swap agreement, as a particular legal transaction concluded for the purpose of protection against interest rate risk and not for the purpose of financing, such payment on the above-mentioned basis is not deemed to be an interest, and, in relation to that, should not be subject to the withholding tax.

The above-mentioned Ruling is particularly significant for legal persons that make payments to the non-residents, on the basis of an interest rate swap agreement.

For all questions regarding the application of rulings in the field of Corporate Income Tax, you can contact Milica Stublincevic, ACCA, Manager in Tax Department (Taxation of Legal Entities) via e-mail address: mstublincevic@deloittece.com.

Accounting Law

Absence of an obligation for the accounting document to contain the signature of the responsible person

Ruling of the Ministry of Finance, no. 011-00-567/2019-16 as of July 15th, 2019

Conclusion from the Ruling: The invoice does not have to contain the stamp and (electronic) signature of the responsible person, but it is enough to contain an "identification mark" that refers to the responsible person.

The above-mentioned Ruling is significant for legal persons and entrepreneurs who strive toward digitalization of the invoicing process.

For all questions regarding the application of rulings in the field of Financial Reporting, you can contact Dusanka Bastaja, Manager in Tax Department (Bookkeeping and Accounting) via e-mail address: dbastaja@deloittece.com.
 

Law on Foreign Currency Operations

Mean of payment when a non-resident's sale of share of a legal entity with its seat in Serbia is performed to a resident

Ruling of the Ministry of Finance, no. 401-00-00196/2019-16 as of January 28th, 2019

Conclusion from the Ruling: A non-resident's sale of shares in a legal entity with its seat in Serbia can not be performed by executing the payment abroad in foreign currency to the domicile account of a non-resident abroad, but the buyer - resident should make a payment in favor of the RSD non-resident account of a foreign person with a bank in Serbia.

The above-mentioned Ruling is significant for legal and natural persons who purchase shares of resident legal entities from non-residents.

For all questions regarding the application of rulings in the field of Foreign Currency Operations, you can contact Stefan Antonic, Senior Manager in Legal Department via e-mail address: santonic@deloittece.com.