Ministry of Finance clarifies registration of foreign entities for VAT purposes

On May 23, 2016, the Serbian Ministry of Finance announced its clarifying opinion on tax representation of a non-resident entity for the purpose of implementing the Law on Value Added Tax and registration for VAT.

Although the concept of tax representatives for non-residents existed in previous versions of the VAT Law as well, the latest amendments to the Act adopted in October 2015 precisely defined conditions that VAT representatives should fulfill while also allowing the possibility to non-residents providing goods and services in the Republic of Serbia to register in the VAT system via a proxy. Instructions on the process of registration were further described in the May 23rd opinion issued by the Ministry.

The criteria that tax representatives have to fulfill include mandatory registration in Serbia, a VAT taxpayer status for at least the last 12 months, no tax arrears, and no conviction for a criminal tax offense. The decision on eligibility is issued by the Tax Administration within 15 days of the application. The VAT representative registration is available online on the web page of the tax authority.

The reason why only a limited number of companies are currently registered as VAT tax representatives for foreign entities is most likely due to the joint and severe responsibility for all obligations of the foreign entity which arises for VAT representatives. Additionally, even though the rulebook and opinion explain most of topics, some practical aspects are still left unclear – including details about procedures for payments or refunds of VAT.
Having all this in mind and considering that registration is not mandatory but rather on a voluntary basis, it remains to be seen whether this new facility will be heavily used by the non-resident entities and their resident associates or will the VAT burden remain with the domestic goods and services recipients.

Aleksandra Rafailovic, Senior Tax Advisor
T. +381 11 3241 484