Serbia amends VAT Law; extends possibilities for VAT refund to foreign companies

On April 19th, 2018, the Serbian Parliament adopted the Law on Amendments to the VAT Law. The adopted Law was published in the Official Gazette No. 30/2018 and came into force on 1st of July 2018, with the exception of certain provisions which will be applicable as 1st of January 2019.

The latest amendments to the VAT Law are conditioned by the harmonization of Serbian regulations with EU regulations, and most notably with the Council Directive 2006/112/EZ on a common system of value added tax. The changes also target the creation of more favourable conditions for business entities. These Amendments relate to the moment of the creation of a VAT obligation, especially for intellectual property rights, as well as to tax exemptions with the right to deduct previous tax and VAT refunds to foreign taxpayers.

Rule on the chargeability of VAT on supplies of intellectual property (IP) rights

According to the amended rule, a tax liability which arises as a result of issuing an invoice before a sale or before an advance payment may also arise for services related to the transfer, assignment and use of copyright and related IP rights, under the condition that such services are performed by the same person which carries out the services of transferring, assigning and making use of copyright and other IP rights. The most common example in practice is the service of granting of the right to use software (software license) provided together with software maintenance services and technical support to the software user.

Free trade zones – tax exemption

The tax exemption with the right to deduction of previous tax has been prescribed for the supply of goods that have entered into a free zone for a foreign entity which is not a taxpayer but has concluded a contract with a tax payer-user of the free zone. Additionally, this new VAT exemption is prescribed for supply of services which are related to the supply of goods stated above.

Refund of VAT to a foreign taxpayer

A foreign taxpayer has the right to refund input VAT on the turnover of goods and services bought in the Republic of Serbia, if goods and services are sold to entities which are VAT payers in Serbia, for goods and services subject to the reverse charge mechanism (i.e. when the obligation to calculate VAT rests with the recipient taxpayer). This will allow more opportunities for foreign entities to reclaim the incurred input Serbian tax. This amendment applies from 1st of January 2019.

Eurofast advises clients that may be affected by the chance to seek professional advice in determining the best approach to benefit from the amendments.

Zvezdana Radulovic
Head of Tax & Accounting
Tel: +381 11 324 14 84

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