Serbia introduces widely-disputed VAT rulebook

A VAT rulebook introducing a new form – called POPDV – was published in the Serbian Official Gazette no.80/16 dated 30th September, 2016. The rulebook has been met with strong criticism, particularly due to its adoption without consultation and cooperation with the private sector, as well as without taking into account the actual applicability of the amendments.

It is believed that the new rulebook drastically and unnecessarily increases the level of complexity of records. One of the most controversial provisions includes a requirement for reporting data specifying detailed goods’ or services’ characteristics (such as name, type, model, quantity, etc.) which would have a serious impact, particularly in large retail chains. Research has shown that the average number of tax return fields in the EU is 39; however, with the latest amendments in Serbia, the VAT return fields would amount to a total of 297 (17 fields in the application form and 280 in the detailed records).

Although officials have stated that the new form is being introduced for purposes of better understanding of the business activities of VAT payers as well as improved efficiency of tax collection, it remains to be seen how the additional reporting requirements (including reporting related to tax-exempt items) will contribute towards that goal. EU practices have shown that increasing the number of reporting fields in VAT returns does not contribute to the increase in VAT collection.

The initially-prescribed deadline to implement the regulations was merely 3 months, thus the race towards finding an appropriate software solution has already commenced. Tax professionals have also highlighted the expected increase human resource expenditures due to the increases reporting workload, which is in turn expected to result in higher outsourced accounting/tax advising fees. However, as a result of the joint initiatives of various parties, the Ministry of Finance declared on 28th October 2016 that it will defer the implementation of the POPDV form until 2018 and will – in the meantime – work on amending the Serbian Law on VAT in order to eliminate perceived deficiencies.

Aleksandra Rafailovic,

Senior Tax Advisor

T. +381 11 3241 484