If you are doing business in Serbia or invest in Serbia, you will face a lot of tax changes with the new year: TPA experts from Serbia give you a tax update for 2020: VAT, CIT, PIT and social security contributions.
1. VAT in Serbia 2020
Amendments to the Value Added Tax Law (VAT Law) in Serbia will bring some extensive changes if you are doing business in Serbia. Applicable from 1. January 2020 besides provisions regarding VAT refund to nonresident citizen and supply of goods and services for infrastructure projects of motor highway construction, applicable from day of law coming into force, i.e. 15 October 2019.
1.1 Value Voucher
Value voucher is newly introduced instrument for which there is acceptance obligation regarding compensation for supply of goods or services provided, if data about such supply, provider identity and voucher conditions are indicated in voucher itself or related documentation. Value voucher can be used in electronic or physical form. Instruments used solely for discount of goods or services without right of purchase are not considered as value vouchers. Additionally, transport tickets, entrance tickets, postal card etc. are not considered as value vouchers.
Types of value vouchers
Type of value voucher varies if all necessary elements for calculation of VAT (especially VAT rate and place of supply) are known in moment of voucher issuance.
- transfer of single-purpose voucher is VAT taxable in moment of voucher transfer to another party (all elements for calculation of VAT are detected) by VAT rate used for taxation of goods or services in voucher, while delivery of those goods or services alone will not be taxed.
- Further, if there are several participants, VAT taxpayers who transfer voucher on their behalf, each transfer is considered as supply of goods or services from VAT Law perspective.
- If transfer of single-purpose voucher was made by taxpayer in the name of another taxpayer, such transfer is considered taxable while party for which voucher was transferred is in position of taxpayer. Taxpayer who transfer voucher in the name of another taxpayer, performs mediation service for supply for which the voucher is issued.
- transfer of multi-purpose voucher is not VAT taxable in moment of transfer (every element for VAT calculation is not detected), while delivery of goods or services in voucher is taxed when voucher is realized i.e. supply of goods or services take place.
- In situation, when taxpayer transfers multi-purpose voucher to another taxpayer that performs supply of goods or services in voucher, it is considered that taxpayer – voucher transferor, performs distribution, advertising, or other VAT taxable services.
- Actual delivery of goods or services in voucher will be VAT taxable when supply of goods or services from voucher take place, while obligation of VAT calculation is up to taxpayer that performs supply of goods or services.
1.2 VAT: Supply of goods
Calculation of VAT deduction
New provisions of the law prescribe additional exclusion from calculation of proportionate VAT deduction beside supply of equipment and objects used for performing business activity, that include investments in objects for performing business activity with chargeable fee, periodical supply of immovables for taxpayer who does not occasionally perform this activity, as well as periodical supply which VAT is exempted without right to deduct input VAT. Periodical supply is considered as maximum of two supply per year.
VAT for meal delivery services
Rules on place of goods supply and meal delivery services that take place on ship, aircraft or train during the passenger transport have changed. Place of supply for mentioned goods and services is considered to be departure place of transport vehicles. Place of aforementioned supply in case of round trip is considered to be the place where transport vehicle started back to it’s starting point. To determine place of supply when taxpayer’s place of permanent residence and inhabitancy are not the same, place of supply is considered to be taxpayer’s inhabitancy place.
1.3 VAT refund for nonresidents
To exercise the right on VAT refund for nonresident passengers who ship goods abroad, bought for noncommercial purposes in personal luggage, value of mentioned goods has to reach minimum of 6.000 RSD including VAT, instead of 100 EUR previously prescribed. Further, deadline for delivering a proof goods are shipped abroad to exercise VAT refund right is extended to 12 months after day of shipment. VAT taxpayer that made supply of these goods is due to issue documentation representing basis for VAT refund on request of nonresident citizen.
2. Coporate Income Tax: CIT in Serbia 2020
Amendments proposed that revenue of resident taxpayer, established in accordance with the regulations governing investment funds, realized on disposals of assets, shall not be included in the tax base, meaning the tax payer does not determine capital gain or loss in accordance with the law.
2.1 Serbia: Country-by-Country Reporting
The country reporting for members of an international group of related parties (hereinafter: international group) is included in the Serbian tax legislation as part of the alignment with the BEPS 13 Action Plan.
Namely, the resident taxpayers who are the ultimate parent entities of international groups of related legal entities will be obliged to submit to the Tax Authority annual report (Country-by-Country Report) on controlled transactions of the international group of related legal entities.
The obligation to prepare the report will come into force from 2020 and the annual reports will be submitted within 12 months of the end of the period for which such report is prepared. An international group of related legal entities is a group of entities that are related by ownership or control in terms of IAS or IFRS, and whose total consolidated revenue, reported in the consolidated financial statements for the period preceding the reporting period, is at least 750 million EUR in RSD equivalent at the middle exchange rate of the National Bank of Serbia at the date of adoption of the consolidated financial statements.
It is prescribed the right to use tax credit related to withholding tax on service fee paid in other country for services performed in that other country.
3. Changes in Personal Income Tax in Serbia
The most important amendments to the Personal Income Tax (PIT) in Serbia are presented below.
Non-resident Taxpayer in Serbia
A new article prescribed an exemption from taxation of the income of a non-resident taxpayer who spends up to 90 days in Republic of Serbia in 12 months if that income is derived from a non-resident principal who does not perform the business activity or other activity in the territory of Serbia.
The amendments increased the non-taxable amount to RSD 16.300 for a person who is working full time.
Salary Tax Base
A new article was prescribed which stipulates that the salary tax base for the new immigrant taxpayer will be reduced by 70% for a period of 5 years from the date of conclusion of a permanent employment contract with a qualified employer. The right to reduce the base relating to the new immigrant taxpayer shall be exercised independently of the change of employer, if certain conditions are met. The above tax relief applies primarily to newly engaged persons, not older than 40 years, who have resided outside the territory of Serbia in the previous period, primarily for the purpose of education or professional development.
PIT for Start-Ups
Also, a new article was prescribed, which refers to the exemption from payment of tax on founder’s salary who are employed in a newly established company that performs an innovative business activity. The tax exemption may be applied to a monthly salary up to the amount of RSD 150,000 for the founder, for a period of 36 months from the date the company was established. The tax exemption can be obtained by an employer established as of 31 December 2020.
Salary Tax deduction for qualified employees
It is prescribed that an employer who employs a qualified new employee is entitled to exemption from paying calculated and withheld tax for the salary paid as until 31 December 2022. It is envisaged that the tax deduction will be applied as follows:
- 70% of salary taxes paid between 1 January and 31 December 2020;
- 65% of salary taxes paid between 1 January and 31 December 2021; and
- 60% of salary taxes paid between 1 January and 31 December 2022.
The possibility of lump-sum taxation has also been introduced for taxpayers who perform activities in the field of accounting, bookkeeping, auditing and tax advisory activities.
4. Social Security Contributions in Serbia 2020
The method of determination of minimal and maximal monthly SSC base has been changed. The SSC base is determined on the basis of paid salaries in the period for the previous 12 months starting from September (not from October as it was before) in the current year.
The SSC rate for pension and disability insurance has been reduced, from 26% to 25.5%. The amendment relates to SSC paid by the employer, so the SSC rate of pension and disability insurance paid by the employer is 11.5% instead of 12%.
The period of application existing tax reliefs is extended (ending on 31 December 2020, instead of 31 December 2019), based on the salaries of new employees in regard to the right to a refund of the paid SSC.
The new articles provide exemption of SSC paid by the employer for new immigrant taxpayer, persons who have an employment relationship with a newly established company that performs innovative business activity and for qualified new employees. The above-mentioned provisions are regulated in order to bring the SSC Law into line with the latest amendments in the PIT Law in the part related to employer benefits.