Tax Highlights - December 2024

AMENDMENTS TO TAX LAWS

On 27 November 2024, the National Assembly of the Republic of Serbia adopted draft amendments and supplements to a set of tax laws and the Law on Electronic Invoicing.

The aforesaid amendments are detailed below.

VALUE ADDED TAX LAW

Transfer of all or part of property

Article 6, paragraph 1, of the VAT Law stipulates that the supply of goods and services, as referred under the said Law, is not carried out in case of a transfer of all or part of property, with or without a compensation, or as a contribution, if the acquirer is a taxpayer or becomes a taxpayer through the transfer and if it continues to perform the same activity.

The amendments to VAT Law introduce the possibility of contracting VAT when transferring a part or whole property, i.e. a new paragraph is introduced that prescribes that the trade in goods and services is deemed to have been performed if a contract or a decision (e.g. in case of a status change) stipulates that VAT is calculated on the trade in goods and services that constitute all or part of property that is being transferred. The new rules will apply to all contracts concluded as of 1 January 2025, whereas the old rules will apply to contracts concluded before that date.

It will be applied as of 1 January 2025.

The tax base for a service whose fee is included in the customs value of imported goods

The new article stipulates that the base for the supply of services, whose fee is included in the customs value of imported goods, is the difference between the total import amount and the customs value of the imported goods.

It will be applied as of 1 January 2025.

Tax base amendment

• Tax base increase

In case of a tax base increase, the VAT payer that supplied the goods and services and is a tax debtor for such a transaction, should increase the VAT amount in accordance with this change. The amendments to VAT Law prescribe the obligation to issue a document on a tax base increase. The amended provisions specify that the obligation to increase VAT also applies to tax debtors - recipients of goods or services.

• Tax base decrease

The law amendment specifies that a taxpayer can reduce VAT if it issues a document on a tax base decrease to both VAT payers and non-VAT payers (until the amendment, the taxpayer was obliged to issue a document on a tax base decrease only to persons who have the right to deduct VAT).

Additional conditions are prescribed if a transaction is provided to a person that is VAT payer, i.e. the VAT base can only be reduced on condition that a document on a tax base decrease has been issued and that the taxpayer has the proof of a tax base decrease, as well as a notification that no VAT refund request has been and will not be submitted for the VAT amount. The amended conditions for a tax base decrease are listed below.

Law amendments introduced provisions related to the conditions for a calculated VAT decrease in case of a VAT base reduction when a tax debtor for the supply of goods and services is the recipient of goods and services i.e. when there is an obligation to perform an internal calculation, which used to be stipulated under the VAT Rulebook. 

In the event of a base decrease for a supply for which the taxpayer is a VAT payer - the recipient of goods and services, that has the right to deduct the input tax, the amount of the calculated VAT can be decreased by the VAT payer if:

1. it has prepared an internal calculation in accordance with the VAT Law and 
2. it has corrected the deduction of input tax (if the calculated VAT was used as input tax).

In case of a decrease in the base for supply for which the taxpayer is a VAT payer - the recipient of goods and services, that does not have the right to deduct the input tax, the amount of calculated VAT can be decreased by the VAT payer if it:

1. it has prepared an internal calculation in accordance with the VAT Law and;
2. has a document confirming that the fee has been decreased. 

If there is an advance payment decrease, the aforementioned rules shall be applied accordingly.

A by-law that regulates this issue in more detail will be adopted by 31 December 2024.

It will be applied as of 1 January 2025.

Conditions for input tax deduction

It is prescribed that if the obligation to issue an electronic invoice is prescribed for the supply of goods or services in accordance with the Law on Electronic Invoicing, the right to deduct input tax can only be exercised on the basis of the accepted electronic invoice. 

The deadline by which an electronic invoice has to be accepted in order for a taxpayer to be able to exercise the right to deduct input tax for the tax period in which the tax liability occurred has been shortened. Namely, a VAT payer can exercise the right to deduct input tax for a certain tax period on the basis of an electronic invoice, if the electronic invoice is accepted no later than the day preceding the day of submission of a tax return for that tax period in accordance with the VAT Law, i.e. no later than the 10th day of the calendar month that follows that tax period, regardless of whether the tax liability occurred in the tax period for which the tax return is submitted or in one of previous tax periods and regardless of whether the electronic invoice was issued on the tax liability occurrence date or after that day. If the electronic invoice is accepted starting from the tax return submission date for the tax period, i.e. from the 11th day of the calendar month following the tax period for which the tax return is submitted, it is envisaged that a VAT payer can exercise the right to deduct input tax for the tax period in which the electronic invoice is accepted.

It is stipulated that a taxpayer can exercise the right to deduct input tax on the basis of the invoice for the sale of goods or services, if the invoice contains formal deficiencies related to the identification of the invoice recipient (name and address of the invoice recipient), with the exception of TIN data.

It will be applied as of 1 January 2025 and/or for tax period of December 2024.

Correction of input tax deduction in case of a tax base change

It is additionally stipulated that an input tax deduction should also be corrected based on an advance payment reduction, as well as on the basis of the cancellation of invoices and other documents of a previous participant in the transaction that affect the input tax deduction.

In addition, the VAT payer that corrected - reduced the input tax deduction can submit a notification about that correction to the VAT payer - the previous participant in the transaction, i.e. the recipient of the advance payment if it received a reduction document from the said VAT payer when there is the obligation to issue a reduction document in accordance with the VAT Law.

It will be applied as of 1 January 2025.

Value change of received agricultural products

In case of a value change of received agricultural products and agricultural services, the VAT payer is required to issue a receipt to the farmer if the value of the received goods or services has increased, and/or a document on decrease if the value of the received goods or services has decreased.

It will be applied as of 1 January 2025.

Registration in and removal from the VAT Payers Register

According to the amendments, the taxpayer is obliged to register for VAT within 5 days after generating a total volume of transactions exceeding RSD 8,000,000 (instead of the expiry of the first deadline for submitting a VAT return).

In addition, in the event of a status change, it is stipulated that no request for the removal from the VAT Register needs to be submitted. Instead, the legal successor of said VAT payer should submit a notification to the Tax Authority about the implemented status change within 15 days from the date of the status change.

It will be applied as of 1 January 2025.

Issuing invoices and making internal calculations

• Issuing invoices

A clarification was made with regard to invoice issuance, i.e. it is prescribed that the VAT payer issues an electronic invoice in accordance with the law governing electronic invoicing, a fiscal invoice in accordance with the law governing fiscalization, a hard copy invoice and/or an electronic format invoice, with the exception of electronic invoices and fiscal accounts, if the recipient agrees to accept an electronic format invoice.

• Obligation to prepare internal calculation

In addition, the Law amendment envisages the preparation of an internal VAT calculation based on the supply of goods and services, whose recipient is a tax debtor, advance payments, increases in the VAT base, i.e. reductions in the VAT base and advance payment reductions (so far, the obligation to prepare an internal VAT calculation has only been prescribed by the VAT Rulebook; now, it is also prescribed under the VAT Law). 

Solutions have been introduced that relate to the reversal of issued invoices with stated VAT, which implies that the VAT payer reduces the base amount, and that the VAT amount can be reduced if it has issued a new invoice (when there is an obligation to issue an invoice) and if it has a document of the invoice recipient - a VAT payer or a person that has the right to a VAT refund in accordance with the VAT Law, which stipulates that the VAT stated in the invoice was not used as input tax, i.e. that a VAT refund request has not been and will not be submitted for the said VAT amount, in the event when an invoice is issued to a VAT payer or a person entitled to a VAT refund.

VAT is also reduced for the tax period for which the above conditions have been met.

A previous solution has been retained, i.e. a person that is not a VAT payer, but it has issued an invoice with stated VAT, does not have the right to correct the stated VAT amount.

It will be applied as of 1 January 2025.

POPDV form

The obligation to prepare a review of a VAT calculation is abolished.

It will be applied for the tax period of January 2026, i.e. January-March 2026.

Change of tax period

New amendments stipulate that a taxpayer whose tax period is a quarter can request to change the period to a calendar month between 20 and 31 December of the current year for the following year (instead of the deadline of 15 January at the latest, applied so far).

It will be applied as of 20 December 2024.

Preliminary tax return

The new law amendment specifies a new term - a preliminary tax return as a set of data related to the supply of goods and services, the import of goods and other transactions and activities that affect the amount of the VAT payer's tax liability. This tax return is made in the SEF based on the data available in that system for the VAT payer's tax period. A preliminary tax return is not made for the tax period in which the VAT activity was started, nor for the period in which it ended.

It is prescribed that the VAT payer submits a tax return with a preliminary tax return, which is an appendix to the tax return. The preliminary tax return is also submitted to the tax authority upon request if the VAT payer has not submitted the tax return within the period prescribed by the VAT Law.

A by-law that will provide more detailes about the aforesaid will be adopted within 6 months from the entry into force of this law (June 15, 2025).

It will be applied for the tax period of January 2026, i.e. January-March 2026.

LAW ON ELECTRONIC INVOICING

The meaning of certain terms

A public sector entity is being changed, which, in addition to entities belonging to the state sector and public companies, will now also include a capital company that is majority owned by the Republic of Serbia.

It will be applied as of 1 January 2025.

Obligation to issue an electronic invoice

The amendment refers to the obligation to issue an electronic invoice for tax representative of a foreign person in the Republic for transactions with the public sector, which now also include payment requests to the public sector that result in a transfer of funds to the applicant.

It will be applied as of 1 January 2025.

Entity status

A new term is being introduced – entity status, which is an entity’s representation in the electronic invoice system about the obligation to calculate VAT in accordance with the VAT Law.
The obligation to provide data on the entity status in the electronic invoice system and the deadline by which the said obligation has to be fulfilled are introduced. Additionally, data on the entity status and the deadlines for adjusting entity status, if there is a change in the data on the entity status, are also specified.

Each entity in the electronic invoice system has the obligation to provide data on the status within five days from the day of entering the electronic invoice system.

Data on the entity status are data related to the obligation to calculate VAT, namely:
1.    whether an entity is a VAT payer;
2.    tax period (calendar month or quarter) of the entity that is a VAT payer. 

By changing the data on whether it is a VAT payer, the entity adjusts within five days the status in the system of electronic invoices to the change, while a change in the tax period is made in the first calendar month of the corresponding calendar quarter. 

As for entities that do not reveal the entity’s status in the electronic invoices system by 15 December 2024 and that are on the user list, the data will be obtained from the tax administration.

It will be applied as of 15 December 2024.

Electronic recording of VAT calculation

When it comes to individual electronic recording of VAT calculations, it now includes its increase or decrease for each obligation.

The amendment excludes the obligation of individual recording for transactions to which special taxation procedures are applied (transaction volumes of travel agencies and second-hand goods, works of art, collectibles and antiques, including received advance payments).

In addition, the obligation of electronic VAT recording is introduced for the first transfer of the right to dispose of newly built construction buildings, economically divisible units within those buildings and ownership shares in those goods, stipulated under the law on value added tax.

The deadline for recording VAT calculations in the system of electronic invoices, including increases or decreases, have been envisaged to be postponed by no later than the 12th day of the calendar month following the tax period for which electronic recording is performed.

As regards retail sale, the obligation to record VAT individually is excluded in every case.

It will be applied for VAT periods beginning after 31 December 2024.

Electronic recording of input tax

The deadline for electronic recording of input tax is not later than the 12th day of the calendar month following the tax period for which the electronic recording of the input tax is carried out as of the day preceding the day of the electronic recording of the input tax (instead of within 10 days after the exoiry of the tax period, as it used to be). Exceptionally if if the electronic recording of input tax is carried out after the 10th day of the calendar month following the tax period for which the electronic recording of the input tax is performed, the electronic recording of the input tax is performed as of the 10th day of that calendar month.

The possibility of correcting the electronically recorded input tax and the authorization of the finance minister to regulate the method, procedure and correction of the electronic recording of the input tax by issuing a by-law are prescribed.

It will be applied for VAT periods beginning after December 31, 2024.

Cross-border trade

The amendment has made it possible for the user of the electronic invoice system to view import data in the electronic invoice system by accessing the list of customs declarations for imports.

It will be applied as of 1 January 2025.

Preliminary tax return

A preliminary tax return term was introduced, which is prepared in accordance with the VAT Law in the electronic invoice system based on the system data.

It will be applied as of 31 December 2025.

Electronic invoice system

An issuer of an electronic invoice may be prevented from further handling the issued electronic invoice in the electronic invoice system, if it had an outstanding monetary claim stated in that electronic invoice (e.g. for entities engaged in factoring).

It will be applied as of 1 January 2025.

CORPORATE INCOME TAX

It will be applied from 1 January 2025.

Most important amendments are presented below:

• It is specified that in liquidation/bankruptcy procedure, a tax return and tax balance are submitted by the liquidator/receiver, instead of a taxpayer.
• The deadline for submitting a tax return and tax balance sheet when closing a branch of a non-resident taxpayer is 60 days from the day of registration of liquidation procedure initiation, end / suspension of liquidation procedure, bankruptcy procedure initiation, start of reorganization plan application at the competent register;
• Shareholders of a liquidated company have joint and several liability for settling a CIT liability determined on the basis of a tax return submitted following the liquidation procedure up to the value of the property belonging to each shareholder within the liquidation procedure, i.e. it is prescribed that shareholders are liable only for liabilities incurred in the last tax period before end of the liquidation procedure;
• When a status change results in closure of a company, the tax return is submitted to the tax authority within 60 days from registration of the status change in the competent register by the legal successor of such company. If there are more than one legal successors, the CIT return is submitted by the legal representative of the company that ceased to exist due to the status change.
• Legal successors of a company that was demerged by division or spinoff are obliged to submit a report on the division of rights and obligations passed from the legal predecessor within 60 days from the day of entering the status change in the competent register. 

 

LAW ON TAX PROCEDURE AND TAX ADMINISTRATION

Overpayment

The refund of overpaid or incorrectly paid taxes, as well as incidental tax obligations, is defined as "overpayment". Therefore, in all subsequent provisions, the previous definition is replaced with the new term.

Cessation of tax liability

The provision regarding cessation of a tax liability is amended, and now tax liabilities cease in the following cases:

1. By collection of the tax,
2. By statute of limitations,
3. By tax discharge, and
4. By the occurrence of permanent non-collectability of the tax.

After expiration of the statute of limitations, unpaid tax and incidental tax dues secured by a mortgage or a pledge may only be settled from the encumbered object if the pledge/mortgage is registered in the appropriate register.

It is prescribed that the provisions on the statute of limitations of the right to determination, collection and refund, as well as settlement of due liabilities by means of reclassification, do not apply to contributions for mandatory pension and disability insurance and contributions for health insurance. 

Permanent non-collectability of taxes

A new article has been introduced, referring to the permanent non-collectability of taxes which occurs in the event that the following conditions are met:

• a taxpayer was deleted in accordance with other regulations, i.e. registered in the register of deceased persons,
• there is no person responsible for settling unpaid tax liabilities of such taxpayer,
• tax collection is not secured by a pledge or a mortgage.

In this case, the Tax Administration issues, ex officio, a decision on the termination of the tax liability due to its non-collectability.

Write-off of tax debt

A new article was introduced, referring to write-off of tax debt and implying that the Tax Administration writes off a tax debt on the basis of:

• decision on statute of limitations or non-collectability of the tax liability,
• government decisions on tax debt relief.

Moreover, the Tax Administration writes off overpayment based on the decision on:

• the statute of limitations of the taxpayer's right to recovery, tax credit and refund, as well as settlement of due liabilities by means of reclassification,
• removal of the taxpayer from the prescribed register, unless the taxpayer has a legal successor.

The right to overpayment of a taxpayer who has been deleted from the prescribed register belongs to the legal successor.

Doubtful and disputed receivables

A new article was introduced, defining doubtful and disputed receivables, which are considered to be unpaid tax liabilities of:

• a company against which bankruptcy proceedings have been initiated,
• a company that has been deleted from the prescribed register in the process of compulsory liquidation,
• a deceased person,
• a legally incapable person, at an amount exceeding the value of his/her property,
• an absent natural person, at an amount exceeding the value of his/her property. 

Records of natural persons

The amendments and supplements to the Law on Tax Procedure and Tax Administration establish a register of private individuals which will be maintained by the Tax Administration, and it represents an electronic database of individuals.

The goal is to provide the tax authority with all relevant information about private individuals in one centralized location.

The Law specifies in detail which data on private individuals are taken from the Central Population Register.

The purpose of processing these data is to determine the facts of importance for exercising rights and establishing obligations from the tax relationship, in the manner prescribed by the laws governing the area of taxation.

Data on private individuals will be stored for:

1. 5 years from the date of the person's death,
2. 10 years from the date of deregistration of residence of individuals who have permanently emigrated from Serbia, or from the moment of processing the last piece of data of a foreign national with approved temporary stay.

The introduction of records of natural persons for tax purposes will apply from 1 January 2026.

Payment of tax liability in foreign currency

Tax collection is envisaged to be done by paying a monetary amount in dinars, and that non-residents may, exceptionally, pay in foreign currency to a foreign currency account for tax payment. 

This provision of the law enters into force on January 1. in 2026.

Postponement of payment of tax liability

The discretionary authority of the Tax Administration when deciding on the taxpayer's right to postpone the payment of a due amount of tax is abolished and it is prescribed that settlement of the liability for the annual personal income tax cannot be postponed.

The provision of the Law related to the postponement of tax payment will be applied from 1 January 2026.

Tax offenses

There is a new misdemeanour for a taxpayer who cumulatively commits misdemeanour acts of failure to submit a tax return and failure to calculate taxes.

A scale of fines in fixed amounts is introduced and the amounts of such fines will depend on the amount of unpaid tax by persons who are in delay with submitting their tax returns, with paying the tax within the legally prescribed period.

A fine range of 30-40% of the tax amount is introduced for the offense of reporting smaller tax amounts and providing incorrect information in the tax return, instead of the current 30% fine.

PROPERTY TAX LAW

Tax base

The establishment of the basis of the property tax is specified, implying that it is determined in the same way when a local self-government unit fails to publish average prices per square meter of the corresponding real estate in the zones within the prescribed period, as it is determined when those average prices are not determined or published because there has been no turnover in the zones on the basis of which the average prices are to be determined i.e. it was specified that it is not enough that average prices have been determined, but that they must also be published by November 30 of the current year.

Moreover, the tax base is regulated in the event that for some of the immovable properties that make up a physical entity (for example, a building with land), the value included in the tax base is the carrying amount, and the taxpayer has not separately stated the value of such immovable property from the value of other buildings and associated land in the books of account, in which case the basis for the property tax is the total carrying amount, regardless of whether the taxpayer is eligible for tax exemption for land or individual buildings.

It is specified that taxpayers who keep books of account do not reduce the tax base additionally on the basis of depreciation in the case when they pay taxes for possession.

Tax exemptions

• the tax exemption for land that is brought back to use is specified, implying that it is uncultivable agricultural land that is converted into arable agricultural land, that is, into land on which forests are grown;
• cases are specified and grouped in one provision when a tax exemption is not granted for land under building on which the tax is paid and the extent of exercising such right is regulated when the building consists of several separate parts having different taxpayers;
• tax exemption ends due to increase in the usable area of immovable property during the year after which the total tax base for all real estate of the taxpayer in the territory of a specific local government unit exceeds RSD 400,000; 
• it is introduced that the taxpayer who keeps business books ceases to have the right to tax exemption for immovable property intended for further sale if he ceases to fulfil the prescribed conditions during the tax year.

Right to tax credit

An amendment introduced implies that the right to a tax credit for the where the taxpayer lives and where its residence is registered is not realized when such house or apartment is recorded in the books of account of the taxpayer, so the tax for it is determined by self-taxation.

Tax on the transfer of absolute rights

A Law amendment stipulates that if a transfer fee is defined alternatively (if there is a choice between two prices offered under a contract) or optionally (there is admissibility of other fulfilment subject), the contractual price is deemed to be the highest of them on the tax liability occurrence date.

Application from 1 January 2025 except for inheritance and gift tax procedures, i.e. tax on the transfer of absolute rights the determination of which was initiated according to the regulations that were valid until the beginning of the implementation of this law, which will be determined by applying the law that was in force on the date of the tax liability.