Changes in Taxation in Serbia

At its session held on December 17th, 2020, the National Assembly of the Republic of Serbia adopted amendments to a number of tax laws, including:

• Law on Value Added Tax
• Law on Corporate Income Tax
• Law on Personal Income Tax

Law on Amendments to the Law on Value Added Tax

The latest amendments to the Law on Value Added Tax consist of the following:

• it is envisaged that in addition to the transfer of the right of disposal on a building or economically divisible whole within a building that is considered real estate in terms of the law governing real estate, the transfer of the right to dispose of movable property dispositions on a construction object or an economically divisible whole within a construction object that is considered real estate in the sense of the law governing real estate transactions;
• a new paragraph is added which stipulates that the ancillary provision of services is not considered to be the service of renting, ie leasing for use of a construction object or economically divisible whole within a construction object which is considered real estate in terms of the law governing real estate transactions;
• a more precise definition of the value voucher is performed;
• the term taxpayer is being expanded to include an open-end investment fund, ie an alternative investment fund, which does not have the status of a legal entity, and which is entered in the appropriate register in accordance with the law;
• it is envisaged that the turnover of goods and services in the field of construction for the purpose of determining the tax debtor is considered turnover in the amount of more than 500,000 RSD, excluding VAT;
• amounts that are not included in the tax base in the supply of goods and services are defined more precisely;

New tax exemptions are introduced, as follows:

• tax exemption with the right to deduct the previous tax for the sale of goods that are in the process of inward processing for which the taxpayer-acquirer would have the right to deduct the previous tax if he procured those goods with calculated VAT;
• tax exemption without the right to deduct the previous tax for the transfer of virtual currencies and exchange of virtual currencies for funds in accordance with the law governing digital property, as well as specifying the said tax exemption for trade and leasing of land;
• it is envisaged that the value added taxpayer may issue an invoice in electronic form.

These legal amendments seek to achieve harmonization with other regulations of the Republic of Serbia, as well as harmonization with European Union regulations governing the field of VAT consumption, primarily with Council Directive 2006/112 / EC on the common system of value added tax, as well as improvement business environment of all participants in the market of the Republic of Serbia.

Law on Amendments to the Law on Corporate Income Tax

The most important changes are as follows:

• the possibility of capital gains is realized by selling the investment unit of the investment fund, as well as by transferring digital assets for a fee;
• in Article 29, two new paragraphs are added, which regulate the manner of determining the purchase value of real estate acquired before 1 January 2004, as well as the purchase value of digital assets;
• it is envisaged that capital gains opened by the sale of digital assets are not included in the tax base if the funds from that sale in that tax period are invested in the share capital of a resident company or investment fund operating in the Republic of Serbia;
• it is envisaged that the residual net asset value of an investment fund that does not have the status of a legal entity, which after the dissolution of that investment fund is distributed to members in proportion to their investment units, and which is above the cost of these investment units, is considered capital gain included in the tax base. in the amount of 50% of the total realized capital gain;
• it is envisaged that the income generated by a non-resident legal entity on the basis of membership in an alternative investment fund that does not have the status of a legal entity is considered a dividend, which will be subject to withholding tax, unless otherwise provided by international agreements on avoidance of double taxation arranged;
• specification is made in the sense that newly employed persons are not considered persons who, starting from the last day of the tax period preceding the investment period, were employed in, directly or indirectly, a related person in terms of this Law.

These changes seek to achieve harmonization with other laws of the Republic of Serbia, as well as to achieve a positive effect on the state budget revenues.

Law on Amendments to the Law on Personal Income Tax

Some of the changes are as follows:

• the non-taxable amount of salary is increased from 16,300 to 18,300 RSD per month;
• the tax base on the salaries of persons sent by an employer from another country to work for a domestic legal entity is specified;
• in the article regulating the right of the employer to a refund of part of the paid tax in the percentage of 65% to 75%, based on the salary of newly employed persons, the application of the existing reliefs is extended until December 31, 2021;
• a new paragraph is introduced which stipulates that income from capital is considered income based on ownership of an investment unit of an alternative investment fund, except for the transfer fee of that investment unit;
• the right to a tax exemption based on capital gains tax is introduced for a taxpayer who invests funds generated by the sale of digital assets in the share capital of a company resident in the Republic of Serbia, or in the capital of an investment fund whose center of business and investment activities located on the territory of the Republic of Serbia.
• Tax exemption from the tax on winnings from games of chance extends to the realized profits from special games of chance, as well as from special games of chance when they are organized through electronic means of communication in the sense of the Law on Games of Chance.

The main goal that the latest legal changes are trying to achieve is to create conditions for more efficient suppression of illegal work of natural persons, additional tax relief for economic entities, employment, investment inflow and economic growth.