Place of trade of services according to the VAT Law in Serbia, new rules from 01.04.2017.

22.02.2017 Article 4 of the Law on Changes and Amendments to the Value Added Tax Law (“Official Gazette of the Republic of Serbia” No. 108/16) Article 12 which determines the place of trade of services, in terms of of this Law, as well as rules for determining the place of trade of services, is completely changed.The Law on Amendments to the Value Added Tax Law entered into force on 01.01.2017. but Article 4 of this Law, or amended Article 12 of the Law on Value Added Tax, hereinafter: the Law, shall apply from 01.04.2017. years.

1. Determination of a taxpayer for the purpose of applying the rules on the place of trade of services

Amended Article 12, Paragraph 1 of the Law says that with this Article determinating the taxpayer solely for the purpose of applying the rules on the place of trade of services.

When service is provided by a VAT payer, the taxpayer shall be deemed to be:

  • any person who performs the activity as a permanent activity, regardless of the purpose of performing such activity;
  • legal entities, state bodies, territorial autonomy bodies with headquarters in RS;
  • foreign legal entities, state bodies, territorial autonomy and local self-government bodies, registered for payment of consumption tax in the country in which they are domiciled (Article 12, paragraph 3 of the Law).

When a service is provided by a foreign legal entity that is not a taxpayer in the Republic of Serbia, the taxpayer shall be deemed to be:

  • any person who performs the activity as a permanent activity, regardless of the purpose of performing such activity;
  • legal entities, state bodies, territorial autonomy and local self-government bodies (Article 12, paragraph 3 of the Law).

2. Principles for determining the place of trade of services

The principles for determining the place of trade of services, in the situation where the taxpayer is specified according to the foregoing rules, are:

  • if the trade of the services is performed to a taxpayer, the place of trade of service is considered to be the place where the recipient of the service has a headquarter or a permanent business unit (branch), if the turnover of the services is done to a permanent business branch which is not in the place where the recipient of the service has its headquarters or place in which recipient of services has his/her place of permanent or temporary residence (Article 12, paragraph 4 of the Law);
  • if the turnover of a service is made to a non-taxable entety/person, the place of trade of service is considered to be the place where the service provider has a headquarter or a permanent business branch if the turnover of the services is performed from a permanent business branch which is not in the place where the provider of the service has its headquarter, ie the place where the provider of services has his/her place of permanent or temporary residence (Article 12, paragraph 5 of the Law).

3. Exceptions in determining the location of service traffic – specific rules for determining the place of trade of services

Notwithstanding the provisions of Article 12, paragraphs 4 and 5 of the Law, for some types of services, the place of trade is not determined in accordance with the principles outlined above and defined in the quoted provisions of the Law, but for each of these types of services unambiguously determines what is considered to be the place of trade.

Exceptions are:

  • real estate services, including mediation in real estate transactions (Article 12, paragraph 6, point 1 of the Act) – the place of trade of service is the place where the real estate is located, irrespective of who the service is provided. The place of trade of service in real estate transactions will be regulated in more detail by a sub-legal act, the adoption of which is expected.
  • transportation of the people – place where transport is really made (Article 12, paragraph 6, item 2 of the Law), irrespective of who the service is provided;
  • the transport of goods to someone which is not taxpayer – the place where the transport is performed, and if the transport is performed both in the Republic and abroad, the provisions of this law apply only to the part of the transport performed in the Republic (Article 12, paragraph 6, item 3 of the Law). A taxpayer means a taxpayer within the meaning of paragraphs 4 and 5 of the Law. If the goods transport service is provided to a taxpayer, the place of service is considered to be the place where the recipient of the service has its headquarter, a permanent business branch to which the service is provided, permanent or temporary residence;

A place of trade of service is considered to be the place where the services are provided, if it is:

  • services relating to the attendance of cultural, artistic, sporting, entertainment or similar events (fairs, exhibitions, etc.), including ancillary services in connection with the attendance of those events, irrespective of whom they have been provided;
  • services of organizers of cultural, artistic, sports and other events, provided to someone who is not taxpayer;
  • auxiliary services related to transportation (loading, unloading, transhipment, etc.) provided to someone who is not taxpayer; services of estimation of movable objects, or works on movable things, if they are provided to someone who is not a taxpayer;
  • services of estimation of movable objects, or works on movable things, if they are provided to someone who is not a taxpayer;
  • services to deliver meals and drinks for consumption on the spot, regardless of which they are provided (Article 12, paragraph 6, point 4, sub-paragraphs 1 to 5 of the Law).

The place of traffic of these services will be regulated in more detail by the sub-legal act, the adoption of which is expected.

If the event organizer services, transport auxiliary services, movable property assessment services and work on movable property services are provided to the taxpayer, the place of trade of such services shall be the place where the recipient of the service have its headquarter, permanent business branch, permanent or temporary residence.

Place of trade of services for the services of renting vehicles for a shorter period of time is considered to be the place where the vehicle is really put in use to the recipient of the service, regardless of whom the service is provided. (Article 12, paragraph 6, item 5 of the Law).

Place of service for the services of renting vehicles for a period not considered as a shorter period of time provided to taxpayer, shall be the place where the recipient of the service has its headquarter, permanent or temporary residence (Article 12, paragraph 6, point 6 of the Law).

If the service of renting vehicles for a period that is not considered a shorter period of time is provided to person who is the taxpayer – the place of trade of service is considered the place of the headquarter, permanent business branch, permanent or temporary residence of recipient of the service.

A short period of time is considered as an uninterrupted period of time not exceeding 30 days, and in the case of vessels, a time period not exceeding 90 days.

It is expected that a by-law will be enacted to regulate what is considered as a vehicle for the purpose of determining the place of service of services.

Services provided to a non-taxable person, for which the place of trade is determined by the place of headquarter, or place of permanent or temporary residence of the recipient of the service (Article 12, paragraph 6, point 7 of the Law), are next services:

  • transferring, giving and making use of copyright and related rights, patent rights, licenses, trademarks, and others;
  • advertising;
  • consultants, engineers, lawyers, auditors, etc., as well as translators for translation services, including translation in writing;
  • processing of data, assignment or information, including information on business practices and experience;
  • take over the obligation to completely or partially refrain from performing any activity or the using of any rights specified in the determination of the services referred to in Article 22, paragraph 6. point 7 of the Law;
  • banking and financial business and insurance business, including reinsurance, except renting safes;
  • making staff available;
  • rental of movable items, other than vehicles;
  • enabling access to the natural gas network, the electricity transmission network and the heating network, ie cooling, transport and distribution through these networks, as well as other services directly related to those services;
  • telecommunications;
  • radio and television broadcasting;
  • service provided by electronic way.

Brokerage services in trade of goods or services:

  • provided to a non-taxable person – the place where the trade goods or services that are the subject of mediation have happened;
  • provided to the taxpayer (other than those relating to real estate related services) – the place where the recipient has his headquarter, permanent business branch, permanent or temporary residence (Article 12, paragraph 7 of the Act).

Author: AKTIVA sistem – Serbian accounting company

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