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Registration of foreign entities for VAT

Registration of foreign entities for VAT

Ministry of Finance Comments on the registration of foreign entities for VAT Registration in an option, but not obligatory for foreign entities

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On 23 May 2016 the Ministry of Finance issued Comments no. 011-00-1180/2015-04 on the tax representative of a foreign entity for the purpose of complying with the Law on Value Added Tax and the foreign entity’s registration for payment of VAT liability.

The Law on Value Added Tax specifies that a foreign entity conducting supplies of goods and services in the Republic of Serbia is obliged to appoint a tax representative with whom it should register for VAT. The provisions which relate to the registration application and its approval for the tax representative are in force as of 1 October 2015.

The Comments by the Ministry of Finance indicate that a foreign entity has the option, but not the obligation, for registering for payment of VAT liabilities, assuming all the statutory requirements have been met. The Comments also indicate that the foreign entity conducting supplies of goods or services in Serbia shall not be subject to any sanctions because it has not appointed a tax representative and registered for VAT.

Below we provide an excerpt from the Ministry’s Comments relating to the aforementioned.

“Assuming all the conditions specified by law have been met, a foreign entity has the option (but not the obligation) to register for the liability of VAT payment, based on the following: the objective of introducing the institution of tax representation for the purpose of applying VAT is, above all, to facilitate the registration of foreign entities for the liability of VAT payment; a specific entity (the VAT taxpayer) can acquire the status of a tax representative according to article 10a of the Law exclusively based on the decision issued by the Tax Authority (and not just based on the authorization issued by the foreign entity), which means that foreign entity cannot become a VAT taxpayer if all the conditions for its registration for the liability of VAT payment have not been met; all the obligations and all the rights specified by the Law in the name and on behalf of the foreign entity are held by the tax representative; for the supply performed by a foreign entity in the Republic of Serbia the tax debtor is the recipient of goods or services if the foreign entity has not designated a tax representative in the sense that it did not grant a power of attorney to any VAT taxpayer with which it authorizes such taxpayer to perform all the tasks required by Law, or that the foreign entity had granted the power of attorney, but that the tax representative had not filed an application for approval of tax representation to the Headquarters of the Tax Authority, or the approval procedure for tax representation is pending, or the application for tax representation has been denied. Besides this, we note that the foreign entity performing the supply of goods and services in the Republic of Serbia shall not be subject to any sanction for not granting a power of attorney which authorizes a specific entity for performing all the tasks required by Law, and therefore for not registering for the liability of VAT payment. In the event that a foreign entity is not registered for the liability of VAT payment, the Law specifies that the counterparty entity has the status of the tax debtor.”

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