As of January 1st, 2021. amends of the Law on Personal Income Tax (“Official Gazette of the RS”, No. 153/2020), Law on Corporate Income Tax (“Official Gazette of the RS”, No. 153/2020), Law on Value Added Tax (“Official Gazette of the RS”, No. 153/2020) come into force.
The Law on Personal Income Tax and the Law on Corporate Income Tax are amended primarily to accommodate changes brought by the new laws on digital assets and alternative investment funds which were adopted in 2020.
The Law on Value Added Tax, in addition to regulating the tax status of open and alternative investment funds, also provides new rules regarding: determining tax debtor for certain construction works, new VAT exemptions, issuing of electronic invoice, supply of used goods and registration procedures in VAT system.
Taxation of income from digital assets and investment funds
Income generated by the units of alternative investment funds are classified and taxed as revenues from yield on capital. Selling of units in alternative investment funds is classified and taxed as capital gains.
There are certain tax benefits envisioned for re-investing such capital gains in alternative investment funds. Natural person can be granted tax credit for the annual personal income tax, up to 50% of investment made in the alternative investment fund for that calendar year. At the same time, tax credit cannot be higher than 50% of the annual personal income tax determined for that year. Tax credit can only be granted based on fully paid monetary contributions which grant stocks or shares or investment units in alternative investment fund.
Following adoption of the Law on Digital assets, amends of the personal income law classify and tax income from sale of digital assets as capital gains. Purchasing price of the digital asset is considered the price which the tax debtor can document as actually paid price.
The law also regulates tax status of „providing services of computer verification of transactions in information systems for digital assets“ (so called “mining” of digital assets). Purchasing price of such asset is considered amount of expenses the tax debtor had in procuring such asset, which they can document. If such asset was already taxed as „other income“ (according to Article 85, paragraph 1, point 16 of the law on Personal Income Tax), than purchasing price is considered declared tax base on which other income tax has been paid.
The law also envisions tax exemptions in the amount of 50% of the capital gain, for tax debtor who invest such income within 90 days in share capital of the company – resident of Serbia, in accordance with the Law regulating Corporate Income Tax, or in the investment fund which has center of its business and investment activities on the territory of the Republic of Serbia, in accordance with law regulating investment funds. In case company in which this capital has been invested, within two years from the moment of investment, perform share capital reduction, tax debtor loses right to tax exemption.
Law on Corporate Income Tax, expands definition of capital gain to include within the definition of capital gain sale of investment units of closed investment funds, as well as sale of digital assets (unless tax debtor has permission to perform services related to digital assets, and who procures digital asset solely for the purpose of selling it within scope of the services they provide relating to digital assets).
Any income non-resident legal entity generates based on membership in alternative investment funds will be considered dividend. Such income will be classified and taxed as income and rules of double taxation treaties may apply.
Certain tax benefits are envisioned in case of re-investment capital gains from selling of digital assets. Capital gains from selling of digital assets will not be part of the tax base if they were invested (within same tax period) in share capital of residential tax debtor, or investment fund which has center of its business and investment activities on the territory of the Republic of Serbia, in accordance with law regulating investment funds.
Amends of the Value Added Tax
Tax debtor for value added tax in case of supply of construction goods and services will be considered receiver of the services in case of supply of goods and services over 500.000 RSD in value. For supply of goods and services bellow this threshold tax debtor is supplier. This rule does not apply for supply of goods for which advance payment was made before December 31st 2020, and which are supplied after January 1st 2021.
Amends of the law prescribe VAT exemption with right to deduct input tax, for supply of goods which are under inward processing regime, if such goods are supplied by the purchaser who would have the right to deduct input tax if such goods were purchased with VAT. VAT exemption without the right to deduct input tax is envisioned for transfer ad exchange of virtual currencies, in accordance with the law regulating virtual currencies.
Regarding electronic invoice, beginning with January 1st 2021. Tax debtor may issue electronic invoice with consent of the recipient of the invoice. Consent is not necessary when invoice in electronic form is prescribed by law as mandatory.
Tax debtors who engage professionally in supply and sale of used goods (second-hand motor vehicles, works of art, collectibles and antiques), may choose for each individual transaction, whether to apply general or special regime of taxation, that is they may opt to determine VAT base as the difference between the sale and purchase price of these goods, decreased for the VAT contained in that difference.
When registering for the VAT system, in case tax debtor does not file application within the deadline determined by the law, debtor may submit application after the deadline, but also Tax Authorities will submit application ex officio. Tax debtor has the right to deduct input VAT as of date of registration form submission.
In the end, in accordance with the changes in regulation of investment fuds, the amends of the Law extend the definition of tax debtor to include open ended and alternative investment fund, which are not legal entities, and are registered with competent authority in accordance with the laws regulating investment funds.