New VAT Rulebook and Confusions in Practice regarding Transportation Services related to Import of Goods
Author: Attorneys from the Law Firm “VUK Tax Attorneys”
Date: 19th November 2021
On 14th April 2021, Serbian Ministry of Finance passed new, unified Rulebook on Value Added Tax (the "VAT Rulebook"), which is being implemented as of 1st July 2021, and as of that day, 27 previously valid Rulebooks adopted on the basis of the VAT Law ceased to be valid, including the Rulebook on Method and Proceedings for VAT Exemptions with Right to Deduct Input VAT (the "Rulebook on VAT Exemptions"). This new unified VAT Rulebook caused doubts and uncertainties in practice amongst local providers of transportation services, because some tax advisers have instructed them to charge VAT on transportation services related to import of goods when they provide these services to local clients (entities with their legal seat in the Republic of Serbia), starting from 1st July 2021. This interpretation of the VAT Rulebook has caused legal uncertainty at the Serbian market and confused certain number of transporters, because until 1st July 2021 they have not been charging VAT to local clients for services related to import of goods, which was correct approach. We believe that there is no legal basis or any tax related reason for changing the practice related to supply and invoicing of these services, and that Serbian taxpayers in this sector should continue to perform their business regularly as they have been doing so far. Considering that new, unified VAT Rulebook does not essentially regulate this matter differently than the previously valid Rulebook on VAT Exemptions, we believe that upon passing and implementation of the new VAT Rulebook, local transporters should not charge VAT to importers who have legal seat in the Republic of Serbia, against providing transportation services related to import of goods. Namely, new VAT Rulebook did not introduce any important or essential novelties concerning application of the clause from the VAT Law which stipulates that VAT is not chargeable on transportation services related to import of goods, if the value of these services is included in the VAT basis for import of goods. Same as before, main goal and essence of this provision is to eliminate double taxation, which would occur if transporter would charge VAT on transportation services, and then if the Customs Authority would also charge VAT when goods are imported on the taxable basis which includes value of provided transportation services related to imported goods. The new VAT Rulebook now specifies that VAT exemption for transportation services related to import of goods, which are regarded as auxiliary costs, VAT payer or other tax debtor can acquire if the value of these services is included in the taxable basis for charging VAT on imports of goods. Further-on, the VAT Rulebook defines that the value of transportation services related to import of goods is included in the taxable basis for charging VAT on import of goods if import of such goods is subject to VAT in accordance with the VAT Law, provided that VAT payer or another tax debtor has a document that proves performance of transportation service (CMR, CIM, manifest, etc.), as well as an invoice or other document that serves as an invoice, issued in accordance with the VAT Law, if the VAT payer performed transportation service. Transporter have every right to reasonably assume that VAT is chargeable on each entry of goods into the Republic of Serbia that are transported from abroad, and that accordingly the transportation cost will be included in the taxable basis for charging VAT on imports of these goods, bearing in mind that VAT is as a general rule chargeable on import of goods into the Republic of Serbia, whereas import is each entry of goods into the customs territory of the Republic of Serbia, as defined in the VAT Law. Therefore, it is not up to the transporter to examine whether conditions for VAT exemption on import of goods are exceptionally fulfilled, since the transporter most commonly is not even in position to do so. Serbian Ministry of Finance also took a position, in one of its Rulings from 2019, that transportation services related to import of goods are exempt from VAT with the right to deduct input VAT, and that "VAT payer – transporter is not obliged to find out whether the competent Customs Authority included in the taxable basis for charging VAT on import of goods also the transportation costs incurred up to the first destination in the Republic of Serbia", and that “any subsequent notification received from the importer that the competent Customs Authority did not include transportation costs incurred up to the first destination in the Republic of Serbia in the taxable basis for charging VAT on import of goods, has no impact on the VAT regime of the transportation service in question”. Therefore, if the transporter possesses a document on the performed transportation service (CMR, CIM, manifest, etc.), which demonstrates cross-border movement of goods, i.e. entry of goods transported from abroad into the Republic of Serbia, which indisputably represents the import of goods into the Republic of Serbia in terms of the VAT Law, whereas the import of goods is normally subject to payment of VAT, and if he possesses an invoice for the transportation service issued in accordance with the VAT Law, we can reasonably conclude that the conditions for VAT exemption of transportation service related to import of goods are fulfilled, and consequently, that the transporter is not obliged to charge VAT on the transportation service in question, regardless for which kind of customs proceedings these goods are declared (release for free circulation, customs warehousing, temporary placement, etc.). By contrary, if the transporter would charge VAT on transportation service of goods which is initially declared in the Republic of Serbia for e.g. customs warehousing proceedings, and later-on, the importer declares these goods for free circulation, double taxation by VAT would occur, because VAT would be charged on the same taxable basis, first by the transporter, and subsequently by the Customs Authority, having regard that the value of transportation services is included in the taxable basis for import of goods in accordance with customs regulations. In addition, the VAT Rulebook now clearly introduces, besides the VAT payer, the tax debtor, as the customer of the transportation services related to import of goods, to which the provision of the VAT Law that defines VAT exemption for transportation services related to import of goods applies, and in this case, it is the importer as the person who controls handling of the transported goods, and the importer is the one who determines for which customs procedure the goods will be declared, about which the carrier does not have to know, and usually does not have such knowledge. Therefore, it can be concluded that the importer is obliged to pay attention whether the conditions for VAT exemption for transportation services related to import of goods are fulfilled, and if it subsequently turns out that these conditions are not fulfilled (e.g. if subject goods is declared from the customs warehousing proceedings directly for export from the Republic of Serbia), the importer, as the tax debtor for received transportation services in terms of the provisions of the VAT Rulebook, which is at the same time the tax debtor for import of goods, would be obliged to perform VAT reverse charge on received transportation services in such a situation. We believe that afore stated approach is completely in line with valid regulations, and that it is in line with the nature of business operations of the transportation service providers. To avoid additional doubts in practice, we believe that all providers and customers of transportation services at the Serbian market should work together to establishing, i.e. maintaining such correct practices, so to avoid potential negative consequences in their business.