The Tax Administration published an official opinion on 28 September 2026 analyzing whether the amount of internal VAT (interno obračun PDV) calculated by a Serbian VAT-registered recipient on services received from a non-resident provider can be identical to the withholding tax (porez po odbitku) levied on the same income under the Corporate Income Tax Law. The opinion addresses a common scenario: a Serbian company receives consulting services from a non-resident (e.g., EU-based) and self-assesses VAT under the reverse charge mechanism (internal VAT at 20%), while simultaneously withholding 20% tax on the gross fee under Article 28 of the CIT Law (or a reduced treaty rate). The Tax Administration clarifies that the two amounts are calculated on different bases and serve different purposes, and thus will rarely be identical. Internal VAT is calculated on the net fee (consideration), whereas withholding tax applies to the gross fee (often including VAT if not separately stated). Moreover, double tax treaties (e.g., Serbia-Slovenia, Serbia-Germany) may reduce withholding tax to 0-10% for business profits, while VAT remains at 20%. The opinion warns against assuming offsetting or netting of these liabilities; they must be reported and paid separately. Effective for transactions from 1 January 2027, new reporting fields in the VAT return (Form PP PDV) and withholding tax return (Form PPO) will require separate disclosure of the bases and amounts.
Key Takeaways
- Distinct Bases and Rates Prevent Identity: Internal VAT (20% on net fee) and withholding tax (0-20% on gross fee) operate on different bases and rates. Treaty reductions apply only to withholding tax, not VAT. Taxpayers must compute each independently and avoid netting.
- New Reporting Fields from 2027: Starting with the January 2027 VAT return (due 15 February 2027), Form PP PDV includes a dedicated section for reverse-charge VAT on non-resident services, cross-referenced to the withholding tax return. Discrepancies will trigger automated audits.
- Documentation Requirements for Treaty Benefits: To apply reduced withholding tax rates, the non-resident must provide a valid Certificate of Residence (Form RES) before payment. Without it, the statutory 20% rate applies, increasing the gap with internal VAT. Serbian payers should implement pre-payment compliance checks.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement