Ministry of Finance officially published new Rulebook on VAT Records – Accountants predict new postponement of implementation

The state has not responded to the appeals made by businessmen, who claim that amendments to the Rulebook on VAT Records, the implementation of which has been postponed until January 1, 2018, are minimal and that the proposed solution is inadequate and expensive. The document, whose full name is Rulebook on the Form, Content and Manner of Keeping VAT Records and the Form and Content of VAT Calculation Breakdown, was published on October 6 in the Official Gazette. Its official version came into effect on October 14, and it will be implemented beginning with the first day of 2018.

Adopted without considerable amendments and largely ignoring suggestions made by experts, the new bylaw brings only minimal changes compared to the last year’s, the implementation of which was supposed to start at the beginning of the current year. Accountants emphasize that the Rulebook is too bulky and that it places considerable burdens on the business sector, especially on small and micro enterprises. The key complaint is that it proscribes keeping much more extensive records than before, forcing companies to adapt their software, hire additional workers and thereby incur greater expenditures.

As pointed out by the Association of Accountants and Auditors of Serbia, one of the document’s harshest critics, in the statement of August 15, the Rulebook is “an inadequate and expensive solution for the implementation of Article 46 of the Law on Value Added Tax”. They now underline it once again and point out that suggestions made by experts from the field have been fully ignored.

– No one pays attention to what the business sector says. Once the implementation starts, it will become clear who is right, what the quality of the implementation is and what the consequent expenses are. Our position remains the same and we believe that this solution will be inapplicable in practice in the first place and that the implementation of the Rulebook will be postponed again – the Association says for our portal.

Regardless of the defined reductions and closer definition of provisions compared to the first Working Version of the same Rulebook, they remind, the document is still too bulky and too expensive to implement – it contains 102 items, 176 form fields and has 5 pages. The Association backs its position by pointing to the advanced practice in Europe, emphasizing that the amount of data the new Rulebook form requires has been increased 5-fold compared to the European average.

– The practice of EU countries shows that the VAT calculation breakdown takes into account book records, is usually presented as part of VAT returns and is much smaller on average, containing 39 fields across one or two pages. Furthermore, the countries in the region outside of the EU have VAT returns with considerably fewer fields – 16 in B&H, 26 in Montenegro and 29 in Macedonia – the Association said in the last year’s statement and pointed out that, in addition to burdening the subjects, the implementation of the Rulebook would slow down the control work carried out by the officials in the competent tax institution.

The Association also reminds of the expenses tied to the implementation of the Rulebook, which will be considerable both for the business sector and for other taxpayers.

In addition to the new burdens, business people also fear potential internal clashes with accountants who might consequently raise the prices of their services.

– For two years, we have been fighting the new rules, which are not beneficial to anyone, and we risk getting into the situation where we clash among ourselves, as someone will have to pay for accountants’ extra work – the director of a Belgrade-based company says.

Since the beginning, accountants have been pointing out that book-keeping agencies will be overloaded with filling out the forms, forcing them to hire new people, while running the risk of increasing the number of potential mistakes.

All this, as our interviewee, a representative of the business sector, emphasizes, is certainly in no way making it easier for the business sector and is a step back from which the state will not benefit either, since, as he says, “you won’t be able to see the tree for the forest”. He hopes, along with the entire business sector, that the implementation of the Rulebook will be postponed once again and that it will be modified in a more serious manner.

The possible outcome of the final version of the new Rulebook will be apparent as soon as next year. As the document specifies, the form will be filed electronically, beginning with tax returns for the first tax period of 2018.

Book records as basis for VAT payment control

The Association believes that book records should act as the basis for records and control of VAT payment, as is the case with control of other tax payments (income tax for legal persons, income tax for citizens, property taxes).

This practice is a rational solution, along with consideration of the need for professional training of persons for VAT control and for keeping book record, including VAT records (most often, these are accountants, especially heads of accounting departments), the Association said in the statement of August, 2017, when, let us remind, the draft of the new Rulebook was prepared.

Biggest expenditures for smallest companies

Micro, small and medium enterprises stand to incur the biggest expenditures as a consequence of the new rules, the Association of Software Producers of Serbia said this summer and asked for further amendments to the Rulebook. Additional permanent costs for the business sector would amount to EUR 24 million a year, whereas one-off costs at the beginning of the implementation would amount to EUR 19 million, as shown by the analyses carried out by the World Bank and the European Commission, the Association of Software Producers said at the time.

As Belgrade media reported, it has been estimated that the implementation of the new Rulebook will influence Serbia’s going down 3 spots on the Doing Business list, as the preparation of VAT returns will take 20% more time than until now.

Ivana Bezarevic

Ministarstvo finansija Republike Srbije

Savez računovođa i revizora Srbije

Rulebook on VAT Records

amendments to the Rulebook on VAT Records

Rulebook on the Form Content and Manner of Keeping VAT Records and the Form and Content of VAT Calculation Breakdown

tax returns

Rulebook on VAT Records form

VAT calculation breakdown

VAT calculation

terms of doing business

Association of Software Producers of Serbia

filling out the Rulebook on VAT Records form