How did SEF complicate VAT rules? – Four regulations, lots of questions and confusion

Although the digitalization of the tax system was supposed to bring greater efficiency and relief for taxpayers, the introduction of the Electronic Invoice System (SEF) in Serbia had the opposite effect, further complicating the implementation of VAT regulations and creating confusion among entrepreneurs. As tax advisor Aleksandar Vasic explains to eKapija, the problem lies not in the idea of digitalization itself, but in the way it was implemented - without a clear legislative basis and in the reverse order of the usual legislation.

The result is the parallel existence of multiple laws and bylaws regulating the same issues, which, according to him, unnecessarily confuses taxpayers and undermines legal certainty.

– Everything has changed, only the dry and incomprehensible way of writing regulations has remained the same – Vasic assesses for eKapija and adds that digital tools can only make sense if they serve the citizens and the economy, and not prolong bureaucratic confusion.

Vasic points out that for almost two decades, all aspects related to VAT were found exclusively in VAT regulations, while SEF introduced a parallel set of rules through the Law and Regulations on Electronic Invoicing.

– Those rules were not simple, but at least we knew where to look for answers. When the large state project of introducing e-Invoices was launched, it seemed that the state itself did not have a clear vision of what it actually wanted to achieve. Or, at the very least, that vision was never publicly announced in its entirety. At the beginning, SEF was supposed to be a channel for delivering electronic invoices. It soon became clear that it would grow into something much bigger. Today, it is taking on the shape of a complex system for managing VAT as the state’s most important tax revenue – explains Vasic.

SEF, he believes, also brought about a fundamentally wrong change in the sequence of moves made by the state.

– Namely, it would be natural to first regulate a certain issue by law, then to adopt bylaws, and then, based on them, to develop tools such as a portal. With SEF, the process was the other way around - as the programmers created the portal, technical instructions were written, and the regulations were adjusted. In the end, the idea of introducing digital tools was not controversial, nor was anything illegal, but the new rules introduced considerable confusion and discomfort among users – our interviewee points out.

He points out that VAT regulations are still in force, but that now taxpayers have to interpret as many as four different acts in order to understand their rights and obligations - two laws and two regulations, on VAT and on electronic invoicing.

– Instead of the new rules being introduced into the existing VAT regulations, a completely new set of rules was adopted, which introduced confusion. Today, these regulations have been harmonized, but it is still not clear why it was necessary to regulate the same things in two places – he says.

As a solution, Vasic proposes that all provisions related to VAT invoices and records be deleted from the Law and the Regulation on Electronic Invoicing. As he explains, all rules related to the elements and presentation of data in e-Invoices should be returned to the VAT legislation, while the SEF regulations should remain technical in nature.

– All rules related to the elements and manner of presenting data in e-Invoices should be regulated by VAT regulations. The regulations on electronic invoicing should contain only one short provision to process invoices whose elements and manner of presenting data are regulated by VAT regulations – he states.

A special problem, as he states, is the VAT records kept in SEF, which are already replacing the POPDV form and other reports submitted via the e-Taxes portal.

– According to the still valid regulations, taxpayers submit their tax returns via the e-Taxes system, and along with the return they also submit a VAT Calculation Overview (POPDV form). These reports will become history at the end of the year, and will be replaced by new records that are already being compiled in SEF. The new system introduces an additional 20 articles that regulate records, in addition to the existing 50 articles in the VAT regulations. This obliges taxpayers to look for answers in as many as four acts – the Law and Regulations on VAT, as well as the Law and Regulations on Electronic Invoicing – explains Vasic.

The next step, as he states, would be to simplify the records themselves. The unification of collective and individual records would also be accompanied by numerous simplifications in the method of data entry.

He is convinced that the simplification of regulations would contribute to greater tax discipline.

– Simplicity should not be equated with superficiality. I advocate for regulations that can be understood, applied and explained to those to whom they apply. This is the foundation of efficiency, legal certainty and trust in the system. If the regulation is clear, there are fewer doubts among taxpayers and the possibility of unintentional errors is reduced. On the other hand, if the regulation is clear and its implementation is consistent, the number of those who look for “loopholes in the law” and believe that they will not be discovered decreases – concludes Vasic.

Ivana Zikic

Electronic Invoice System

SEF

VAT

VAT regulations

Aleksandar Vasić