General VAT rate at 20 percent - Amendments to Law on Value Added Tax adopted

General rate of the value added tax (VAT) will be increased from 18 to 20 percent on October 1st, whereas the lower rate on basic foodstuffs will remain at 8 percent, pursuant to amendments to the VAT Law that were adopted today by the Serbian parliament.

A total of 137 MPs from the ruling majority voted for these amendments.

As of January 1st, small and medium-sized enterprises will be able to pay VAT after they get paid for their goods.

Amendments to the Law on VAT also envisage an increase in the VAT return rate for farmers from current 5 to 8 percent, which will be paid directly to farmers' accounts.

One of the changes is that the VAT in the construction industry will be charged to the investor instead of the contractor.

Also, the VAT on baby equipment will be returned to parents whose monthly income is below RSD 80,000.

According to these amendments, the turnover limit for VAT will be raised from current 4 to 8 million dinars, thus making it possible for numerous small entrepreneurs to choose between VAT and lump sum taxation. In addition, the VAT on goods and services required for operations in free zones is abolished.

The Serbian government expects these amendments to the VAT Law to boost budget revenues by RSD 6.7 billion until the end of this year, and by RSD 33.8 billion in 2013.