November 2022

Draft amendment laws to the following laws have been published on the website of the Ministry of Finance:

• Value Added Tax Law (amendments take effect as of January 1, 2023)
• Law on Property Taxes (amendments take effect as of January 1, 2023);
• Fiscalization Law (amendments take effect as of the eighth day from the day of publication in the Official Gazette);
• Personal Income Tax Law (amendments applicable as of January 1, 2023)
• Law on social security contributions (amendments applicable as of January 1, 2023)
• Law on Tax Procedure and Tax Administration (amendments take effect as of the eighth day from the day of publication in the Official Gazette).

Value Added Tax Law

The most significant amendments to the Value Added Tax Law are listed below:

• Article 10a of the Value Added Tax Law, which refers to the non-existence of the obligation to appoint a representative by a foreign legal entity that performs sales of goods and services in the Republic exclusively to VAT payers, as well as provision of bus passenger transportation services for which the VAT base is the average transport fee for each individual transport, was amended so that the aforementioned foreign entity is not obliged to appoint a tax representative even for the sale of goods in the customs warehousing procedure in accordance with customs regulations.

• For Article 17 of the VAT Law, which refers to the tax base for the turnover of goods and services, two new paragraphs are added: "The market value from para. 5 and 6 of this article, and in accordance with this Law, is considered to be the total amount that the buyer of goods, ie., the recipient of services would pay at the time of the sale of goods, ie., services to an independent supplier for sale in the Republic. If the market value cannot be determined for specific goods or services, the market value is determined for similar goods or services, and if the market value cannot be determined for similar goods or services, the market value is considered to be:

-       for the sale of goods, an amount that is not lower than the purchase price of those or similar goods, and if that price is unknown, the total amount of determined costs at the time of delivery;

-       for the turnover of services, an amount that is not lower than the total amount of the determined costs of providing the service borne by the taxpayer.".

• After the above-mentioned article 17, two new articles are added:

-       Article 17a: "The tax base for the sale of goods, i.e. services in exchange for a multi-purpose value voucher is the fee paid for the multi-purpose value voucher, and if there is no information about aforementioned fee, the tax base is the monetary value stated on the multi-purpose value voucher itself or in the related documentation, without VAT related to delivered goods, i.e. rendered services."

-       Article 17b: "In the case of the transfer of goods, ie., services between entities that are considered related parties in accordance with this Law, with compensation that is lower than the market value, where the acquirer does not have the right to deduct input VAT in full, the tax base is considered to be the market value of those goods, ie. services, without VAT. Related parties in accordance with this Law are considered to be related parties in accordance with Corporate Income Tax Law, persons with whom there are family or other personal ties, management, ownership, membership, financial or legal ties, including the relationship between employer and employee, ie., members of the employee's family household determined in accordance with Article 56a paragraph 6 of the VAT Law."

• In Article 28, which refers to the conditions for VAT deduction, two paragraphs have been added:

-       "The invoice referred to in paragraph 2. point 1) of this Article is considered to be an electronic invoice that has been accepted, ie., which is considered to have been accepted in accordance with the law regulating electronic invoicing."

-       If the electronic invoice from paragraph 5 of this Article is accepted no later than the deadline for submitting the tax return for the tax period in which the tax liability arose in accordance with this Law, the taxpayer can deduct the input tax at the earliest for the tax period in which the tax liability has arisen, regardless of whether the electronic invoice was issued on the day the tax liability arose or after that day."

• Paragraph 1 of Article 51a is amended:

-       The taxpayer is obliged to notify the tax authority in electronic form about changes of data from the registration application that are important for the calculation and payment of VAT, no later than within five days from the date of the change.

-       In addition, the taxpayer is obliged to submit the data specified in paragraph 2 of this Article to the tax authority in electronic form along with the tax return for the last tax period of the calendar year, i.e. the last tax period.

Law on Property Taxes

The most significant amendments to the Law on Property Taxes are listed below:

• Article 5 of the current version of the Law on Property Taxes, which refers to the determination of the tax base is to be amended by addition of the following two paragraphs:

-  "For a built object over which, or next to, an extension was made so that the added part is not considered a separate part of that object, the reduction in value for depreciation in accordance with paragraph 3 of this article is carried out at the rate:

1)    by which the value of the object would be reduced if it was not extended - when the useful area of the part of the object before the extension is greater than the useful area of the extended part;

2)    by which the value of the extended part would be reduced if it were a separate part of that object - when the useful area of the part of the object before the extension is less than or equal to the useful area of the extended part.

- Reconstruction, i.e. extension of the building, in the sense of paragraph 3 of this article, is considered as reconstruction, i.e. extension, in accordance with the law regulating planning and construction.”.

• Article 7b of the current version of the Law on Property Taxes, among other is to be amended by addition of the following two paragraphs:

-       „When a taxpayer who keeps business books has not registered land in his business books on which, or under which, the object recorded in his business books is located, for the purpose of taxation with property tax, that land is considered recorded in the business books.

-       When the local authorities have not published the average price of a square meter of suitable land in either the zone or the most equipped zone, the value of the land referred to in paragraph 2 of this article is determined in the manner referred to in Article 6, paragraph 13 of this Law.

• In accordance with Article 14 and Article 23, the right to permanent use of a parking space in an open residential block or residential complex is considered subject to inheritance and gift tax, as well as subject to transfer tax.,

• Starting from January 1, 2024, local authorities fully determine, collect and control the inheritance and gift tax and the transfer tax and are considered as tax authority in accordance with the provisions of paragraph 1 of this article. The provisions of this Law, which transfer the jurisdiction of the Tax Administration for the determination, collection and control of inheritance and gift taxes and transfer tax to local authorities, will apply from January 1, 2024.

Fiscalization Law

The most significant amendments to the Law on Fiscalization are listed below:

• In Article 3, which refers to the subject of fiscalization, a paragraph is added: "Retail sales from paragraph 1 of this Article shall not be considered sales made outside a retail establishment if the user of the delivered goods and services, i.e. goods and services that will be delivered or provided in the case of received advances, is a legal entity, i.e. a taxpayer on income from self-employment in accordance with the Law regulating personal income tax.".
• The obligation to enter the turnover value at tax rates as a mandatory element on fiscal accounts is abolished;
• In the previous paragraph 3, which becomes paragraph 4, the full stop at the end of the sentence is replaced by a comma and the following is added: "as well as the seat of the taxpayer that carries out retail sales over the Internet through distance trade.".

Personal Income Tax Law

The most significant amendments to the Personal Income Tax Law are listed below:

• Paragraph 1. of the Article 12b, is changed: "Standardized costs in the dinar amount from the  Article 56, paragraph 2, point 1) and Article 85, paragraph 5, point 2) subpoint (1) of this law based on the income that an individual earns in the quarter, are recognized in the amount of 96,000 dinars."
• After paragraph 1, a new paragraph is added, as follows: "Standardized costs in the dinar amount from Article 56, paragraph 2, point 2) and Article 85, paragraph 5, point 2) subpoint (2) of this law based on income that an individual earns in the quarter, are recognized in the amount of 57,900 dinars.".
• The non taxable amount from Article 15a was increased to 21,712 dinars;
• In Article 58, which defines the tax rate on income from copyrights, paragraph 2 is added, as follows: "With the exception of paragraph 1 of this article, the tax rate on income from contractual remuneration from copyright and related rights on which tax is paid based on self-taxation, for which standardized costs are recognized in accordance with Article 56, paragraph 2, point 2) of this law, amounts to 10%."
• In Article 86, which refers to the definition of the tax rate for other income, paragraph 2 is changed as follows: "With the exception of paragraph 1 of this article, the tax rate on income from: 1) personal insurance from Article 84 of this law is 15%; 2) contracted fees for work performed, on which tax is paid through self-taxation, for which normalized costs are recognized in accordance with Article 85, paragraph 5, item 2) sub-item (2) is 10%.".
• Article 100 of the Law is amended in such a way that the competence to determine the annual income tax of citizens is deleted from the jurisdiction of the tax authorities;

Law on Social Security Contributions;

The most significant amendments to the Law on Social Security Contributions are listed below:

• Article 28 of the Law defining the contribution base for persons who receive contracted compensation as taxable income from contracted compensation in accordance with the PIT Law, was amended as follows:

-       With the exception of paragraph 1 of this article: 1) contribution base for mandatory pension and disability insurance for the quarter, for persons referred to in article 57, paragraph 2 of this law, who, in accordance with the provisions of the law regulating the personal income tax, pay the tax by self-taxation on taxable the income that makes up the gross income realized in the quarter deducted for the standardized costs determined in the dinar amount and 34% of the gross income realized in the quarter, is at least three times the amount of the lowest monthly contribution base from Article 36 of this law; 2) the contribution base for mandatory health insurance for the quarter, for persons referred to in Article 57, paragraph 2 of this law, who, in accordance with the provisions of the law governing the personal income tax, pay the tax through self-taxation on the income generated in the quarter, is at least three times the amount of the base from Article 35b of this law. If the contribution base from paragraph 2 of this article is lower than the taxable income, the contribution base is the taxable income."

Law on Tax Procedure and Tax Administration

• In Article 38, paragraph 9, which refers to the submission of returns by individuals that is not related to the performance of activities, it is specified that the aforementioned returns can be submitted in electronic form or in written form - directly or by mail, except tax returns for the annual personal income tax submitted exclusively in electronic form.

• In accordance with the amendments to this Law, the following two activities listed below are considered new criminal tax offenses punishable by one to five years in prison:

-       Unauthorized production, processing, sale or procurement for the purpose of sale, possession or transfer or otherwise unauthorized placing on the market of electronic devices, equipment and software that are not registered in the register of manufacturers of electronic fiscal devices, and which are used to avoid the recording of retail transactions in a way governed by regulations governing fiscalization;

-       Unauthorized production, processing, sale or procurement for the purpose of sale, possession or transfer or otherwise unauthorized distribution of accounting and other software that serve to avoid recording transactions, i.e., avoid paying taxes.

For the aforementioned criminal acts, the responsible person in the legal entity and the entrepreneur shall also be sentenced to a security measure of prohibition of conducting business for a period of one to five years.