Based on Article 57 of the law 92/2014 On Value Added Tax in the Republic of Serbia Supplies of processing services for non-Albanian goods carried out by the exporter, classified under the active processing regime, are treated as zero-rate VAT supplies. (contract work) services that add value to the processed goods intended for re-export are zero-rated VAT supplies.
Treatment at the 0% VAT rate is guaranteed for the processing service of non-Albanian goods under active processing regime in the invoice issued by the exporting operator, which is attached to the customs re-export declaration of these goods.
In accordance with paragraph “c” of Article 57 of the law, in the case of the provision of processing services for non-Albanian goods intended for re-export, is carried out by a subcontractor who performs this processing service on behalf of the active processing company that contracted him. (the exporting company) which is subject to the active processing regime, this supply of processing services is taxable at the 0% VAT rate.
The subcontractor is a taxable person holding the appropriate authorization from the customs authority.
For the correct performance of the procedure for documenting the processing service for these goods, as well as for documenting the movement of non-Albanian goods under the active processing regime, for tax purposes the following procedure must be applied:
- The provision of the service for processing non-Albanian goods intended for re-export, carried out by subcontractors duly authorized by the customs authority, on behalf of
For active processing companies, it is a taxable service supply subject to VAT 0%. - Activities classified under the active processing regime are considered entirely intended for re-export.
- The conditions for the existence of this type of operation are:
- The processor (subcontractor) must never become the owner of the materials supplied by the customer (the active processing company).
- The materials supplied by the customer to the processor must be fully incorporated into the manufactured product.
- Materials delivered by the customer in the form of raw materials must be physically returned to him by the processor in the form of a semi-finished product or finished product, with the exception of technological waste during the production process and in accordance with the production technology cards. This requires, as a necessity, that these materials be identified with the appropriate documentation at the processor at all times during processing.
- If it turns out that the quantity of the semi-finished or finished product is less than it should have been relative to the materials used in processing, the difference is considered a sale made by the processor and is a taxable supply subject to VAT 20%. For this purpose, information is exchanged with the General Directorate of Taxes.
Special obligations
A contract in accordance with the Civil Code has been entered into between the principal (the main contractor operating under the active processing regime) and the processor (the subcontractor).
Processors must keep a separate register describing the performance of work on behalf of the principal. This register must record the identity of the principal—i.e., the trading name, VAT identification number, the administrator's first name and last name, their legal status, and the registered address. For each incoming and outgoing operation, the following is recorded:
- Type and quantity of materials to be processed and the date of receipt. The movement of the goods will be documented with a waybill.
- Type and quantity of the semi-finished or finished product, as well as the date of release.
- The register must also record the goods in stock with the processor. A monthly inventory is prepared for this purpose.
- The movement of any quantity of semi-finished or finished product from the processor (subcontractor) to the customer (contractor) is accompanied by a 0% VAT tax invoice for the value of the service rendered.
For the implementation of these rules, every taxable subcontractor, immediately upon obtaining authorization from the customs authority, submits an application to the respective Regional Tax Directorate. Attached to the request is a copy of the authorization issued by the customs authority recognizing the subcontractor as such, as well as a copy of the contract entered into with the contractor (the active processing company).
The Regional Tax Directorate issues to the subcontractor the authorization “For participation in active processing operations” no later than 30 days from the date the customs authority issues the authorization. The validity of this authorization is the same as that issued by the customs authority. For any changes, the subcontractor is required to notify the relevant tax authority.
All issued authorizations are recorded by the Regional Tax Directorate in a special register where the name of the taxable person (the subcontractor), NIPT, address, type of activity, the contractor for whom it works, the date of issuance of the authorization, and the validity period. Service supplies under the active processing regime are not provided by subcontractors not authorized by the relevant customs and tax authorities.
In accordance with the provisions of the law and this guidance on the right to deduct VAT, the taxable subcontractor is entitled to deduct VAT on various expenses incurred with VAT that are allowed under the terms of the regime applied, which serve the supply of
taxable processing services for these goods on behalf of the active processing company. The active processing company that re-exports these goods is not entitled to deduct the VAT charged on the invoice it received for the supply of goods processing services.
Non-EU transactions carried out under the regime as of January 1, 2019, since the supply is taxable at 0% VAT and not at 20% VAT.
Source: General Directorate of Taxes.