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1. The VAT is charged at every stage of production and sale.

2. This is a new form of taxation, but not in the sense of a new, additional tax burden, but in terms of a form of taxation that replaces the sales tax.

3. In Serbia every entity that posted over 25, 000euros in turnover in the past year, or expects to post as much over the next 12 months, is subject to the VAT.

4. Authorities expect the VAT to reduce the grey economy, and boost competitiveness and exports.

5. The VAT will also test the liquidity of companies, as tax obligations will now be charged far more quickly than before.

6. In Serbia neither basic provisions nor computers were previously subject to sales tax, but now they are being taxed at the 8 per cent and 18per cent rates, respectively.

7. Massive spending took place at the end of 2004 as consumers rushed to make purchases before the new taxation system went into effect.

8. According to the Serbian Tax Darectorate, some businesses are likely to announce price increases as a marketing strategy.

9. Experts believe it could take as much as half a year for companies to adjust to VAT.

10. Regardless of the initial problems introduction of VAT in Serbia could face, VAT is one of the prerequisites for launching Stabilization and Association talks with the EU.

11. VAT has been functional in most European countries for three decades now.

12. The customs value any import tax obligations, and, if applicable, the excise tax are added together. The sum is then multiplied by 20% for the VAT amount.

13. Inside Russia, the VAT is paid on value added as goods move from raw materials to sale of finished goods.

14. VAT paid on the costs of raw materials, supplies, and services which are deductible from profit taxes can be recovered, so the tax really amounts to the VAT paid by buyers, minus the VAT paid by suppliers on raw materials, supplies, and services.

15. A constantly changing list of exemptions is maintained by the State Customs Committee, which at present includes high-technology equipment (particularly if that equipment is used for manufacturing or research and development) and specialized and public transport, telecommunications, and medical equipment.

16. If the importer can prove that the imported equipment is designed to produce goods or means of production, exemptions may also apply.

17. For in-country producers, VAT that has been paid for imports of fixed capital and nonmaterial assets is refundable once they are in operation.

18. Commodities deposited in kind into the charter fund of an enterprise with foreign participation are presently exempt.

19. The recent amendment also revise rules for determining the VAT on service transactions between Russia and foreign entities.

20. VAT is no longer levied on direct intercompany loans from a parent company to a local subsidiaries, although indirect loans through third-country subsidiaries still are.

21. The VAT paid on the purchase of fixed capital assets (charter capital contributions) can now be refunded once the assets are operational.

22. Recent changes represent partial progress toward meeting these recommendations.

23. Historically, Russia treated sales of goods to buyers in member states of the Commonwealth of Independent States (the CIS)as domestic sales subject to VAT, but has since agreed that such sales (except for oil, natural gas and gas condensate) should be treated as exports and subject to a 0% rate.

24. Input VAT related to exempt supplies is not recoverable; input VAT related to zero-rated supplies is recoverable.

25. Should the amount of input VAT exceed output VAT, the excess is to be offset (возмещать) against other amounts of tax or penalties due to the same (i.e. Federal) budget for a period of three months.

26. Once a taxpayer has submitted the application, the tax authorities are allowed up to two weeks to determine whether the refund is due.

27. In the case when goods are returned (including during the warranty period) to the seller, VAT previously paid by the seller to the budget in respect of the sale of these goods may be deducted.

28. Vat paid to the budget from amounts of advance payments or other payments received by the seller against future goods may be deducted in the case of cancellation of the corresponding contract and the return of the appropriate amounts of advance payments.

29. These deductions should be made in full amount after the appropriate adjustments in respect of the return of the goods, or rejection of the goods have been recorded, but not later than one year from the time of return or rejection.

 

Exercise 5