The purchase of the first property marks a significant moment in anyone’s life. However, many are uninformed about the possibility of claiming a refund for a portion of the Value Added Tax (VAT) paid during such a transaction, or they are unsure about how to utilize this tax relief. In the Republic of Serbia, the tax system has established mechanisms that enable a VAT refund when purchasing the first property. To utilize these tax benefits correctly, it is crucial to understand the rules and conditions involved in this procedure, which can be complicated if you decide to embark on this process yourself due to the numerous and not collectively listed rules. Hence, I will try to simplify this process and draw attention to certain details.
Conditions for Exercising the Right to a VAT Refund for the First-Time Property Buyer?
It is worth noting that the VAT refund for the purchase of the first property is regulated by the Value Added Tax Act https://www.paragraf.rs/propisi/zakon-o-porezu-na-dodatu-vrednost.html and the Value Added Tax Rulebook https://www.paragraf.rs/propisi/pravilnik-o-porezu-na-dodatu-vrednost-pdv.html . Basic conditions to exercise this right include being an adult citizen of the Republic of Serbia, residing in Serbia, and not having owned or co-owned a property in Serbia from July 1, 2006, until today. Therefore, it must be your first property – an apartment, purchased from a developer, implying that it is new-build, never previously transacted property. Meaning, if you’re buying an older property, or not directly from the developer, even if it’s your first property, you won’t be eligible for this right. Once you ascertain that these conditions are met, you can proceed to collect numerous documentation.
VAT Refund Procedure
The VAT refund process involves submitting a request to the competent tax authority, specifically to the tax office within whose territory the property in question is located, using a special form prescribed by the tax authority. Although the law does not specify the deadline for submitting this request, the practice is usually within 30 days of concluding the sales contract. The tax authority must review the submitted Request and documentation within 30 days of the submission and, if all conditions are met and the documentation is in order, issue a Decision on VAT refund to the first-time property buyer, then proceed to transfer the funds to your account within 15 days of issuing the said Decision.
VAT Refund Amount
The law stipulates that the first-time buyer is entitled to a VAT refund for a property with a surface area of up to 40m2 and up to 15m2 for each member of their household. What does this actually mean? It implies that you get a refund of the VAT amount that corresponds to the paid VAT for a maximum of 40m2, plus if you have household members, that amount increases by 15m2 per member. Here’s a practical example:
For instance, if a buyer purchases the first apartment of 100 square meters and the square meter price is 2,000 euros (including VAT), with three additional household members, in practice, VAT should be refunded for up to 85m2, equating to approximately 17,000 euros in tax refunds (refunding for a 40m2 area for the buyer and 15m2 per three household members). This amount is not negligible and can be used for furnishing the apartment, thus killing two birds with one stone. Therefore, it is essential that the Request is accurately filled out, considering all circumstances and gathering all necessary documentation. The required documents include:
Filled refund request form – RFN of the tax authority, notarized;
Statement on form IKPS PDV, declaring it is your first property purchase, notarized;
Real estate purchase contract and Seller’s Confirmation that the price has been fully paid, original or notarized copy;
Final invoice or bill showing the calculated VAT, original or notarized copy;
Bank statement confirming the payment of the price with VAT to the seller’s account (or at least the VAT amount in prescribed cases);
Extract from the birth register and certificate of citizenship for you and each household member;
Notarized copy of your ID card;
Ministry of Interior’s Certificate on residence movement for you and your household members, confirming all residences since July 1, 2006, until the request submission date;
Certificate that you have not been an owner/debtor of property tax since July 1, 2006, from the Revenue Administration of all municipalities where you were registered, not only the current residence tax authority, and for each household member, regardless of whether they are minors;
Copy of your bank account card;
Decision on construction approval – building permit or occupancy permit, a contract on joint construction, copies are sufficient, obtained from the Seller – developer;
It’s common for the Tax Authority to request additional documentation and have further inquiries. Therefore, it’s typical to engage an experienced attorney from start to finish in this process to represent you before the Tax Authority and collect and prepare all documentation.
Important Advice
It’s vital to note that if you list your household members in the request and thereby achieve a larger VAT refund, neither your children nor your spouse will be entitled to a VAT refund or exemption from property transfer tax when buying their first property in the old building in the future. Hence, think carefully before deciding to take this step, considering whether it’s more beneficial to list them or not. It’s also important, due to this fact, to check with your parents before initiating the process to see if they had previously exercised this right, mentioning you as a household member.
Seek Professional Help
Due to the detailed and complex nature of the process, it is highly advisable to enlist professional assistance to navigate through the legal and administrative aspects of obtaining a VAT refund on your first property purchase in Serbia. Furthermore, professionals can ensure that all necessary documentation is accurate, and the application is submitted in adherence to the appropriate procedures, ensuring a smooth and efficient process. Having this concise guide, you are now equipped with a general knowledge of the VAT refund system on the purchase of the first property in Serbia. However, keep in mind that practical application might entail various nuances, and you might find the need to delve deeper into certain aspects. For a more tailored approach to your specific case and further professional assistance, you can always reach out to experts in Serbian property law and tax procedures.
Conditions for Exercising the Right to a VAT Refund for the First-Time Property Buyer?
It is worth noting that the VAT refund for the purchase of the first property is regulated by the Value Added Tax Act https://www.paragraf.rs/propisi/zakon-o-porezu-na-dodatu-vrednost.html and the Value Added Tax Rulebook https://www.paragraf.rs/propisi/pravilnik-o-porezu-na-dodatu-vrednost-pdv.html . Basic conditions to exercise this right include being an adult citizen of the Republic of Serbia, residing in Serbia, and not having owned or co-owned a property in Serbia from July 1, 2006, until today. Therefore, it must be your first property – an apartment, purchased from a developer, implying that it is new-build, never previously transacted property. Meaning, if you’re buying an older property, or not directly from the developer, even if it’s your first property, you won’t be eligible for this right. Once you ascertain that these conditions are met, you can proceed to collect numerous documentation.
VAT Refund Procedure
The VAT refund process involves submitting a request to the competent tax authority, specifically to the tax office within whose territory the property in question is located, using a special form prescribed by the tax authority. Although the law does not specify the deadline for submitting this request, the practice is usually within 30 days of concluding the sales contract. The tax authority must review the submitted Request and documentation within 30 days of the submission and, if all conditions are met and the documentation is in order, issue a Decision on VAT refund to the first-time property buyer, then proceed to transfer the funds to your account within 15 days of issuing the said Decision.
VAT Refund Amount
The law stipulates that the first-time buyer is entitled to a VAT refund for a property with a surface area of up to 40m2 and up to 15m2 for each member of their household. What does this actually mean? It implies that you get a refund of the VAT amount that corresponds to the paid VAT for a maximum of 40m2, plus if you have household members, that amount increases by 15m2 per member. Here’s a practical example:
For instance, if a buyer purchases the first apartment of 100 square meters and the square meter price is 2,000 euros (including VAT), with three additional household members, in practice, VAT should be refunded for up to 85m2, equating to approximately 17,000 euros in tax refunds (refunding for a 40m2 area for the buyer and 15m2 per three household members). This amount is not negligible and can be used for furnishing the apartment, thus killing two birds with one stone. Therefore, it is essential that the Request is accurately filled out, considering all circumstances and gathering all necessary documentation. The required documents include:
Filled refund request form – RFN of the tax authority, notarized;
Statement on form IKPS PDV, declaring it is your first property purchase, notarized;
Real estate purchase contract and Seller’s Confirmation that the price has been fully paid, original or notarized copy;
Final invoice or bill showing the calculated VAT, original or notarized copy;
Bank statement confirming the payment of the price with VAT to the seller’s account (or at least the VAT amount in prescribed cases);
Extract from the birth register and certificate of citizenship for you and each household member;
Notarized copy of your ID card;
Ministry of Interior’s Certificate on residence movement for you and your household members, confirming all residences since July 1, 2006, until the request submission date;
Certificate that you have not been an owner/debtor of property tax since July 1, 2006, from the Revenue Administration of all municipalities where you were registered, not only the current residence tax authority, and for each household member, regardless of whether they are minors;
Copy of your bank account card;
Decision on construction approval – building permit or occupancy permit, a contract on joint construction, copies are sufficient, obtained from the Seller – developer;
It’s common for the Tax Authority to request additional documentation and have further inquiries. Therefore, it’s typical to engage an experienced attorney from start to finish in this process to represent you before the Tax Authority and collect and prepare all documentation.
Important Advice
It’s vital to note that if you list your household members in the request and thereby achieve a larger VAT refund, neither your children nor your spouse will be entitled to a VAT refund or exemption from property transfer tax when buying their first property in the old building in the future. Hence, think carefully before deciding to take this step, considering whether it’s more beneficial to list them or not. It’s also important, due to this fact, to check with your parents before initiating the process to see if they had previously exercised this right, mentioning you as a household member.
Seek Professional Help
Due to the detailed and complex nature of the process, it is highly advisable to enlist professional assistance to navigate through the legal and administrative aspects of obtaining a VAT refund on your first property purchase in Serbia. Furthermore, professionals can ensure that all necessary documentation is accurate, and the application is submitted in adherence to the appropriate procedures, ensuring a smooth and efficient process. Having this concise guide, you are now equipped with a general knowledge of the VAT refund system on the purchase of the first property in Serbia. However, keep in mind that practical application might entail various nuances, and you might find the need to delve deeper into certain aspects. For a more tailored approach to your specific case and further professional assistance, you can always reach out to experts in Serbian property law and tax procedures.