While Serbia has kept its VAT entry threshold at eight million dinars since 2013, neighboring countries have seen significant changes after raising their own thresholds, providing relief to small businesses.
In Bosnia and Herzegovina, the threshold for mandatory VAT registration was increased from 50,000 convertible marks (roughly 2.99 million dinars) to 100,000 KM (around 5.98 million dinars) in December last year. This change has had a notable impact on the business sector. According to data from the Indirect Taxation Administration (ITA), 2,365 businesses applied to leave the VAT system in the past year, a 40 percent increase from the previous year.
The increase in the threshold followed persistent calls from the business community in Bosnia and Herzegovina. Many businesses, especially small craft shops, argued that the previous threshold of 50,000 convertible marks had become unrealistic amid rising inflation and costs. Despite the higher threshold, VAT revenue continued to grow, with Bosnia and Herzegovina recording a surplus of 486 million KM in VAT collection from January to September 2024. This suggests that the increase did not negatively impact the national budget but rather eased the burden on smaller businesses.
Similarly, in Croatia, the threshold for mandatory VAT registration will increase from 40,000 euros to 50,000 euros starting January 1, 2025. This adjustment is expected to relieve the smallest business entities, allowing them to leave the VAT system and reduce administrative burdens. Entrepreneurs who remain below the 50,000 euro threshold will need to submit a request to exit the VAT system by January 15.
In contrast, Serbian businesses have long advocated for an increase in the VAT entry threshold, but the Ministry of Finance has rejected these proposals. Despite the fact that the current limit of eight million dinars has been in place for over a decade, officials argue that it remains one of the highest in the region. Dragan Demirović, Assistant Minister of Finance, stated at the end of 2022 that while the threshold was set 10 years ago, there are no plans to change it.
In 2023, the Association of Protectors of Businessmen and Entrepreneurs of Serbia (ZPPS) proposed increasing the flat-rate taxation threshold from six to at least eight million dinars per year and raising the VAT entry threshold to 10 million dinars. This suggestion was made in response to rising inflation. Tax advisor Zvezdana Pisarević also supported increasing the threshold, stating that it would help relieve the burden on smaller companies.
Although Serbia’s VAT entry threshold will remain unchanged in 2025, several significant changes are expected. For example, the transfer of assets, whether partially or entirely, will be exempt from VAT if the transferee continues the same business activity. Additionally, the exchange of goods under warranty will no longer be subject to VAT, and business samples and promotional materials in limited quantities will also be exempt.
However, businesses will face additional responsibilities if the conditions for VAT exemptions change within three years, as they will be required to recalculate VAT. Companies that change their prices must follow strict procedures. A price increase triggers immediate VAT calculation, while a price decrease requires written confirmation from clients regarding the correction of the previous VAT deduction.
For businesses dealing with imports, the VAT base will be calculated based on the difference between the total fee and the part included in customs duties, which will affect companies that rely on imported goods.
Farmers will benefit from a new VAT refund system, allowing them to claim an eight percent refund on the value of their products and services. This refund will be paid in cash, provided farmers issue receipts.
For those who voluntarily register for VAT, the obligation will last for at least two years. Businesses whose turnover exceeds eight million dinars in the previous 12 months must register for VAT within five days, with non-compliance leading to forced registration. Entrepreneurs wishing to exit the VAT system must submit a request at least 15 days before ceasing operations.
The new VAT regulations also include stricter rules for recording and reporting, which will improve system transparency and enable better control. The Tax Administration plans to implement more intensive checks to ensure timely reporting, aiming to enhance VAT collection efficiency.
