Re-export operations – Serbia

Re-export operations from the perspective of foreign trade and foreign exchange operations

There are various classifications of re-export operations, but three types of re-export are most common:

• Direct re-export, where goods are purchased abroad and directly sold abroad without the procedure of importing goods into the country of the re-exporter;
• Indirect re-export, where goods purchased abroad are temporarily imported into the customs territory of Serbia without paying customs duties and VAT, and then delivered further abroad;
• Processing re-export, where goods are purchased abroad, imported into the re-exporter’s country where they undergo the agreed processing procedure, and then exported in a modified state to the foreign supplier or a third country. This is also without the obligation to pay customs duties and VAT.

Domestic entities can perform re-export operations as defined in Article 39, Item 1 of the Law on Foreign Trade only based on commercial documentation (contracts, invoices, etc.).

The Law on Foreign Trade, which defines the operations of import, export, and transit of goods, prescribes the following in Article 17:

• Export refers to the removal, dispatch, or delivery of goods from the territory of the Republic of Serbia to another country or customs territory, in accordance with the customs regulations of the Republic of Serbia;
• Import refers to the bringing, delivery, or dispatch of goods from another country or customs territory into the territory of the Republic of Serbia, in accordance with the customs regulations of the Republic of Serbia;
• Transit refers to the passage of goods through the customs territory of the Republic of Serbia, in accordance with the customs regulations of the Republic of Serbia.

Item 4, Sub-item 7 of the Decision on Reporting Credit Operations with Foreign Countries (Official Gazette of RS, Nos. 56/13 and 4/15) mandates the reporting to the National Bank of Serbia regarding commercial loans and credits as defined in Article 4 of the Law. However, this excludes, among other things, transactions involving the purchase of goods abroad that are directly delivered to another country or customs territory for use in service production processes for a resident’s production process abroad.

The Regulation on the Method of Offsetting Debt and Claims from Realized Foreign Trade of Goods and Services (Official Gazette of RS, No. 59/13) cannot be applied to operations from Article 39, Item 1 of the Law on Foreign Trade.

Code 312 from the Payment Codebook is used for orders in foreign payment transactions exclusively in cases of payment transactions based on Article 39, Item 1 of the Law on Foreign Trade (direct re-export), i.e., in cases of direct re-export transactions where the goods paid for remain abroad and are directly delivered abroad without entering the customs territory of the Republic of Serbia.

In contrast, for payments related to transactions from Article 39, Item 2 of the Law on Foreign Trade (indirect re-export), code 312 should not be used in foreign payment transaction orders. Instead, other appropriate codes should be used, depending on whether the transaction involves processing, import for export, or other cases.

Re-export operations as subject to VAT taxation

According to the general rule, the subject of VAT taxation is the supply of goods and services performed by a taxpayer in the Republic of Serbia for compensation, as well as the import of goods into the Republic. In this regard, it is clear that direct re-export operations are not subject to VAT. This is not considered a transaction exempt from VAT but rather a transaction not subject to taxation. Accordingly, compensation for this transaction is not recorded in tax records, nor is it reported in the tax return, nor is it included in the total turnover of goods and services in accordance with the VAT Law.

The VAT exemption from Article 24, Paragraph 1, Item 8 of the VAT Law, for other services related to the transit of goods, can be applied if the taxpayer possesses an invoice or other document serving as an invoice, issued in accordance with the VAT Law.

Indirect Re-export

According to Article 11, Paragraph 1, Item 1 of the VAT Law, the place of goods supply is the location where the goods are located at the time of dispatch or transport to the recipient, or, at their request, to a third party if the goods are dispatched or transported by the supplier, the recipient, or a third party at their request.

If goods in a customs warehouse are released into free circulation, the customs authority calculates VAT. If goods are sold from the customs warehouse without dispatch to another entity, meaning the goods remain under customs warehousing procedures, the transaction is VAT-exempt in accordance with Article 24, Paragraph 1, Item 6 of the VAT Law, provided the prescribed conditions are met.

According to Article 9 of the Rulebook on VAT Exemptions, for transactions involving goods under customs warehousing procedures, the taxpayer performing the transaction or the recipient of goods, who is the VAT debtor, can apply for exemption if they possess:

• A customs declaration or a certified copy of the declaration proving that the goods are under customs warehousing procedures, in accordance with customs regulations;
• An invoice for the supply of goods, certified by the competent customs authority (the customs authority certifies the invoice if the goods were under customs warehousing procedures at the time of the transaction).

Processing Re-export

One possibility that may arise in practice is the import of goods for processing and their subsequent resale abroad. According to Article 26, Paragraph 1, Item 2 of the VAT Law, this transaction is VAT-exempt, meaning that VAT is neither calculated nor paid on the import of goods into Serbia for processing and re-export.

Foreign entity as the owner of goods under customs warehousing procedures

The owner of goods imported and re-exported through the indirect re-export procedure may be a foreign legal entity. In this case, under customs regulations, the foreign entity is obliged to appoint an indirect representative. The customs declaration is filled out as prescribed by the Rulebook on Completing the Customs Declaration.

From the perspective of VAT regulations, from January 1, 2023, a foreign entity that conducts transactions involving goods under customs warehousing procedures in the Republic of Serbia is not required to appoint a tax representative or register for VAT obligations in the Republic of Serbia.