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The Government of the Republic of Serbia

In the service of citizens

VAT reduced by five to ten percent on certain goods

Belgrade, 27 July 2005

Head of the Serbian Tax Administration Vladimir Ilic said today that with the reduced value added tax (VAT) rate, prices of newly-built flats and other goods taxed at a lower rate should be reduced by five to ten percent.

Vladimir Ilic at today's press conference

Ilic said at a press conference that the Law on Changes and Amendments to the Law on the VAT, that became effective on July 26 this year, implies certain reliefs whose aim is to reduce the tax rate and increase the number of exemptions.

He recalled that the expanded list of goods with an eight percent VAT rate includes newly-built flats, frozen fruit and vegetables, fish, food grains, honey, medications (including veterinary ones), fodder and live stock.

According to him, the VAT rate will also be reduced on tickets for the cinema, theatre, fairs, concerts and similar events.

Ilic pointed out that the changes to the law have led to the establishing of duty-free shops, and expanding tax exemptions on the import of humanitarian aid according to the contract on donations. He added that the right on a VAT refund for traditional church and religious communities has also been introduced, as well as a retroactive refund for donations that had occurred in the period before the law was changed.

From the budgetary viewpoint, the reduction in the VAT rate has a negative influence on tax revenues, Ilic said adding that there is also a possibility that taxpayers abuse the reliefs by presenting their goods turnover as humanitarian aid.

Speaking about the Law on Changes and Amendments to the Law on Tax Procedure and Tax Administration, Ilic said that this law aims to make collection of public revenues more efficient, to reduce the costs of debt enforcement, as well as to suppress grey economy and tax fraud.