The Property Tax Law of the Republic of Serbia (hereinafter: the “Law”) stipulates that the tax on transfer of absolute rights is paid, among other, when transferring ownership rights in relation to real estate for a fee.

The Law also prescribes that the taxpayer of said tax is the seller of a real estate. However, in numerous cases in practice, the sales contract provides that the cost of paying tax on transfer of absolute rights for transferring ownership rights related to the real estate is borne by the buyer.

In that case, the buyer is authorized, after the public notary submits an adequate tax return on behalf of the seller, to represent the seller before the competent tax authority in the procedure of determining the tax on transfer of absolute rights, and upon its completion, the buyer is obliged to pay determined tax liability.

On the other hand, the Law also stipulates tax exemption for a taxpayer who transfers ownership right over an apartment or a family residential building to individual who purchases the first apartment.

Namely, the tax on transfer of absolute rights is not paid on transfer of ownership right over an apartment or a family residential building, or ownership share over an apartment or a family residential building, to an individual who purchases the first apartment, for an area of up to 40 m2 for the buyer of the first apartment and for his/her family household members who, as of 1st July 2006, did not own or co-own an apartment (or family residential building) on the territory of the Republic of Serbia up to 15 m2 per each member, provided that:

  • the buyer of the first apartment is an adult citizen of the Republic of Serbia, with residence in the territory of the Republic of Serbia, and that
  • the buyer of the first apartment from 1st July 2006 until the day of conclusion of the sales contract on which basis he/she acquires the first apartment, did not own or co-own an apartment (or family residential building) in the territory of the Republic of Serbia.

The family household members of the buyer of the first apartment may be his/her spouse, children, adoptees, children of his/her spouse, adoptees of his/her spouse, his/her parents, his/her adoptive parents, parents of his/her spouse or adoptive parents of his/her spouse.

It should be noted that when concluding the contract which basis he/she acquires the first apartment, the buyer of the first apartment and members of his/her family household should have registered residence at the same address, which is also confirmed by the Ministry of Finance of the Republic of Serbia in one of its official opinions related to this topic.

Therefore, in order to exercise the right to the said tax exemption, the conditions prescribed by the Law must be fulfilled on the day of conclusion of the contract or other act on which basis the buyer purchases the first apartment. In addition to the sales contract, it is necessary to submit other documents to the competent tax body, which prove the fulfillment of the conditions for tax exemption (statement of the buyer that he/she buy the first apartment, birth certificates, certificates of residence, etc.).

Finally, we would like to mention that the right to tax exemption does not have a taxpayer who transfers the ownership right over an apartment to:

  • person who already exercised the right to a VAT refund in accordance with the Law on VAT, or a tax exemption from payment of tax on transfer of absolute rights in accordance with the Law, based on first purchase of an apartment;
  • member of the family household of the buyer of the first apartment for whom the right to VAT refund in accordance with the Law on VAT, or tax exemption from payment of tax on transfer of absolute rights in accordance with the Law, has been already exercised once.

Author: Goran M. Ćiraković, Attorney-at-Law

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