Serbia, SEE: Guidelines for Determining VAT for Transactions Related to Cross-Border Electricity Exchange in Energy Community

, AppSerbia

In January, the Energy Community Secretariat announced the guidelines for determining the VAT rate for cross-border electricity trade between the contracting parties within the Energy Community (EnC), aimed at harmonizing the approach for overcoming tax obstacles in cross-border electricity trade which is relevant to the implementation of the Treaty Establishing the EnC.

Considering that there is not a common VAT system within the Energy Community, or in the transactions between the contracting parties and the EU members, it is important to ensure that the tax is charged for all goods and services and that there is no double taxation for any goods or service provided in accordance with the Treaty Establishing the EnC.
The EU tax regulations cannot be directly implemented within the EnC, but certain assumptions should be considered so as to ensure a market without tax barriers.

The Treaty explicitly requires that ”customs and quantitative restrictions on the import and export of grid electricity and all measures with an equal effect be forbidden between the contracting parties“.
It is the subject of a case-to-case study whether this provision can be understood as the obligation to eliminate all existing fees for electricity or gas supply. However, the key participants have identified the VAT as a trade obstacle and they have indicated towards the need to remove the tax as an obstacle.

The EnC document has been prepared so as to represent a harmonized approach for overcoming tax obstacles in electricity trading and to provide the instructions for handling the tax aspects of cross-border trade, relevant for the treaty implementation.

So as to avoid double taxation or non-taxation of trade in transmission system services, the implementation of the EU rules with respect to the place of providing services is recommended.
With respect to other transactions related to cross-border trade, the Article 3.4 of the Directive on the Rules for the Internal Market in Electricity requires that contracting parties ensure that all consumers have the electricity provided by the supplier, on the basis of the supply contract, regardless of the member country in which the supplier is registered. In this respect, the contracting party will take all necessary measures so as to ensure that administrative procedures do not discriminate the companies registered in another signatory country.

Considering that the Energy Community is not a unified tax and customs area, for the implementation of this Article, the contracting parties should seek a feasible solution with a common and harmonized approach.

In the case of hosting cross-border electricity transmission, distributions system operators are obliged to allocate free capacities in a competitive procedure. If free capacities are not sufficient to satisfy the demand, the consumer will be charged for the service of accessing interconnective capacities in accordance with the allocation rules.

In accordance with the general rule that the place of providing services should be based on the place in which the main receiver is located, the VAT is charged and paid in the place in which the receiver is located, it is stated in the Energy Community guidelines.