1. VAT on the purchase of a new-build apartment

If you are buying an apartment from a developer who is VAT-registered, the following is calculated on the purchase price:

· 10% VAT on residential properties

· 20% VAT on non-residential premises

VAT is already included in the apartment price and is not paid separately, but as part of the total purchase price.

VAT Refund for First-Time Homebuyers

First-time property buyers are entitled to a VAT refund, which is one of the most significant tax benefits when purchasing an apartment.

Conditions for VAT Refund

To be eligible for a VAT refund, you must:

1. be an adult individual,

2. be a citizen of the Republic of Serbia,

3. have permanent residence in the Republic of Serbia,

4. have not owned or co-owned an apartment in Serbia by the date of contract certification.

The same conditions apply to family members (spouse, children, adopted children, parents), provided they have registered residence at the same address.

What square footage is eligible for a refund?

The right to a VAT refund is granted for:

· up to 40 m² for the buyer,

· plus an additional 15 m² per household member.

If the apartment exceeds the permitted square footage, VAT is refunded proportionally for the part that meets the conditions.

Required Documentation

To claim a VAT refund, an application must be submitted to the Tax Administration, along with:

·      a certified sales contract,

·      proof of payment for the apartment,

·      a statement confirming you are purchasing your first apartment,

·      a certificate confirming you have not previously owned real estate,

·      personal identification documents.

The Tax Administration issues a decision, after which the funds are refunded to the buyer's account.

It is important that the developer is registered in the VAT system, as a refund is not possible otherwise.

2. Property Transfer Tax (Resale Properties)

If you are buying an apartment from an individual, you do not pay VAT, but rather a property transfer tax of 2.5%.

This tax is calculated based on the market value of the property as assessed by the Tax Administration, even if the agreed price is lower.

The payment deadline is 15 days from the receipt of the decision.
The tax declaration is submitted by the notary who certified the contract.

In practice, although the seller is the formal taxpayer, the cost is almost always borne by the buyer.

First-time property buyers may be exempt from this tax if they meet the legal conditions.

3. Property Tax – Owner's Annual Obligation

After registering ownership rights in the cadastre, the owner becomes liable for annual property tax.

The obligation arises:

·      on the day of acquiring ownership,

·      or upon obtaining an occupancy permit for new construction.

How is property tax calculated?

The tax base consists of:

·      the usable area of the apartment,

·      the average price per square meter in the zone where the apartment is located.

The following tax rates are applied to the determined tax base:

·      up to 0.30% for individuals,

·      up to 0.40% for legal entities.

For higher-value properties, a progressive rate is applied.

Tax Reliefs

If the owner lives in the apartment and is registered at that address, they are entitled to:

·      a 50% tax reduction,

·      up to a maximum of 20,000 RSD annually.

A reduction in the tax base due to property depreciation is also possible (up to 1% annually, maximum 40%).

Payment deadlines

Property tax is paid in four annual installments:

February 15th

May 15th

August 15th

November 15th

Failure to pay on time incurs statutory interest.

4. Capital Gains Tax on Apartment Sales

Capital gains tax is paid upon the sale of real estate if there is a difference between the acquisition price and the selling price.

The tax rate is 15% on the realized gain.

How is capital gain calculated?

Capital gain represents the difference between:

·      the selling price,

·      and the acquisition value (adjusted for inflation).

The acquisition price may include:

·      taxes paid at the time of purchase,

·      notary fees and duties,

· investments in renovation (with proof of costs).

When is capital gains tax not paid?

Exemption applies if:

· the property was owned for more than 10 years,

· it is transferred between spouses or inherited,

· the proceeds from the sale are reinvested in a new property within the statutory period.

If only a portion of the funds is reinvested, the tax is reduced proportionally to the invested amount.

Conclusion – how to plan taxes when buying and selling an apartment

Buying and selling property in Serbia requires precise tax planning. It is crucial to know in advance:

· whether you pay VAT or property transfer tax,

· whether you are entitled to a VAT refund,

· what the annual property tax will be,

· whether a capital gains tax obligation will arise.

Proper analysis of tax obligations can save you significant funds and prevent unnecessary costs. Therefore, it is advisable to consult with a real estate and tax law expert before concluding a purchase agreement to optimize your entire investment.