The tax system in Serbia, as well as the laws that regulate this area, have been the target of criticism for years

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The tax system in Serbia, as well as the laws that regulate this area, have been the target of criticism for years. Experts in this field and businessmen claim that the main reason is unfairness and inconsistency.

The year at the end brought numerous tax policy innovations, of which probably the biggest and most significant is the introduction of the online fiscalization system.

The Law on Electronic Invoicing applies from May 1, 2022 to public and private sector entities, while businessmen who do business with the public sector had to issue invoices through SEF from the beginning of May, and from July 1 to receive them, not only from public sector entities but also from private individuals who choose to have their invoices delivered through the electronic system.

From January 1, 2023, the issuance and storage of electronic invoices will be mandatory in all transactions between private sector entities.

Tax advisor and member of the Board of the Association of Tax Advisors of Serbia, Aleksandar Vasić, in an interview with Biznis.rs, says that in his opinion, the most significant change is certainly the introduction of a new system of online fiscalization and the system of electronic invoices.

“Both systems imposed large additional obligations on taxpayers. The biggest problem in implementation was the unwillingness of the state to enact clear and applicable regulations in a timely manner. In the long term, businessmen have expectations that these systems will ensure the reduction of the gray economy, a better business environment, but also better control over the spending of budget funds”, emphasizes Vasić.

He adds that the best tax system is a stable tax system, and that stability should be characterized by predictability, but also consistent application of tax regulations.

New regulations on taxation of freelancers

Starting next year, amendments to the Law on Personal Income Tax will define the status of freelancers in Serbia. This means that all those who work online will pay taxes and contributions through self-taxation. Freelancers will be able to choose one of the two offered models (A and B) in relation to the amount and regularity of their earnings.

Commenting on the way in which the tax status of freelancers in Serbia was resolved, our interlocutor says that the state’s attitude towards the taxation of workers on the Internet could be a textbook example of what tax policy should not look like.

“On the way to a favorable solution for the taxation of these incomes, all the rules and principles on which a serious state should rest, including its tax system , were violated”, said Vasić.

The assessment of the Fiscal Council on the taxation of freelancers is also negative.

“The existing Law on personal income tax inconsistently and unfairly treats some of the main income from work, such as income from employment, royalties, temporary and casual contracts. Proposing new models for taxation of income from copyright and related rights will lead to additional differences in taxation of labor income depending on the amount and chosen model of taxation. On several occasions, we have already warned that the approval of selective tax reliefs and privileges is not in accordance with good tax practice and the principle of equal treatment of all taxpayers and economic activities”, emphasized the Fiscal Council.

Tax reliefs

The law on personal income tax also brought news to farmers. Employees in agriculture will be able to pay personal earnings, which actually means that they can pay income tax on the amount of personal earnings they choose, instead of paying it on the realized profit in the business year.

A novelty in 2022 under the Personal Income Tax Act is that the tax relief for newly employed persons has been extended.

For newly employed persons who have been at the office for at least six months, i.e. three months for trainees, the Tax Administration refunds part of the tax paid – depending on the number of persons who are employed with the use of tax relief. The deadline for using the facilities was originally until the end of 2022, but was extended until the end of 2023.

The Government of the Republic of Serbia has extended the period of application of the Regulation on closer conditions, criteria and elements for flat-rate taxation of self-employed income tax payers for another year.

This means that until the end of 2023, a provision limiting the increase of the tax base, up to 10 percent per year, will be valid in the case when the amount of the base is increased in relation to the compensation determined for the previous year.

The novelty that also affects taxpayers is that the tax return for the previous year will be submitted no later than May 15 of the current year. The annual tax was paid when the decision of the Tax Administration arrived, but a novelty was introduced that the tax authority will form a tax return based on official records and will post it on the portal of the Tax Administration no later than April 1.

Taxpayers are obliged to review such application and make possible changes and additions in the part where the data is not appropriate and correct. After review and corrections, the taxpayer electronically signs the tax return created in this way.

Necessary reform of the tax system

Member of the Board of the Association of Tax Advisors of Serbia, Aleksandar Vasić, believes that one of the most important tasks ahead of us is the comprehensive reform of income taxation.

“In that reform, one of the key places must be the recognition of new forms of work and their fair taxation. The issue of progressive taxation is always topical, and this method of taxation is also the fairest. The question of the good functioning of the tax system is not only a question of the amount of tax revenue, but of its relationship to the taxpayer. At the moment, I do not see the satisfaction of taxpayers with the way the tax system functions. I believe that a different attitude of the state towards the citizens is possible”, emphasizes Vasić, Biznis writes.

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