Loss of rights to lump-sum taxation – the reasons
As there are conditions that must be met in order to become a lump-sum entrepreneur, there are also conditions that must be met in order to remain in this status. The first condition refers to the annual income, and the second – to the total turnover for one year continuously. The first limit is 6 million, the second is 8 million and it means the entry into the VAT system.
The first limit (6 million) refers to realized income during the calendar year, i.e. for the period from January 1 to December 31 each year and is means that if this income exceeds 6 million, the lump-sum taxpayer status for the next calendar year is lost. The beginning of each calendar year marks the beginning of the calculation of the limit from 0 to 6 million dinars.
If this limit is exceeded, the Tax Administration issues a decision on the loss of the right to lump-sum taxation, with which there is also the obligation to conduct accounting according to the double entry system, or, as we say in Serbian jargon, “knjigaši”. If the limit of 6 million is exceeded in the first half of the year, the Tax Administration will order the accounting starting from July 1 of the current year until the end of the calendar year.
Loss of the right to a lump sum if the limit of 6 million dinars is exceeded also means the obligation to file electronic statements in which you declare the beginning of accounting books and the end of lump-sum taxation by filing a final PPDG-1R tax statement and an initial PPDG-1S.
Keep in mind that if you lost lump-sum status by going over the 6 million limit, you can regain it if you meet the condition that you have an income of less than 6 million in the next year and file an application to the Tax Administration for the lump-sum taxation for the next year – then you can return to the “lump-tax” system.
The second limit (8 million) refers to realized turnover for a 12-month non-calendar year period and applies to turnover over 8 million and VAT entry. This limit means the traffic reached in the previous 365 consecutive days. Therefore, at the beginning of the year, this limit will not start from zero, as with a limit of 6 million, but is calculated as the turnover for the previous 365 days.
Exceeding this limit means entering the VAT system, according to which the status of a lump-sum taxpayer is automatically lost, and from that moment you are required to keep accounting records. The application for entry into the VAT system is made by submitting the EPPDV form to the Tax Administration – you yourself determine this limit and control over the excess of the limit, as well as registration in the VAT system. The application deadline is before the PPOPDV periodical application deadline, more precisely by the 15th of each month for the previous month, but the period is from the system entry day (i.e. the day the limit was exceeded) until the last day of the month.
Because you automatically lose lump-sum tax status, in this case you also file PPDG-1R and PPDG-1S electronically, as you would if you exceed the 6 million limit.
You must remain in the VAT system for at least two years, after which, if the turnover and income of your entrepreneurial business is less than 8 and 6 million, respectively, you can apply for lump-sum taxation again.
Keep in mind that losing lump-sum tax status changes your business in many ways and requires the professional management of your books. Creative Finance is at your disposal, whether for the loss of lump-sum taxation status and accounting obligations, as well as for checking limits and advising on your business.