Lump-Sum Tax Base – Serbia
Determining the Lump-Sum Tax Base – Serbia
To determine the lump-sum tax base, the Tax Administration uses the average monthly salary per employee for the last 12 months, taking into account the area, where the salary is received. The average salary in the Republic, city or municipality, determined in this way, is multiplied by the official number of employed people and a business activity coefficient and then divided by the total number of people living in the Republic, city or municipality, where the business is located.
Exceptionally, the base for the listed activities is determined by multiplying the average monthly salary, received in the Republic, by the number of employed people in the Republic, based on the newest data published by the state statistical body, and the business activity coefficient, and then dividing it by the number of people living in the republic:
| Business activity code | Business activity name |
| 4932 | Taxi operation |
| 4939 | Other land passenger transportation |
| 5911 | Motion picture, video and television programme production activities |
| 6201 | Computer programming |
| 6202 | Computer consultancy activities |
| 6209 | Other information technology services |
| 6311 | Data processing, hosting and related activities |
| 6312 | Web portals |
| 6399 | Other information service activities n.e.c. |
| 7022 | Business and other management consultancy activities |
| 7111 | Architectural activities |
| 7112 | Engineering activities and related technical consultancy |
| 7410 | Specialized design services |
| 9001 | Performing arts |
| 9002 | Support activities to performing arts |
Tax base correction, its reduction or increase is determined by applying the following elements:
- location of the taxpayer’s registered office
- time that has elapsed since the registration of an entrepreneur
- taxpayer’s age and work ability
- other circumstances affecting profit realization
- Location of the Taxpayer’s Registered Office
The tax base correction is made based on the data on the location of the taxpayer’s registered office by multiplying the starting base for specific activity codes by zone coefficient. Zone coefficients are determined in compliance with the law regulating property taxation.
| Business activity code | Business activity name |
| 1071 | Manufacture of bread, fresh pastry goods and cakes |
| 1512 | Manufacture of luggage, handbags and the like; manufacture of saddlery and harness |
| 1814 | Bookbinding and related services |
| 3314 | Repair of electrical equipment |
| 5610 | Restaurants and mobile food service activities |
| 7420 | Photographic activities |
| 8211 | Combined office administrative service activities |
| 8219 | Photocopying, document preparation and other specialised office support activities |
| 8621 | General medical practice activities |
| 8622 | Specialist medical practice activities |
| 8623 | Dental practice activities |
| 8690 | Other health care activities |
| 9329 | Other amusement and recreation activities |
| 9511 | Repair of computers and peripheral equipment |
| 9521 | Repair of consumer electronics |
| 9522 | Repair of household appliances and home and garden equipment |
| 9523 | Repair of footwear and leather goods |
| 9525 | Repair of watches, clocks and jewellery |
| 9529 | Repair of other personal and household goods |
| 9601 | Washing and (dry-)cleaning of textile and fur products |
| 9602 | Hairdressing and other beauty treatment |
| 9604 | Physical well-being activities |
It is important to mention that the business activity coefficient is related to the municipality in which the activity is performed and the zone coefficient refers to the area within the municipality. The location coefficient is applied to the greatest number of activities, except from the activities whose market is not related to the municipality area (for example, consultants). In contrast, zone coefficients are related to a smaller number of activities, namely those in which micro-location significantly affects business profitability (for example, hairdressers).
- Time That Has Elapsed Since the Registration of an Entrepreneur
The tax base correction, made in accordance with the parameter of time that has elapsed since the registration of an entrepreneur (the critical moment is December 31st), in terms of stimulating newly registered entrepreneurs’ profitability by reducing the amount of their liabilities that they have to pay to the state, which can be considered as a stimulus.
- Taxpayer’s Age and Work Ability
The correction refers to the taxpayers, who are under 30 at the critical moment, on December 31st of the year preceding the year for which the tax base is determined, as well as the taxpayers, who are older than 55 years; the applicable coefficient is 0,9.
However, there is an exception related to the taxpayers, who are under 30 on December 31st, as well as those, who are older than 60; the applicable coefficient is 0,7 if the business activity code is one of the following:
| Business activity code | Business activity name |
| 6910 | Legal activities |
| 7111 | Architectural activities |
| 7112 | Engineering activities and related technical consultancy |
| 7500 | Veterinary activities |
| 8621 | General medical practice activities |
| 8622 | Specialist medical practice activities |
| 8623 | Dental practice activities |
| 8690 | Other health care activities |
The purpose of this corrective element is to make the reduction stimulating for both young and older people and make it easier for them to start and perform the activity.
The coefficient of 0,85 refers to the taxpayers with reduced work ability and the status of a person with disability, which is proved by a decision of the competent institution.
The coefficient of 0,85 is applied to the taxpayers, who are on a sick-leave longer than 90 days due to a special-care pregnancy, maternity leave and childcare leave of the parents of the children with special needs, during their leave, which is documented by a decision or a medical certificate of the competent body. In cases like these, there is the option for an entrepreneur to designate a manager, who enters into labour agreement and performs the activity until the entrepreneur comes back.
- Other Circumstances Affecting Profit Realization
The correction refers to the taxpayers, who perform activities that belong to the group of vintage crafts in accordance with the rules regulating the issuance of certificates for vintage crafts, artistic crafts and handicraft businesses. The coefficient applied in these cases equals 0,5.
In terms of newly registered entrepreneurs, who want to perform the activities that belong to the group of vintage crafts – after the data is submitted by the Business Registers Agency and the decision is issued by the Ministry of Economy, which issues vintage crafts certificates, the competent Tax Administration shall not make reduction i.e. it will not apply the coefficient of 0,5.
It is important to point out that the cumulative coefficient value cannot be lower than 0,5, which means that the tax reduction based on tax reliefs cannot be lower than 50% of the initial base.
Lump-Sum Taxation Limitations
We have already stated that the lump-sum taxation is the taxation of an assumed income and that it refers to the activities for which business records cannot be kept.
When it comes to the income, the Legislator has set a limit in the amount of 6 million dinars for the entrepreneurs as a business form for the turnover made during one calendar year. The turnover is the sum of the values of all invoices issued during the year, regardless of whether the invoices were collected. In other words, it is the amount of goods and services invoiced during the calendar year based on the activity. This is the accrual accounting method applied in our course of dealing, regardless of the legal form. If the limit is exceeded during the first half of the year, from July 1st, the entrepreneur shall start keeping business records by applying double-entry book-keeping principles; if the limit is exceeded in the second half of the year, book-keeping shall start the following calendar year.
It shall be noted that the entrepreneurs, who exceed the limit, should not wait for the Tax Administration to become aware of it; they should take care of that on their own and keep the Tax Administration informed, which is regulated by the Individual Income Tax Law.
The entrepreneurs, whose business activities are also funded by other entities, cannot be subject to lump-sum taxation either.
Apart from the income amount limitation, it is also possible to limit lump-sum taxation by the type of activity. The codes that can be subject to lump-sum taxation are available via the following link https://www.purs.gov.rs/sr/biro-za-informisanje/novosti/6078/pausalci.html
The limitation of the lump-sum taxation is a decision on VAT registration or, to be more precise, VAT payers cannot be lump-sum taxpayers.
