Lump-sum tax entrepreneurs
Lump-sum tax
There are some questions such as foundation, operation, termination, tax and other liabilities that frequently arise in everyday communication with clients opting for entrepreneurship. This is why we will try to answer some of the questions we are often asked. Although we are aware that we cannot answer all of them in this article, you can contact the “Creative Finance” team for all other questions.
So, the main question is “How to become an entrepreneur?”
In accordance with the Article 40 of the Individual Income Tax Law, a self-employed taxpayer submits an application for lump-sum taxation to the competent Tax Administration. During the process of registration with the Business Registers Agency, new entrepreneurs opt for lump-sum taxation by filling in forms. This complies with the Article 42 Paragraph 2 of the Individual Income Tax Law, where the Business Registers Agency forwards this application to the Tax Administration.
The Tax Administration shall check if the entrepreneur has the right to lump-sum taxation and, in accordance with that, it shall adopt a decision on the recognition or denial of the right to lump-sum taxation. The right to lump-sum taxation is not recognized in the following cases:
- if an entrepreneur performs an activity related to advertising and market research,
- if an entrepreneur performs an activity related to wholesale, retail, hotels, restaurants, real estate, financial mediation,
- when others invest in entrepreneurs’ business,
- if an entrepreneur is in the VAT system,
- if an entrepreneur’s total planned turnover is less than 6 million RSD.
What is the amount of lump-sum tax?
Lump-sum tax and contributions are calculated based on an estimated tax base, which depends on the type of activity, on the location of an entrepreneur’s headquarters, taxpayer age, etc. You can check the information about the estimated monthly amount of lump-sum tax on the website of the Tax Administration of the Republic of Serbia at the following link: https://eporezi.purs.gov.rs/kalkulator-pausalnog-poreza-i-doprinosa.html
Which business records shall lump-sum taxpayers keep?
In accordance with the Article 43 Paragraph 4 of the Individual Income Tax Law, the only type of business records that shall be kept is the business book on flat turnover of taxable taxpayers (Serbian: KPO). All income gained by a lump-sum entrepreneur by selling products and services is chronologically recorded in the business book on flat turnover of taxable taxpayers. Expenses are not recorded in this book because the lump-sum entrepreneur uses his assets freely and it is not obliged to acquit them. All issued invoices are recorded regardless of whether they have been collected or not.
Deadlines for tax payment
According to the decision of the competent Tax Administration, the liabilities related to taxes and mandatory social insurance contributions are payed once a month, on the 15th day of the month for the previous month. Monthly amounts shall remain the same until the Tax Administration informs you of changes in the form of a decision.
When do I stop being a lump-sum entrepreneur?
The right to lump-sum taxation shall be lost when the total annual turnover for the year preceding the year for which the tax is determined exceeds 6 million dinars. The total turnover includes the income gained by selling products and services and it does not include loans or payments collected by the entrepreneur for the purpose of discharging liabilities.
Apart from the 6 million dinar limit, all entrepreneurs shall lose their lump-sum entrepreneur status by force of law when they enter the VAT system.
Lump-sum entrepreneurs can make an unsolicited decision to stop paying taxes and contributions based on the lump-sum income. They can inform the Tax Administration of that decision and lose their status as of the following calendar year but they are obliged to submit the PPDG-1S tax return by January 15.
