In turbulent business conditions and business decisions, we often find ourselves in situations to question the correctness of
business decisions, especially when having in mind the number of tax laws, regulations, statutes and tax returns.
Almost every day, the Ministry of Finance of Serbia publishes opinions on its official website only regarding the application of the Law on VAT and the Law on Profit Tax. The number of official interpretations and instructions for tax laws application exceeds the figure of 3000. That’s quite a lot and it’s no wonder if mistakes are made.
The tax audit has the task of controlling historical data in tax returns. The audit is a simulation of tax control which
determines errors that may be formal or essential, i.e. materially significant or materially insignificant, and the consequence is the most common errors in the application of tax and accounting regulations.
The tax audit includes the following:
– VAT review
– Corporate income tax review
– Other taxes review
Value Added Tax Review
It includes an review of VAT calculations, i.e. control of VAT returns in the analysed periods, and above all a book of
incoming and outgoing invoices, incoming and outgoing invoices from the aspect of the Law on VAT, as well as relevant contracts and accompanying documentation. The aim of the review is to identify possible formal and essential shortcomings and make suggestions for their amendments. Each invoice in the observed period will be taken into account.
Corporate Income Tax Review
It represents the control of the profit tax calculation and forms that should be submitted to the Tax Administration (tax
balance, tax returns, tax depreciation, etc.). This control will cover significant items (costs and revenue), expressed in the above stated forms.
Other Taxes Review
This review includes the control of all other taxes (except VAT and income tax) calculated and paid in the period for which the analysis is performed. The aim of this review is to identify other tax risks.
Determining the existence of a formal or essential, i.e. materially significant or materially insignificant error or errors is
important for taxpayers for several reasons, but one of the most important is related to the correctness of submitted tax returns.
So, the tax consequence is the submission of an amended tax return due to the correction of errors from the previous period.
The same applies to the correction of financial statements.
The deadline for the amended tax return submission according to the Law on Tax Procedure and Tax Administration is
five years, with the deadline being calculated from the first day of the following year from the year in which the original tax return was filed.
After filing the amended tax return, the taxpayer has to pay the difference between the tax calculated and paid according to
the original tax return and the amount of tax calculated in the amended tax return, with accrued interest on the difference.
If the taxpayer does not file an amended tax return, but the Tax Administration finds an error or omission during the control
procedure, in addition to taxes and interest, the taxpayer risks incurring tortious liability and fines, and in some cases criminal liability.