Tax Evasion – What is Tax Evasion and How is it Proven?

Tax evasion is a serious criminal offense that involves avoiding tax obligations by falsely presenting information or concealing data relevant to determining tax liabilities. This form of tax violation is regulated by the Criminal Code of the Republic of Serbia and, due to its nature, it is often regarded as one of the most severe forms of economic crime.

The primary goal of tax evasion is to avoid paying taxes, whether for the benefit of the perpetrator or another party. The most common methods used to commit tax evasion include misreporting income, failing to report liabilities, or hiding relevant facts that affect the determination of tax obligations.

Given its impact on the state budget, tax evasion is treated as a serious social issue, making the process of proving this criminal offense particularly demanding. Below, we will analyze the key elements of tax evasion and how intent is established in cases involving this offense.

Objective Circumstances as Evidence of Intent to Evade Taxes in Tax Evasion Cases

Tax evasion is clearly defined in Article 225, Paragraph 1 of the Criminal Code of the Republic of Serbia. To establish the existence of this criminal offense, it is necessary to prove the key subjective element – the perpetrator’s deliberate action aimed at avoiding tax obligations. Courts use specific objective circumstances as the basis for determining this intent. Below, we will analyze these circumstances in detail, with a special focus on case law.

Definition of Tax Evasion According to the Criminal Code

Article 225, Paragraph 1 of the Criminal Code of the Republic of Serbia prescribes the following:

“Anyone who, with the intention that they or another person completely or partially avoid paying taxes, contributions, or other prescribed duties, provides false information about earned income, property, or other facts that affect the determination of such obligations, or who, with the same intention, in the case of a mandatory declaration, fails to report earned income, property, or other facts that affect the determination of such obligations, or who, with the same intention, conceals data related to determining such obligations in any other way, and if the amount of the obligation being avoided exceeds one million dinars, shall be punished by imprisonment of one to five years and a monetary fine.”

Based on this definition, the key elements of the criminal offense of tax evasion are as follows:

• Subjective element – The intent to avoid paying tax obligations.
• Objective actions – Misreporting information, failing to report obligations, or concealing facts.
• Financial threshold – The amount of the avoided obligation must exceed one million dinars.

It is clear that the essential element of this offense is intent, meaning that it is necessary to prove the perpetrator’s deliberate and targeted actions.

Complexity of Establishing Intent

Proving intent is the most challenging aspect of proceedings for tax evasion, as the law does not prescribe a precise methodology for determining this subjective element. Unlike objective actions, which can be easily documented (misreporting, non-reporting, and concealing information), intent is proven indirectly – through analysis of the perpetrator’s actions and behavior.
The court relies on objective circumstances that indicate the existence of intent to avoid paying taxes.

These circumstances may include:

• Sudden changes in financial operations (e.g., a sudden drop in reported income without a valid explanation).
• Concealment of financial documentation (e.g., the unavailability of invoices, contracts, or accounting records).
• Repeated actions with a similar pattern (e.g., multiple instances of unreported revenue or income).
• Falsely representing transactions (e.g., categorizing personal expenses as business expenses).

Case law shows that intent can be proven by analyzing evidence from the case, but also through financial expert reports, which often provide crucial information about the perpetrator’s behavior and motives.

Conclusion

Tax evasion is a serious criminal offense that involves the intent to avoid paying tax obligations. According to the Criminal Code of the Republic of Serbia, this offense is proven through the presence of three key elements: intent, objective actions, and a financial threshold (exceeding one million dinars).
Proving intent is the most difficult part of the proceedings, as it requires evidence of the perpetrator’s deliberate and targeted actions. Courts rely on objective circumstances such as concealing documentation, misreporting data, and other actions that indicate deliberate avoidance of tax obligations.

Case law shows that key evidence in such cases includes financial expert reports, witness testimonies, and transaction documentation that does not align with reported data. If it is proven that the amount of unpaid taxes exceeds one million dinars, the perpetrator faces imprisonment of one to five years and a monetary fine.
Understanding case law related to this criminal offense can help businesses and individuals avoid unintentional mistakes in their operations that could be interpreted as tax evasion. It also provides insight into legal practices and the methods courts use to prove intent in tax-related cases.