The last two decades were marked by growing business opportunities in the IT domain, softer R&D, advertising, graphic design, etc, which were all supported by the development of digital platforms on the Internet. In this environment it spontaneously became common practice for domestic residents to be employed by foreign companies which are not registered in the Republic of Serbia with the Business registers agency. The legal position of IT experts which make their earnings in this way for years has remain unregulated and with that the question of taxes has also remained unanswered considering that foreign employers practically had no obligation which was being enforced in regards to paying taxes and social security contribution for hired experts.
Now only a few days after the publication of the aforementioned newsletter, the newly passed announcement of the Tax Administration of the Republic of Serbia is officially opening the door to the applicability of tax regulations on much broader categories of the citizens.
As it is stated in the newest Announcement of the Tax Administration, a certain number of citizens has been identified who receive payments from abroad on their foreign currency accounts, pointing to a very low rate of tax regulation compliance by these specific members of the population. What is vital to note is state authorities have placed the spotlight in particular on the revenues made by payment cards opened in abroad, SKRILL, PAYONEER, and NETELLER to name but a few, including payments which are sent to BOOKING.COM.
In the light of all current events on the economical scene in Serbia, especially taking into account the growth of the gross domestic product in digital economy sector, the Tax Administration was forced to take its first steps. Keeping in mind rapid development of new technologies and lower taxation law flexibility in regards to the frequent arising shifts, this issue had come a long way before it has taken seriosly into consideration by the competent authorities.
Furthermore, the above mentioned Announcement of the Tax Administration clearly dictates that all freelancers, on their own accord, must submit tax returns for the income made before from abroad which is earned from working at one of the digital platforms, such as GOOGLE, UPWORK, BIBO, GLOBAL OPPORTUNITY, AIRBNB and etc. As a result of that, the practice of tax control and collection of tax receivables, after quite some time finally gets its more complete expression by directly targeting IT professionals. Considering that in most cases these taxed haven’t been paid for several years, the main question on everyone’s mind is what will be the total amount of tax and how it will be calculated? Will outstanding debt be payable only for the previous period of 5 years whereas older taxes will be subject to the statute of limitations? Are Tax Authorities only going to claim tax debts for the future period with no consequences on earlier default on tax payment or will they initiate misdemeanour violation sentencing and collection of non-paid tax receivables, currently is still an unknown.
With nature of tax laws that are known for a wide variety and great disunity of regulations, taxpayers are not often able to regulate their position in a satisfactory way for both sides. It is important to mention the fact that the National bank of Serbia has access to all account information, including accounts used to withdraw funds earned online, which makes the procedure of tax control extremely simple and expedient in order to prevent covering up of tax debt. In addition, according to the Tax Procedure and Tax Administration Act, in case of the existence of tax debt, Tax Administration firstly initiates the procedure of compulsory execution of its receivables from funds deposited on domestic and foreign currency accounts of tax debtors.
With strict regulation which will undoubtedly be widely applied, taxpayers have to keep in mind the relatively high penalties in the cases of tax violation, which can amount to 150,000 rsd and half of the amount of evaded tax. Moreover, tax evasions over 500,000 rsd entail criminal liability with the possibility of imprisonment.
The new practice of Tax Authorities will not only be limited to professionals in the IT sector but will include influencers, YouTubers who make a living through advertising of goods and services on the social network as well. We should not forget foreign language teachers who lecture on well-known online platforms whose position from the point of view of tax regulations is equal to the position of other mentioned experts.
Taking into account the changes brought about by the new practice of competent state authorities, together with the great heterogeneity of regulations, citizens who could be included in tax control should seek help in the form of tax advice and professional legal services. In this regard, our tax consulting company – ZSTAX together with our law office, with several years of experience, provides tax consulting services, professional legal assistance, and representation for the purpose of the complete legal security of our clients in these and in other issues relevant to the business activities of our clients.
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