The Tax Administration of the Republic of Serbia has recently published a call to natural persons who acquired income abroad in the past period to file tax applications, calculate and pay taxes and contributions for mandatory social insurance with relevant interest as soon as possible, in order to avoid offence liability.
This call followed after the Tax Administration had established incompatibilities between the data on natural persons’ income from abroad and the information on submitted applications and paid taxes by self-taxation, which will result in institution of tax control of such persons.
According to the Tax Administration, such incomes are acquired from provision of various services, most frequently software development, translation, foreign language teaching, promotion, graphic design etc. In addition, these incomes are also generated by natural persons through social networks as so-called “you-tubers” and “influencers”, through online betting and by leasing their own real estate for a period up to 30 days (so-called “short term”).
Taxpayer in such situations is a natural person acquiring income. However, when it comes to withholding taxes, the income payer shall be obliged, upon income payment, to calculate and pay appropriate taxes and contributions (“by withholding” from gross amount), so that the recipient of income receives net amount on his/her account. In this manner, the payer of income shall have the role of payer of taxes although he/she is not taxpayer, which ensures more efficient control of tax payment and less burden on natural persons – income recipients, considering that income payers are most often legal entities and entrepreneurs.
However, when income payer is a non-resident (with seat or residence abroad), such model of collection and control of tax collection is impossible. Therefore, the Law on Citizens Income Tax prescribes that taxpayer who acquires salary and other income from another state shall be obliged to calculate and pay withholding taxes under this law, which means that taxes shall be paid by self-taxation. The same applies in situations when payer of income is not a legal entity or entrepreneur.
Therefore, the persons who acquire income from abroad were obliged to file tax applications and to pay appropriate taxes and contributions for mandatory social insurance.
In relation thereto, it should be noted that the Law on Tax Procedure and Tax Administration (“LTPTA”) establishes that the right of Tax Administration to establish and collect taxes and auxiliary tax duties shall become obsolete five years after the first day of obsoleteness, whereas the obsoleteness shall start on the first day of the year following the year when taxes i.e. auxiliary tax duties should have been established. It is also important to say that the provisions of the LTPTA that regulate obsoleteness of the right to establishment and collection of taxes shall not apply to contributions for mandatory social insurance.
The LTPTA also prescribes misdemeanour fines ranging from RSD 5.000,00 to 150.000,00, which may be imposed to a natural person for several offences such as failure to file a tax application, refusal to participate in the procedure of tax control, failure to provide notices upon Tax Administration order etc. If a person fails to pay taxes it may be subject to fine amounting to 50% of the established taxes, but no less than RSD 5.000,00.
This article is to be considered as exclusively informative, with no intention to provide legal advice.
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By Ivana Ruzicic, Managing Partner, PR Legal