Lump-sum taxpayers are independent entrepreneurs who have decided not to or are unable to keep business records, and who pay taxes and contributions to the state for their business based on the received lump-sum solution. Lump-sum taxation is a taxation system where taxes and contributions are paid on a lump-sum determined income, and these amounts are fixed. In fact, the Tax Administration determines a fixed amount of tax and contributions for each month, and these amounts are determined once a year for the entire year. The business activities of entrepreneurs subject to lump-sum taxation are regulated by the Law on Personal Income Tax (hereinafter: the “Law”) and the most common forms of organizing business entities in our country are limited liability companies, i.e. abbreviated LLCs, and entrepreneurs.
Entrepreneurs entitled to this form of taxation include, among others, those who achieve an annual turnover up to 6,000,000.00 dinars, as well as newly established entrepreneurs planning annual turnover lower than 6,000,000.00 dinars.
Additionally, it should be noted that the Law specifies which activities cannot be subject to lump-sum taxation, namely: wholesale and retail trade, restaurants, hotels, financial intermediation activities, real estate-related activities, advertising, market research, where other entities also invest in their activities.
Regarding the application for lump-sum taxation, the Law stipulates that the application can be submitted to the competent tax authority until 31 October of the current year for the following year.
The choice of lump-sum taxation must be made during establishment and registration with the Serbia Business Registers Agency (hereinafter the “SBRA”) which refers this application to Tax Administration. Entrepreneurs who do not opt for lump-sum taxation during establishment cannot subsequently apply for lump-sum taxation for the current year. The Tax Administration issues a decision on the determined tax and contributions obligation electronically within 48 hours from the day of registration and delivers it to the tax mailbox on the Tax Administration portal – ePorezi. The amount of tax and contributions is determined based on the average earnings in a specific activity, varying according to the type of activity and municipality where the lump-rate taxpayer is registered. The amount of the lump-rate determined tax obligation is established based on the average earnings in the registered entrepreneur’s activity, the registered location of the entrepreneur, and the number of employed workers.
The amount of tax and contributions can be roughly calculated using the calculator available on the Tax Administration portal (https://eporezi.purs.gov.rs/kalkulator-pausalnog-poreza-i-doprinosa.html). Taxes and contributions are paid based on the decision by the 15th of the month for the previous month (or within 15 days of receiving the decision for all outstanding months).
Apart from losing the right to lump-sum taxation when exceeding the turnover amount of 6,000,000.00 dinars in a calendar year, the same right is lost if the VAT turnover in the last 365 days exceeds 8,000,000.00 dinars.
There are situations where a lump-sum entrepreneur may not exceed the limit for lump-sum taxation but exceeds the limit for entering VAT. The eligibility for lump-sum taxation considers the total turnover achieved in the calendar year in the Republic of Serbia and the turnover realized based on services provided abroad.
Entrepreneurs who do not register with the SBRA (e.g. attorneys) are subject to a different procedure and are obliged to submit a request for lump-sum taxation within five days from registration to the competent organizational unit of the Tax Administration according to their seat of business. Since 2020, there has been an amendment regarding the application for lump-sum taxation of entrepreneurs who do not register with the SBRA, allowing submissions solely through the Tax Administration portal in line with this change.
A lump-sum taxed entrepreneur has the option, if they do not generate turnover for a certain period, to change their status to a dormant state. In this case, the SBRA is provided with a form for change – temporary cessation of activity. After receiving the decision from the SBRA, it is necessary to amend the PPDG-1R and inform the Tax Administration to suspend obligations during that period. Upon resuming business activities, a form for change – resumption of business activities are submitted to the SBRA, and after receiving the decision from the SBRA, it is necessary to inform the Tax Administration.
Regarding the determination of the lump-sum income amount, it should be emphasized that, among other things, from 1 January 2024, a The Regulation Amending the Regulation on Detailed Conditions, Criteria, and Elements for Lump Sum Taxation of Taxpayers on Income from Independent Activities comes into force reducing the tax base for newly established lump-sum entrepreneurs in the year of registration by 50%. The initial base is multiplied by a coefficient related to the time preceding registration. For instance, an entrepreneur registered in the year for which the tax liability is determined, the initial base is multiplied by a coefficient of 0.5; for the following year, the initial base is multiplied by a coefficient of 0.8, and so on.
It is important to note that the increase in the taxation base compared to the previous year for which the tax was determined cannot exceed 10% until 2025.
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