Tax Evasion in Serbia: Criminal Law Procedure

Tax evasion is a serious problem in the modern economic system of Serbia. As tax regulations become increasingly complex, individuals and businesses often find themselves inadvertently entangled in tax-related procedures or, in more severe cases, facing charges of tax evasion. Understanding the legal aspect of tax evasion and its legal implications is of utmost importance for anyone operating within the fiscal system of Serbia.

Criminal Law Aspects (Article 225 of the Criminal Code)

To comprehend tax evasion fully, it’s crucial to begin with a clear definition within the Serbian legal framework. Tax evasion, as prescribed in the Criminal Code of Serbia, refers to refers to acts of providing false information or failing to report earned income or other facts that have an impact on the determination of tax obligations, with the intention of fully or partially avoiding tax payment. This includes various activities, such as not declaring income, falsely declaring expenses, hiding assets or carrying out various fraudulent schemes.

The severity of threatened penalties imposed for tax evasion in Serbia is directly proportional to the amount of the evaded tax liability:

• if the amount of tax whose payment is avoided exceeds one million dinars (about 8,500 euros), the penalty is imprisonment for a period of one to five years and a mandatory fine.
• if the amount of tax whose payment is avoided exceeds 5 million dinars (about 43,000 euros), the penalty is imprisonment for a period of two to eight years and a mandatory fine.
• if the amount of tax whose payment is avoided exceeds 15 million dinars (about 128,000 euros), an even stricter prison sentence of three to ten years and a mandatory fine are prescribed penalties.

Tax Control and Criminal Prosecution for Tax Evasion

The Tax Administration controls the reporting and collection of taxes, and this state authority has a key role in detecting and reporting irregularities on the part of taxpayers. When the Tax Administration conducts tax controls of taxpayers and identifies potential irregularities, the process that follows is legally regulated in detail. Key steps in this process include:

1. Minutes on Tax Control and Established Irregularities: When irregularities are discovered during a tax control, the Tax Inspector prepares minutes that thoroughly documents all relevant facts and findings. These minutes serve as a factual basis for the competent authorities in further proceedings regarding potential tax evasion;
2. Tax Police Division: If the facts and circumstances indicate the existence of grounds for suspicion that a tax crime has been committed, the Tax Inspector prepares a report and along with the obtained evidence, submits them to the Tax Police, which, in order to detect tax crimes and their perpetrators, acts as an internal affairs authority in the pre-investigation procedure and is authorized to undertakes all evidentiary actions, with the exception of movement restrictions. In accordance with the provisions of the law regulating criminal proceedings, the Tax Police may summon and interrogate the suspect, including bringing him in by force, then before initiating criminal proceedings conduct inspection of the apartment, business or other premises, vehicles and persons and carry out the temporary confiscation of items that may serve as evidence in criminal proceedings for tax crimes. The inspection of the apartment and other premises can be carried out only based on a court order and in the presence of two witnesses.
3. Criminal Report: Based on the collected information, as well as the facts and evidence from the Tax Inspector’s report, the Tax Police prepares a Criminal Report and submits it to the competent public prosecutor office, which undertakes further prosecution regarding the committed tax evasion. If the Tax Police determines that the facts and circumstances stated in the Tax Inspector’s report do not indicate the existence of grounds for suspicion that a tax crime has been committed, and that there are no conditions for filing a Criminal Report, the Tax Police Inspector informs Director of competent Branch of the Tax Administration about this in order to submit a request for the initiation of tax misdemeanour proceedings.
4. Criminal Prosecution: After receiving the Criminal Report, the Public Prosecutor undertakes evidentiary actions in order to conduct criminal proceedings against suspected taxpayers for the crime of tax evasion. This entails conducting an investigation, gathering evidence (which is carried out exclusively by the Tax Police), and finally, pressing charges against those suspected of tax evasion.

It is essential to note that the entire process, from tax audits to potential criminal prosecution, adheres to strict oversight and legal procedures.

What to Do If Accused of Tax Evasion

Facing accusations of tax evasion is a serious situation, in which it is important to remember that you have legal rights and options to protect yourself and address the situation appropriately. The following steps should be particularly considered if you are suspected of a tax evasion:

1. Seek Legal Representation: One of the most critical steps you should take immediately is to consult with an experienced tax consultant or attorney (with note that only an attorney can represent you in criminal proceedings) who can provide you with valuable legal advice, protect your rights, and guide you through the entire legal process.
2. Gather Documentation: Collect and organize all relevant financial records, tax returns, and documents that pertain to the subject of tax control. These documents can serve as crucial evidence in your defence and help clarify any misunderstandings.
3. Do Not Communicate with Tax Authorities Without Legal Counsel: It’s important not to make any statements or provide information to tax authorities without your attorney present. Your attorney can help you navigate communications with the tax authorities to ensure your rights are protected.
4. Explore Possible Resolutions: Depending on the specific circumstances of your case, your attorney may explore various options, such as negotiating with tax authorities, entering into a plea agreement, or challenging the charges in court.
5. Prepare for Legal Proceedings: If the case progresses to criminal proceedings, your attorney will prepare with you the defence strategy. This may include presenting evidence in your favour, and ensuring your rights are protected throughout the trial.

Remember that being accused of tax evasion does not automatically make you guilty. With the assistance of a skilled attorney and careful attention to legal procedures, you can protect your rights and work towards resolving the situation in the best possible manner.

Tax evasion has legal, financial and personal implications that affect both individuals and companies alike. Consequently, it is important that you make informed decisions and, if necessary, secure the legal support needed to navigate this complex terrain.