Have you double – checked your tax returns in the previous three years?

March 29, 2019

Have you double – checked your tax returns in the previous three years?

March 29, 2019

Miloš Velimirović

Miloš Velimirović

Partner

Milan Novakov

Milan Novakov

Senior Associate

Annual Tax Audit Plan has been Adopted

Each year the Tax Administration adopts an annual audit plan specifying the sector of the economy and the tax obligors which will be its center of attention in the current year. Recently, the director of the Tax Administration has signed off on the 2019 Tax Administration Annual Tax Audit Plan (hereinafter the “Audit Plan”).

In accordance with the introduction section of the Audit Plan and the article 118 of the Law on Tax Procedure and Tax Administration (“Official Gazette of RS” no. 80/2002… 95/2018 – hereinafter the Law), the Tax Administration has decided to focus its attention in 2019 on the tax obligors with the following characteristics, based on their significance and their association with the predetermined tax risks:

  • tax obligors with non-resident shareholders, in which case the focus of the Tax Administration shall especially be on the transactions with affiliated entities and the application of the treaties for the avoidance of double taxation,
  • tax obligors which have conducted status changes (mergers, spin-offs, ) and the effect of the transfer of the property therein to the value-added tax and company income tax, and
  • tax obligors which are engaged in the sale and purchase of petroleum products and calculation and payment of excise tax.

In the 1.3 section of the Audit Plan, the Tax Administration has additionally noted that the tax obligors which have presented the tax credit or which are using the tax credit for a period longer than 12 months shall be especially targeted.

The time period which may be encompassed by the tax audit can be up to three previous business years, or even more if the tax inspector determines irregularities, but limited to the statute of limitation of the respective tax obligation (generally, up to 5 years in accordance with the section seven of the Law).

In accordance with section 1.4. of the Audit Plan, the duration of the Tax Audit is limited depending on the size of the tax obligor from 85 working hours up to 240 working hours.  This means that the tax inspector may choose to stay in the premises of the tax obligor from 10 working days to 30 working days.

Tax Audit Procedure in a Nutshell

In accordance with article 124 of the Law, the tax audit procedure is regularly initiated by an order which needs to be delivered to the tax obligor. The tax audit may be suspended based on the objection of the tax obligor, per the discretion of the Tax Administration. In accordance with the article 125 of the Law, the tax inspector must compile the minutes on tax audit to which the tax obligor may object to within eight days, except in the case of audit of turnover of the fiscal register in which case the tax obligor may object within two days.

If the tax inspector determines irregularities during the tax audit the consequences may be severe, and in accordance with the article 130 and article 131 of the Law may relate to the confiscation of goods and transport vehicles and/or the temporary prohibition on all business activities for up to one year.

Within sixty days from the delivery of the minutes on the tax audit, the Tax Administration adopts the resolution by which it determines the tax obligation of the tax obligor and orders the payment of the calculated amount and/or the submission of the tax return. If the tax obligor does not act in accordance with the resolution of the Tax Administration, the Tax Administration in accordance with the article 132 of the Law may prohibit: (i) the disposal with funds of the tax obligor and/or (ii) the disposal with property of the tax obligor and/or (iii) the performance of one or more business activities by the tax obligor.

The tax obligor has the right to appeal the resolution of the Tax Administration within 15 days from the day of receiving of the resolution, and if the resolution becomes final in certain instances the tax obligor may dispute the resolution before the Administrative Court.

However, if you believe that your company is susceptible to tax audit in accordance with the Audit Plan, and having in mind the cumbersome tax audit procedure and the consequences in case of discovery of any irregularities – how certain are you that your business is in compliance with the tax regulations?

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Miloš Velimirović , Partner
milos.velimirovic@sog.rs

Milan Novakov, Senior Associate
milan.novakov@sog.rs

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