Flat-rate taxpayers are entrepreneurs that have a fixed amount of taxes that they are obligated to pay.
Different from other taxation methods where one way or another, legal entities have tax obligations based on their profit, flat-rate taxpayers are taxed in a fixed amount regardless of their incomes or outcomes.
The Tax administration based on precise prescribed elements decides what will be the fixed monthly rate of taxes during one calendar year.
In the further text, we will represent information that every flat rate taxed entrepreneur should know.
Who can be a Flat Rate Taxpayer?
Flat-rate tax payer can be every entrepreneur besides:
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- Entrepreneurs performing business activity from the field of advertising and market research;
- Entrepreneurs performing business activity in the field of wholesale, hotels and restaurants, financial mediation, and activity regarding real estate;
- The one in which business activity others invest;
- Whose total turnover in one calendar year is greater than 6.000.000,00 rsd;
- Entrepreneurs registered in the VAT system.
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To what period of time the flat rate tax payer is obligated?
The tax administration determines a fixed monthly rate that the flat-rate taxpayer must pay during the time of one calendar year. Specifically the period from 01.01.-31.12. during the current year is relevant.
For example, if an entrepreneur is registered on September 21, 2023, the Tax Administration will issue a Decision by which it will determine tax obligation until December 31, 2023.
To conclude, it is irrelevant at what time during the current year the flat-rate taxpayer is registered, the tax administration will determine the tax obligation during that current year.
How is the flat-rate tax determined?
The Tax Administration based on various criteria such as:
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- the place of performing the business activity,
- the code of business activity,
- the age of the entrepreneur and
- Other criteria
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evaluate the tax, and with a Decision, determines the amount flat-rate taxpayers will need to pay.
If you would like to have a general calculation on what amount of taxes would be in your case if you decide to become a flat-rate taxpayer, we advise you to consult with an expert.
How is the Flat-rate Taxpayer registered?
Persons that start performing a business activity that is registered in the Business Registers Agency will at the moment of registration decide if they want to be Flat-rate taxpayers.
Exceptionally, persons that are not registered with the Business Registers Agency, need to submit a request to the Tax Administration within five days from the day of registration, electronically through the portal euprava.
If entrepreneurs that are already registered but not as Flat-rate taxpayers want to become a flat-rate taxpayers, can submit a request to be registered as Flat-rate Taxpayers until October 31 current year for the following year.
Limit of 6.000.000,00 dinars during one calendar year
We already mentioned that flat-rate taxpayers have by law a prescribed limit of turnover that they can not exceed if they want to be flat-rate taxpayers.
That limit amounts to 6.000.000,00 dinars turnover during one calendar year.
Turnover is every transaction on the current bank account related to the Invoices that the entrepreneur issues to the customers.
What happens if the flat-rate taxpayer exceeds the limit of 6.000.000,00 dinars turnover on current bank account?
In this case, the flat-rate taxpayer will be obligated to inform the Tax Administration of the fact that he is no longer fulfilling the requirements to be a flat-rate taxpayer.
Bearing in mind the moment when the flat-rate taxpayer exceeds the limit of 6.000.000,00 rsd, it will depend on when the Tax Administration will oblige the entrepreneur to have financial books.
The Tax Administration will oblige the entrepreneur to have financial books from as of the middle of the current year or starting from the next year.
Can the flat-rate taxpayer who can no longer be taxed by flat rate apply for personal salary taxation?
According to the Ministry of Finance, the answer is partially positive. If the entrepreneur submits a request for personal salary taxation until December 15 starting from the next year. So, to conclude, according to the Ministry of Finance, it is not possible to apply for personal salary taxation in the same year when flat-rate taxation stopped. It is possible only from the beginning of the next year(the year preceding the year when the status as a flat-rate taxpayer has stopped.)
Limit of 8.000.000,00 dinars during the period 365 days
We have acknowledged the subject of a calendar year, that is with the timeline during the period 01.01.-31.12. within the current year.
However, for the limit of 8.000.000,00 dinars, it is considered the timeline of 365 days looking backward. That is, if the entrepreneur exceeds the limit of 8.000.000,00 dinars in 365 days backward, the next day after exceeding the limit will enter into the VAT system.
Different from the limit of 6.000.000,00 dinars, where the tax administration will issue a Decision by which it will order the entrepreneur to keep financial books, the same day when the entrepreneur entered into VAT he will be obligated to keep financial records.
What books do Flat-rate taxpayers need to have?
Even though flat-rate taxpayers are not obligated to have financial bookkeeping, they need to have a book on total turnover.
Independent test
In 2020, there is a new legal regulation that prescribes a certain „Test“ which every entrepreneur needs to „pass“ to be able to prove his independence.
It was prescribed to prevent massive tax evasion as many employers in order not to pay socials and contributions for their employees have „hired“ them as entrepreneurs.
We will try to represent the basic elements of the independent test and what criteria are applicable to entrepreneurs.
– To whom is the independent test applicable?
For both entrepreneurs and flat-rate taxpayers.
Concerning whom the independence test applies?
Concerning every principal, the entrepreneur can not fulfil more than five out of nine criteria. So, if you fulfil four or fewer criteria, it is considered that you have passed the independence test.
– What are the nine criteria for the independence test?
1. Working hours and absences from work
Within this criteria, it is observed if the principal or related entity with the principal decides working hours and/or absences from work of the entrepreneur. Also, it is observed whether the compensation during absence diminishes. If it is determined that the principal is responsible for your working hours and absences, it will be considered that you did not successfully pass this criteria.
2. Workspace
Within this criteria, it is evaluated whether the entrepreneur usually uses the workspace which the principal provides. If this is the case, it will be considered that you did not successfully pass this criteria.
3. Personal improvement and education
Within this criteria, it is analyzed whether the principal is organizing or conducting personal education of the entrepreneur. If that is the case, it will be considered that you did not successfully pass this criteria.
4. Advertising for work positions
The entrepreneur will not pass this criteria, if the principal has engaged the entrepreneur after seeing an advertisement in the public information media for the needs of workers or if the entrepreneur is engaged through a third person that is performing the prevailing business activity as recruitment..
5. Work-related tools
If the principal is providing basic tools, that is material or nonmaterial means for the basic work of the entrepreneur, it will be considered that you have not passed this criteria.
6. The entrepreneur’s income
If within the period of 12 months, at least 70% of the total entrepreneur’s income is achieved from the side of one principal or connected person to that principle it will be considered that the entrepreneur has not passed this criteria.
7. Business risk clause
If in the work contract of the entrepreneur it is not mentioned that the entrepreneur is responsible (usual business risk) for the work delivered to the client it will be considered that the entrepreneur has not passed this criteria.
8. Non-competition clause
Bearing in mind that an entrepreneur is a natural person that is performing the business activity as an independent person if the work contract is included partial or total prohibition that the entrepreneur provides services to other principles (besides partial ban for a few direct competitions) it will be considered that the entrepreneur has not passed this criterium.
9. 130 work days within the period of 12 months
If the entrepreneur is performing a business activity with compensation for the same principal continuously or with breaks for 130 days or more within the period of 12 months, it will be considered that the entrepreneur has not passed this criteria. One work day is included in the period of any time in one day between 00 and 24h.
Now when you know all the important questions you can answer to the following question:
Would you pass the test?
