“Forced savings” due to tax payment – Three-month VAT stops payments in October, monthly payment turns out to be a better solution

“I will pay you right after I paid VAT” – this is what 70% of Serbian economy was saying during October. The “D” day is Monday, October 21st, when the final deadline for a three-month tax payment is due. As the Law on VAT which came into forceJanuary 1 this year stipulates, more than 70% of Serbian companies automatically moved to a three-month basis payment. Therefore, the last month of the period became a month “the payment system stops”.

- It is a commonly-known fact that the financial discipline is not our advantage. Majority of us does not leave a monthly obligation on the side and does not have cash for three months but the profit is spent on other things and when the time comes for VAT everything is left for that purpose. Then I pay as well only urgent things and only those who have to pay me – S.P., a director of a Belgrade-based company says for our portal.

With the implementation of t he Law on VAT, as of January 1, taxpayers which generated turnover higher than RSD 20 million and lower than 50, automatically moved to a three-month VAT.

The Tax administration says that there are 112.148 active taxpayers. Out of that number, 30.185are monthly taxpayers, 81.963 pay on a three-month basis. Therefore, 26, 91% of VAT taxpayers calculates and pays VAT on monthly basis while 73, 09% does it on a three-month basis.

According to their data, the new payment collection system contributed that the budget receives more funds but still less than planned.

- As of January 1 until September 30 this year, a total of RSD 280,63 billion was paid to the budget of Serbia which is 6,1% more than in 2012.

Still, the figure is a bit lower than forecast 2013. Based on the payment of this tax form, a total of RSD 291, 53 billion should be delivered to the budget of the state.

Documentation arrives in the third month as well

Bookkeeping agencies are not the happiest with the new regime of work either.

- The new system generated a problem. Namely, as much as companies guaranteed they will deliver documentation to agencies in a regime they had when VAT was paid on monthly basis, the practice is not such. Documentation is late and is “zoomed” in the third month. This makes huge problems to book-keepers who must process three times more documentation in a short period of time. On the other hand, companies until the final calculation do not know the final VAT amount – a book-keeper of one of the leading agencies in Belgrade explains.

As he says, in waiting for the information on VAT amount, companies move to „forced saving“in order to maintain reserve until final payment.

- Apart from everything mentioned, companies feel that book-keeping agencies react more slowly and they object to our work – the agency representatives say.

The agency does not see a reason why payment collection would not return to the same system as earlier especially at the moment of submission of electronic signed forms, monitoring of status of sent forms and insight into taxpayers‘tax cards.

VAT payment after realization

Dragoljub Rajic, director of the Union of employers says for our portal that there is a problem with a three-month based payment collection and he is suggesting VAT upon realization as an alternative.

- As of October 2012, small companies and entrepreneurs in the VAT system have the option to pay VAT upon realization. However, a large number of companies has not utilized this option yet. This way, Only those generating less than RSD 50 mil of annual turnover can pay VAT this way which means that almost 85% of companies in Serbia which are VAT taxpayers can exploit this option.

As our collocutor says, VAT payer can submit to an authorized tax institution a request for an approval of tax payment on the basis of collected payment for the executed turnover of goods and services, under condition: that it was submitting VAT tax applications in the previous 12 months within deadline, that in the previous 12 months terms for VAT calculation, based on the payment collection system did not stop, i.e. that VAT payer did not stop using payment system upon his or her own request.

- Therefore, the method of VAT payment for 85% of taxpayers is a matter of choice – whether they want to do it on a three-month basis or monthly. Since VAT calculation in practice is complicated and that the Law on bylaws itself has 2500 pages with even 1200 pages of interpretation of the Law, many companies do not want to pay VAT monthly even with an option to pay it after they collect payments because they think the implementation of the Law is complicated and requires extensive administration – our collocutor says,

Marija Kambic