Starting an entrepreneurial business in Serbia can be challenging, but choosing flat-rate taxation often makes things significantly simpler. If you’re an entrepreneur in the IT sector, a designer, consultant, or provide any type of service, flat-rate taxation might be the right option for you. To make everything clear, let’s explain in detail what this model involves, its pros and cons, and how to easily calculate your obligations.
What is flat-rate taxation?
Flat-rate taxation is a model in which taxes and contributions are calculated in a predetermined annual amount, without the obligation to keep business books. The simplicity of this model makes it a popular choice among entrepreneurs who want to focus on their work rather than paperwork.
- No bookkeeping or bureaucracy: No need to keep books, issue invoices for every expense or income.
- Fixed obligations: You know in advance the exact amount of taxes and contributions to be paid each month.
- Ideal for service-based businesses: This is especially favorable for the IT sector and freelancers, allowing smooth operations with minimal administrative costs.
How does flat-rate taxation work?
When you choose the flat-rate model during business registration, the Tax Administration determines your taxes and contributions based on the following criteria:
- Activity code: The type of business directly affects the amount of flat-rate obligations.
- Location: The flat-rate amount varies depending on the municipality where you operate.
- Annual revenue: If you exceed RSD 6,000,000, you lose the right to use the flat-rate model.
The Tax Administration assigns you fixed monthly amounts for taxes and contributions, regardless of how much you actually earned in a given month.
Flat-Rate Calculator: Easily calculate your taxes!
Wondering how much you’ll pay in taxes as a flat-rate entrepreneur? Good news — there’s a flat-rate calculator that allows you to quickly and easily calculate your monthly obligations.
How to use the flat-rate calculator:
- Visit the flat-rate calculator on the Tax Administration portal.
- Enter your activity code (e.g., 6201 for IT services).
- Select the municipality where your business is registered.
- The calculator will show you the estimated amount of taxes and contributions you’ll pay monthly. This is a great tool to understand how much you’ll set aside for obligations and whether the flat-rate model truly suits you.
Advantages of Flat-Rate Taxation
- Simplicity of operations:
No obligation to keep books or track every expense. - Fixed monthly costs:
You know in advance how much you’re paying — no surprises. - Lower costs for beginners:
For most service businesses, flat-rate taxes are lower than with other models. - Fast business setup:
No need to hire an accountant to maintain books — ideal for beginners.
Disadvantages of Flat-Rate Taxation
- No expense recognition:
If you have large expenses (e.g., equipment, marketing), you can’t deduct them from your taxes. - Losing flat-rate status:
If your annual income exceeds RSD 6,000,000, you switch to bookkeeping. - Obligations regardless of income:
You must pay the predetermined flat amount even if you had no income in a given month.
Who can use flat-rate taxation?
Flat-rate taxation is not available to everyone. Here are the basic rules:
- Eligible activities under the rulebook:
IT services, education, design, consulting, and similar service activities. - Income limit:
You must not exceed the RSD 6,000,000 annual limit. - Activity code compliance:
Your business activity must fall under codes that allow flat-rate taxation.
How to get started as a flat-rate entrepreneur?
To register as a flat-rate entrepreneur, follow a few simple steps:
- Register online via the APR portal:
Follow the guide from our article “How to register a sole proprietor online” for a step-by-step process. - Choose the flat-rate model in the application:
In the section for choosing the tax model, mark “flat-rate taxation.” - Submit the application to the Tax Administration:
The Tax Office will determine your monthly obligations based on your data. - Use the flat-rate calculator to estimate obligations:
Plan your monthly costs in advance with the flat-rate calculator.
Mistakes to Avoid
- Wrong choice of business activity:
The activity code is crucial — check whether your code is on the list of activities eligible for flat-rate taxation. - Not keeping track of income limits:
If you exceed the RSD 6,000,000 threshold, you move to bookkeeping — plan your income carefully. - Missing tax payment deadlines:
Late payments result in interest and penalties.
Author: Ivan Obućina
Source: Pitaj Knjigovođu website
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