Business people and experts claim the flat-rate taxation threshold changes

Despite significant changes in the economic environment, Serbian small business owners follow the flat-rate tax model for years with the key threshold of an annual turnover of up to six million dinars unchanged since 2013.
The problem is that consumer prices have increased by 70%, diminishing the real value of this threshold significantly and making it increasingly difficult to stay in the system.
Notably, only entrepreneurs who earn less than six million dinars in a calendar year have the right to flat-rate taxation.
But as an expert analysis in the Grey Book published by NALED states, the inflation has eaten away a substantial part of that amount, more and more people are falling out of the system because of basic market dynamics.
As for VAT threshold, there is an even greater inconsistency (eight million dinars). It is based on the last 12 months of business activity, rather than the calendar year, so entrepreneurs can enter the VAT system even if they have not yet surpassed the six million dinar mark in the current year, as the periods do not align.
Another frustrating thing for flat-rate taxpayers is the lack of flexibility in switching between different taxation regimes.
Notably, it is possible to change the taxation method only online via the eTaxes system up until 15 December for the following year. There are he only two transitions in the application: from flat-rate to self-taxation and from self-taxation to the personal salary system. It doesn’t allow a direct transition from flat-rate taxation to the personal salary system the following year.
A 2020 opinion from the Ministry of Finance further complicated this restriction (no. 430-00-7/2020-04), stating that an entrepreneur who loses the right to flat-rate taxation during the year cannot switch to personal salary payments in that same year and must wait until 15 December to apply for the following year.
Practically, this makes an entrepreneur who unintentionally or due to business growth surpasses the eight million dinar threshold exit the flat-rate system and enter the VAT regime.
Analysts in the Grey Book suggest amendments to raise the upper turnover threshold for flat-rate entrepreneurs in the year preceding from six million to eight million dinars, as Croatia and Montenegro did.
To solve the problem, the Ministry of Finance should issue an opinion or enactment on the application of Article 33a of the Personal Income Tax Law, stating that a flat-rate entrepreneur may opt for personal salary taxation upon exceeding the threshold.

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