Who controls the implementation of enterprise independence test and how

The adoption of amendments to the Law on Income Tax in late 2019 has led to the implementation of new rules which aim to test whether the relation between an enterprise and its employer can be considered independent. The implementation of the independence test started on March 1 and it is not yet known when the first tests will take place and how. Sofija Popara, the founder of the Pausal.rs portal, says for eKapija that it seems that there will be no office control.

– The control of all enterprises is possible from March 1. What we do know is that there will be no office control and that control will instead be carried out “per invitation”. Lump-sum taxpayers will be invited to come to the Tax Administration, where the control will be carried out and that is what the tax advisers who interpreted the new regulations have explained – Popara says.

According to her, the first entities to be inspected will be LLC companies with plenty of enterprises under them.

– That is my personal opinion. The first ones to be inspected are those who have not switched to proper employment, that is, those who misuse an entrepreneur instead of a worker. Individuals not so much, but I believe that they are ready for changes as well – our interviewee believes.

The independence test features nine criteria examining the independence of entrepreneurs in relation to the employer.

The Tax Administration recently published a detailed 90-page Guide to Implementation of the Independence Test, which Popara sees as an unprecedented event with positive effects.

– Making the guidelines public is not something that the Tax Administration usually does. I believe that this is a very positive exception, as entrepreneurs will be able to examine all the items and make a reasonable assessment as to whether they can pass the test or not. In my opinion, the guide is excellent, because it cites concrete examples that entrepreneurs can identify with. The text is user-friendly and presents the essence of the issue – Popara says.

The Guide says that, in most cases, the burden of proof will be on the Tax Administration.

– In the context of control which includes the implementation of the independence test, the burden of proof will be on the person that is looking to implement a special taxation as the result of at least five of the nine criteria being met, which, in most cases, will be the Tax Administration – the Guide reads.

It is also said that the test will be implemented within the tax controls which entail the control of the calculation and payment of withholding taxes and contributions – unified payment, as well as those entailing the control of the calculation and payment of taxes on income from independent activity.

As said, the independence test can be implemented within tax control as part of:

– the control within which the controlled taxpayer is the employer (domestic legal entity or enterprise);
– the control within which the controlled taxpayer is an enterprise with an employer (domestic legal entity or enterprise);
– the control within which the controlled taxpayer is an enterprise with an employer (foreign entity).

I. Milovanovic

Poreska uprava Srbije

pausal rs

Sofija Popara

independence test

Law on Income Tax

implementation of the independence test

Guide to Implementation of the Independence Test

lump sum taxpayers

entrepreneurs

taxpayers