What Should Taxpayers Know About Deferring Tax Payments?

Deferring the payment of tax liabilities or tax debt is defined by the Law on Tax Procedure and Tax Administration ("LTPTA").

In accordance with the LTPTA, the obligation to pay taxes is the duty of every taxpayer, and the taxpayer is responsible for fulfilling the tax obligation from the moment of occurrence of the facts that a certain tax law prescribes to create a tax liability. If the tax liability arises and falls due for payment, and the taxpayer does not pay the tax in time, the legal default interest begins to accumulate on the main debt. However, this may not be the worst tax law consequence for the tax debtor, since the tax administration in most cases initiates a compulsory enforcement procedure against the tax debtor, which includes the costs of forced collection and other costs. Moreover, the taxpayer risks the potential tax violations or tax crimes. This topic is explained in detail by experts from Milosevic Law Firm.

In case the taxpayer is aware that for some reason he will not be in a situation to settle the tax debt upon maturity, the LTPTA provided the possibility for the taxpayer to postpone the payment of his tax debt, i.e. to pay the tax in installments.

• Who can request a tax deferral?

Deferment of tax payment can be requested by a taxpayer, i.e. a person designated by a special tax law as a taxpayer for a certain tax, and persons designated as tax debtors (tax guarantor, tax payer, etc.) in accordance with the LTPTA.

• What taxes does the deferral apply to?

The right to defer payment of tax debt refers to all public revenues to which the LTPTA applies, to the value added tax (VAT), to the contributions for compulsory social insurance, as well as to the original public revenues of local self-government units (e.g. local administrative fees).

A request for deferring the tax debt payment may be submitted only for the due tax debt until its settlement by regular or forced means.

• Conditions for deferring the payment of tax debt

The Tax Administration has the discretionary power to defer payment of tax debt, in whole or in part, at the reasoned request of the taxpayer, provided that the payment of tax due to the taxpayer is unduly burdensome or causing significant economic damage to the taxpayer.

The Tax Administration may grant the deferral of the tax debt payment to the taxpayer if the debt amounts to at least, for:

• Natural person - 10% of taxable income in the year preceding the year in which the request for deferment was submitted;

• Entrepreneur, small legal entity and micro legal entity - 5% of the total annual turnover stated in the last financial report, i.e. annual lump sum turnover;

• Medium and large legal entities - 5% of the working capital shown in the last financial report.

Before submitting the request for a tax deferral, the taxpayer is obliged to harmonize the state of the debt according to the types of public revenues whose deferral he requests.

Exceptionally, if a taxpayer does not meet the above conditions and wishes to submit a request for the deferral of tax debt, the competent authority has the discretion to authorize the deferral of tax payment if the taxpayer offers an irrevocable bank guarantee or promissory note endorsed by a commercial bank, in the amount which may not be less than the amount of due tax whose payment is being deferred.

• To whom to submit it and who decides on the request for a tax debt deferral?

The taxpayer submits the request for deferral of debt payment to the competent organizational unit of the Tax Administration.

After the conditions are fulfilled, whether to grant the postponement of the tax debt payment is decided by:

• The Minister or a person authorized by him - on the basis of a written proposal of the head of the organizational unit of the tax administration according to the main place of business, i.e. the place of residence of the taxpayer - except for the original public revenues of local self-government units;

• The mayor, i.e. the president of the municipality, i.e. the person authorized by him, of the local self-government unit to which the original public revenues belong, the collection of which is deferred in accordance with this Law.

The deferment of tax payment is done by signing an agreement between the Tax Administration and the taxpayer, i.e. by the relevant decision of the Tax Administration.

• For which period can a tax debt deferral be granted?

A tax deferral can be granted in installments, up to the maximum of 60 months, with the possibility of using deferred payment for up to 12 months.

• What should a request for a tax debt deferral contain?

The request for a tax debt deferral can be submitted in electronic form through the Tax Administration portal or in writing - directly or by email.

The LTPTA did not prescribe the form of this request, so the request can be submitted in free form or according to the form that can be found on the Tax Administration website.

Along with the request for deferral of debt payment, the taxpayer submits the evidence of fulfillment of conditions for deferral, i.e. proof that the payment of due tax represents an inappropriately large burden/causes significant economic damage to the taxpayer, as well as the debt security instruments (except in exceptional cases).

• Securing the collection of due tax and exemption from providing security

Along with the request for deferral of tax debt payment, an instrument of securing the collection of the tax debt shall be submitted, as follows:

• Mortgage on the taxpayer's real estate;

• Pledge on the taxpayer's movable property;

• Irrevocable bank guarantee;

• Guarantee of another person who owns property;

• Drawn bill of exchange, accepted by two guarantors, from whose earnings, on which an administrative ban is established, the tax debt can be collected; or

• Bill of exchange endorsed by a commercial bank.

We especially note that the instrument of securing the collection cannot be less than the amount of the due tax, the payment of which is being delayed.

An exception to the need to provide collateral for the purpose of deferring tax debt occurs if the tax due on the day of submitting the request for deferral of payment amounts to:

• For legal entities, entrepreneurs and funds - up to RSD 1,500,000;
• For natural persons - up to RSD 200,000.

For more information about this topic, you may contact Milosevic Law Firm.

Advokatska kancelarija Milošević

Milosevic Law Firm

Law on Tax Procedure and Tax Administration

deferral of payment of tax liabilities

value added tax

VAT

mandatory social insurance contributions

local administrative fees