Regarding the new regulations on digital assets and the accompanying tax adjustments, in one of the previous texts (Crypto tax), we analysed the issues that these have caused for the crypto community. It seems that few of them have been resolved since then.
Although we assessed the regulation of digital assets as useful, primarily from the perspective of legal certainty, the advancement of certain solutions has not taken place in practice or is still pending. The two most obvious problems are the form of tax returns and the inability of Tax Administration to act on them.
At the beginning of the application of tax regulations governing income from digital assets and their declaration, law abiding taxpayers were forced to be creative because the tax return form did not contain the fields necessary for entering data relevant to taxation. This shortcoming was eliminated after more than half a year after the new tax rules came into force. In addition, the problem of filing tax returns for each realized capital gain from the sale of digital assets was solved at the initiative of tax professionals. Now, a taxpayer who transfers digital assets during calendar year, which may result in capital gain or loss in accordance with the Law on Personal Income Tax (LPIT), is required to file a tax return no later than 120 days after the end of the quarter in which they generated income from the transfer of digital assets. This rule should allow taxpayers to list all transactions they had in the relevant quarter that resulted in a capital gain or loss in a single application.
However, on the day this text is sent to the editorial office, there is still one paradox, which is that the tax return for capital gains from the sale of digital assets (NFT, cryptocurrency, etc.) can only be submitted in a paper form, by mail, or in person at the Tax Administration office. The reason for that is that “ePorezi”, the electronic service of Tax Administration, has not been updated, so there is no option related to digital assets. For now, this paradox and software failure only cause the astonishment of taxpayers but fortunately no problems.
Software problems also affect tax inspectors who need to process paper tax returns and compile resolutions that determine capital gains tax. Namely, Tax Administration still does not act on citizens’ tax returns because the internal software for tax calculation has not been updated, which results in a pile of tax returns that are waiting for better times. Of course, this information is not official, but based only on the oral confirmation of several tax inspectors from different Tax Administration branches. However, apart from the astonishment of taxpayers, for now the Tax Administration’s delay in determining the tax on capital gains from the sale of digital assets is not a problem.
Given that taxpayers fill in tax return forms on paper, Tax Administration could easily overcome the software entanglement only if it distributed enough calculators and pencils to inspectors to calculate the amount of taxes that taxpayers should pay. If not for all tax returns, then at least for those in which the purchase price is not documented, the tax rate of 15% should only be applied to the entire amount of declared income. In this way, both taxpayers and the custodians of the state treasury would be satisfied.
Progress and regress
If we were to summarize the processes that the state administration is currently working on, the subtitle of this section would be the most appropriate. Therefore, the reasons for the obsoleteness of the Tax Administration system should first be sought in the processes, i.e., projects in which significant capacities of this institution are engaged. It is about introducing a system for electronic invoicing and improving the reporting of taxpayers, because these processes should improve the collection of value added tax (VAT) and excise duties. This is understandable, since VAT and excises are at the very top in terms of the percentage of participation in public revenues of the Serbian budget, i.e., in terms of their generosity in relation to collection costs. Therefore, the effort of the Ministry of Finance to update various types of reporting and documentation of transactions with Tax Administration (Law on Fiscalization and Law on Electronic Invoicing) is indisputable.
Given that the capital gains tax hardly exceeds 1% in the structure of public revenues in Serbia, it is not surprising that the tax return for capital gains from the sale of digital assets has not been updated, i.e., that those forms submitted to the Tax Administration are still pending. Nevertheless, the Ministry of Finance and Tax Administration must not delay implementing the legal solutions that are within their competence, regardless of the form of tax. If not because of the public budget, then because of their own reputation and the message they send to citizens.