Tax audits are not random nor conducted arbitrarily; they are based on the analysis of data submitted by taxpayers through tax returns, financial statements, and other legally required records, in accordance with the Law on Tax Procedure and Tax Administration in Serbia. The Tax Administration assesses tax risk based on the overall picture of a business – reported revenues, expenses, profits, VAT obligations, payroll data, and information cross-checked with other taxpayers’ records are all analyzed. Significant discrepancies, inconsistencies, or misalignments in records may trigger further review.

For example, prolonged reporting of losses despite ongoing operations, frequent VAT refund requests, sudden changes in turnover without a clear economic reason, or differences between data reported by business partners can increase the level of tax risk. Audits can be desk-based, reviewing submitted documentation, or field-based, involving an on-site inspection of the taxpayer. An audit does not automatically mean a violation has occurred, but if irregularities are found, additional tax, interest, and corresponding legal procedures may be applied.

The best protection is accurate and compliant business practices – properly maintaining accounting records, timely submitting tax returns, and consistently documenting all business transactions. Transparency and accuracy in reporting significantly reduce the risk of complications and additional costs in case of a tax audit.