Undocumented expenses

Undocumented expenses are expenditures that cannot be properly verified with appropriate accounting documents or are not related to the business activity. These expenses directly affect the tax base, as they are not recognized as legitimate business costs, meaning they increase the base on which corporate income tax is calculated. In practice, this can result in a significant increase in the taxes that an entrepreneur or company must pay.

According to the Corporate Income Tax Law, expenses that cannot be documented or are not related to business operations are considered unjustified and must be added to the tax base. This means that, instead of reducing the income subject to taxation, undocumented expenses increase the tax base, resulting in higher taxes.

For example, if an entrepreneur has revenue of 10,000,000 RSD and undocumented expenses amount to 1,000,000 RSD, the tax base will be 11,000,000 RSD. In this case, the corporate income tax of 15% will be calculated on the base of 11,000,000 RSD, meaning the tax will be 1,650,000 RSD, whereas the tax would have been only 1,500,000 RSD if all expenses had been properly documented.

Examples of undocumented expenses include payments made with business cards without proper documentation, expenses based solely on fiscal receipts, or costs for which there is no additional documentation proving the actual provision of services. Such expenses can be problematic in the case of a tax inspection or audit, as it may be difficult to explain the justification of these expenditures.

For this reason, it is crucial for entrepreneurs to maintain precise records of all business expenses and ensure proper documentation. Transparency in financial operations not only reduces the risk of issues with tax authorities, but also contributes to the accuracy of financial statements, which is important for daily business operations and decision-making.

Tax International offers the following services:

Accounting services
Tax consulting
Company and business registration
Payroll calculation
Freelance tax calculation
Issuing invoices and similar administrative tasks

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