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					 Presentation
SME Conference

  Tbilisi, Georgia
  May 4-6, 2011
     Patricija Pergar
                   Agenda

 classification of companies,
 taxation system for sole entrepreneurs,
  lawyers, notaries, journalists, etc.,
 taxation system for companies,
 simplifications,
 reporting net income – challenges and
  problems,
 grey economy and supervision.



                                            2
      Classification of companies

  Companies are classified as micro, small, medium and
  large companies with the application of the stated
  criteria:

 average number of employees in the business year,
 net revenue from sale and
 value of assets.




                                                         3
        Classification of companies

   99 percent of all companies are classified as small.


                                        2007      2008      2009
Total number of taxpayers registered
for income tax purposes                161.261 166.074     170.000

Total number of small enterprises
registered for income tax purposes     159.586   164.409   168.355


Proportion of small enterprises on     98,96%    99,00%    99,03%
total number of taxpayers (%)


                                                                     4
       Taxation system for sole
   entrepreneurs, lawyers, notaries,
           journalists, etc.

Persons liable for income on performing business activities
belong to this group. These are sole entrepreneurs as well
    as other individuals, for example lawyers, notaries,
   journalists, sportsmen, persons performing business
     activities in the field of culture, etc., who register
 performing of activities on the basis of other regulations.



                                                           5
       Taxation system for sole
   entrepreneurs, lawyers, notaries,
           journalists, etc.

  The tax base from income from business activities is
  established in two ways:

 with taking actual income and expenditures into
  consideration,
 with taking norm expenditures into consideration.


                                                         6
     Taxation system for sole
 entrepreneurs, lawyers, notaries,
         journalists, etc.
The tax base from income from business activities is
established by taxpayers themselves in tax returns.
The annual tax base is a sum of tax bases from income
from employment, income from performing business
activities, income from basic agricultural and basic
forestry activities, income from renting property, from
transfer of property right and other types of income.
The tax authority establishes the liability for payment of
tax for the previous tax period with the assessment
decision.
                                                        7
  Taxation system for companies



The tax base of companies is established only by taking
actual income and expenditures into consideration.

Taxation is performed according to the system of self-
taxation.




                                                          8
                    Simplifications


 Establishing of the tax base by taking norm expenditures
  into consideration,

 books of account,

 accounting reports,

 annual reports.

                                                         9
Establishing of the tax base by taking norm
      expenditures into consideration


 Expenditures are defined in a lump-sum amount and
 they represent 25% or 70% of income realised, which
 depends on activities, performed by taxpayers.




                                                  10
              Books of account


Taxpayers, who establish the tax base by taking norm
expenditures into consideration, don’t have to manage
books of account. These taxpayers manage only the
record of issued invoices and record of fixed assets.




                                                   11
              Books of account




Sole entrepreneurs may manage books of account
according to the system of single entry bookkeeping in
cases when they fulfil certain conditions.




                                                    12
              Books of account




Other entities manage books of account according to the
principle of double entry bookkeeping.




                                                     13
                Books of account

The tax authority may establish the subject of taxation
with assessment and on this base it assesses tax also in
cases when persons liable for tax fail to file tax returns or
file them without data or fail to submit books of account
and records, which they shall keep, or if the subject
matter of books of account and records is not correct or
if they show such essential formal insufficiencies, which
provide justified doubts about their substantive
relayability and correctness.



                                                           14
            Accounting reports

Companies prepare breakdown of accounting reports in
relation to the size. Smaller companies require
breakdown with fewer details.




                                                 15
               Annual reports
Taxpayers, who establish the tax base by taking norm
expenditures into consideration, don’t have to prepare
annual reports.

Annual reports of sole entrepreneurs include balance
sheets and profit and loss accounts, where a detailed
breakdown of balance sheets and profit and loss
accounts is not required. Explanations for accounts with
disclosures and business reports are also not necessary.




                                                     16
                 Annual reports


  The annual report of small companies with share capital,
  with the securities not listed on the organised stock
  markets, consists of at least:

 balance sheet,
 profit-and-loss account and
 annexes with explanations for statements.



                                                        17
                Annual reports



Small companies with share capital don’t prepare cash-
flow tables, capital-flow statements and business reports.
Breakdown of balance sheets and profit and loss
accounts doesn’t include so many details as at large
companies.




                                                       18
                Annual reports


Annual reports of other entities include accounting
reports, consisting of balance sheets, profit and loss
accounts, cash-flow tables, capital-flow statements and
annexes with explanations for accounts and business
reports. Companies, which are subject to audit, shall also
prepare statements of comprehensive income.




                                                       19
          Reporting net income –
         challenges and problems

 assistance to taxpayers in tax compliance,
 submission of reports for several purposes at the same
  time,
 performing electronic services with the public
  administration,
 input control of returns received.




                                                           20
  Grey economy and supervision

Grey economy is one of important reasons for non-
compliance with tax regulations, so special attention will
be focused on it in next periods. In 2010 there were
3,586 audits performed within the grey economy project,
1,616 violations established, 900,000 EUR of fines
imposed and 1.4 million EUR of estimated additional tax
liabilities.




                                                       21
  Grey economy and supervision


Last year 2,256 audits in total were performed at small
taxpayers. Out of this number there were 1,658 audits at
micro companies and companies categorised as smaller
than micro and 598 sole entrepreneurs. The most
frequent examples of violations are:




                                                     22
     Grey economy and supervision
 failure to issue invoices (hotels, restaurants, catering,
  transporters, construction field),
 deficiency in management of subsidiary records (cash
  register operations, records of travel expenses,
  construction journal),
 fictitious invoices for expenditures (non-performed
  services in construction, transport, consultant services),
 irregularities   in    connection      with    depreciation
  (recalculation for assets already depreciated or for assets
  already alienated).
                                                          23
    Grey economy and supervision

 expenditures for personal use – private purpose (as a
  rule there is no separation between business and private
  use),

 “fictitious” travel expenses and daily allowances, for
  which it is established in supervision procedures that
  taxpayers don’t have relevant papers and documents for
  proving reality.



                                                       24
     Grey economy and supervision


Modern auditing methods are already applied:

 application of the computer programme for electronic
  data processing (ACL tool),
 supervision over electronically managed cash registers
  with methods of computer forensics,
 supervision over electronic distance selling (selling on the
  Internet).


                                                           25
                  Conclusion




Activities of tax auditing are directed into supervision
over tax compliance as well as into preventive activities
and prevention of further tax evasion.




                                                      26
THANK YOU FOR YOUR ATTENTION!




                                27

				
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posted:8/24/2011
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