The criminal act of tax evasion and the amount of evaded tax in the calendar year that represents the fiscal or business year

Tax evasion is a very specific crime and as such one of the basic crimes in the field of financial crime that has always caused dilemmas in our legislative and judicial practice.

According to the Law on Amendments to the Criminal Code (“Official Gazette of RS”, No. 35/2019), the criminal offense of tax evasion exists if the amount of unpaid tax exceeds one million dinars (app. 8 thousand EUR), while the Criminal Code “Official Gazette of RS”, no. 85/2005, 88/2005-corr., 107/2005-corr., 772/2009, 121/2012, 104/2013, 108/2014 and 94/2016) provided for a lower amount and a criminal offense existed if that amount exceeded half of the current value.

The amount of unpaid tax is important for the existence of the criminal offense of tax evasion, because it is a precondition for incrimination.  If the amount of unpaid tax is below the legally prescribed threshold, the stated acts will not constitute a criminal offense, but may have the characteristics of other tax violations (according to the Law on Tax Procedure and Tax Administration), thus misdemeanor sanctions could be imposed on the tax offender.  

For practical purposes, the question raised in this particular issue is whether this criminal act exists if a person avoids paying a tax obligation in the amount that constitutes a misdemeanor in several consecutive years, and whether the amounts of these annual outstanding liabilities can be added up.
The prosecutor’s offices erred in assuming that several acts, which do not individually constitute criminal offenses, could be aggregated and thus create a continuing offence, which is not the rightful interpretation of the law.

For the assessment of the existence of an element of the criminal offense of tax evasion from Article 229, paragraph 1 of the CC, and whose element refers to the amount of tax avoided (exceeding the amount of 150,000.00 dinars), the amount of tax evasion in one calendar year is vital, which represents the fiscal or business year, which arises from the provision of Article 41, paragraph 3 of the Law on Tax Procedure and Tax Administration, which stipulates that the aggregate tax return for withholding tax is to be submitted to the tax administration once a month within five days following the end of the month, separately for each payment made in the previous month, and paragraph 5 of the same article stipulates that an individual withholding tax return for each taxpayer or payer, marked with their PIB (Tax ID number), is submitted once a year, and no later than January 31. for the previous year.  Based on the above, it follows that it is unacceptable to add up individual amounts of tax liabilities whose payment is avoided in two or more calendar years.

In year 2016, the law office of Golubović Simić Marinković had one just such a case in its practice.

The indictment of the First Basic Prosecutor’s Office in Belgrade charged the defendant Dragoslav Kosmajac with committing the extended criminal offense of tax evasion under Art. 229. st. 1 of the Criminal Code in connection with Article 61 of the Criminal Code. In this particular case, the indictment charged the accused Kosmajac of failing to report all income based on the yearly annual incomes, for the calendar years 2009, 2010, 2011, 2012 and 2013, in order to partially avoid paying the annual income tax, including rental income, which falls under legally acquired income, and thus the defendant avoided paying the annual personal income tax for the stated calendar years.  Hereby we specifically emphasize that in no single calendar year, the amount of the obligation whose payment is avoided did exceed 150,000.00 dinars.

By the decision of the First Basic Court in Belgrade from May 2016, the indictment in question was dismissed on the basis that “In order for there to be a criminal offense of tax evasion under Art. 229. st. 1 of the Criminal Code, it is necessary that the amount of the obligation whose payment is avoided exceeds 150,000.00 dinars, which is an element of incrimination. ” As, in the specific case, in no single calendar year the amount of tax liability did exceed 150,000.00 dinars, the particular case does not represent the criminal offense under Art. 229, paragraph 1 of the Criminal Code, but possibly a misdemeanor under the Law Law on Tax Procedure and Tax Administration because multiple misdemeanors can never constitute a criminal offence. 

In support of the above, we refer to the judgment of the Supreme Court of Cassation KZZ no. 56/2011 of 31.08.2011. in which it is stated: “For the assessment of the existence of an objective element of the criminal offense of tax evasion, in terms of the amount of tax avoided (to exceed the amount of 150,000.00 dinars), the amount of evaded tax in one calendar year is important, that is within one fiscal, ie tax year. “