Surviving a Tax Inspection in Serbia: A Foreign-Owned Company’s Playbook

It’s a Tuesday morning at headquarters when the email comes in from Belgrade. Your local office manager — or your Serbian accountant — has forwarded a scanned letter. It’s from the Tax Administration (Poreska uprava), it’s in Serbian, and the one word everyone in the room recognises is the name of your subsidiary. A quick translation confirms it: the Serbian company is going to be inspected, and the review covers more than one past year.

The first reaction at headquarters is almost always the same: “Didn’t we just have our audit?”

That question is where most of the avoidable trouble begins. A tax inspection is not the audit you had, the people asking the questions aren’t the people you’ve dealt with before, and the decisions about how to respond are being made thousands of kilometres from where the inspection will actually happen.

This playbook is written for exactly that situation. It won’t turn you into a Serbian tax lawyer, and it doesn’t need to. It will tell you what a tax inspection is, why foreign-owned companies experience it differently, and what to do before, during, and after — so that a letter in Serbian becomes a manageable process rather than a crisis.

Table of contents:

First: which “audit” is this?

In English, “audit” covers two very different things, and mixing them up leads headquarters to underestimate what’s coming.

• A statutory audit is carried out by an independent auditor your company appoints. It examines whether your financial statements give a true and fair view. The auditor works for the company, and the outcome is an opinion on your accounts. (If you’re unsure whether your entity needs one, we cover that in are you audit-ready?)
• A tax inspection (poreska kontrola) is carried out by the Tax Administration. It examines whether your company has calculated, reported, and paid its taxes correctly. The inspector works for the state, and the outcome can be additional tax, interest, and penalties.

A clean audit opinion is helpful background, but it doesn’t settle anything in a tax inspection. The two look at different questions, with different powers, and with very different consequences.

How a tax inspection works, in broad strokes

The procedure is set out in Serbia’s Law on Tax Procedure and Tax Administration (Zakon o poreskom postupku i poreskoj administraciji), and its details can change, so treat what follows as the general shape rather than a legal checklist.

• Two kinds of inspection. A desk review (kancelarijska kontrola) is carried out at the tax office, largely on the basis of your filings and the documents you’re asked to submit. A field inspection (terenska kontrola) involves the inspector reviewing your records and operations in person. Either can lead to findings.
• It starts formally. A field inspection is opened by a formal written inspection order (nalog za kontrolu) that defines what’s being inspected — which taxes, and which periods.
• Documents and explanations. The inspector can request books, records, contracts, invoices, and explanations. Expect follow-up requests as the inspection develops.
• The findings are written down. At the end, the findings are recorded in an inspection report (zapisnik o kontroli). You have the right to submit objections (primedbe) if you disagree — within a set deadline.
• A decision follows, and if additional tax is assessed, it comes as a formal tax decision (rešenje). Legal remedies, starting with an appeal (žalba), are available if you believe the decision is wrong.

Two practical points sit underneath all of this. First, inspections can look several years back, so records you thought were “old” still matter. Second, deadlines in the process are real and short enough that a slow chain of email approvals between Belgrade and headquarters can eat most of them.

Why foreign-owned companies get a different kind of inspection

The procedure is the same for every company. The exposure isn’t. A foreign-owned company’s books are full of cross-border flows, and those are exactly where the complicated questions live.

The substance of what’s in the books:

• Intra-group services. Management fees, IT support, shared services, and recharged costs from the parent are a classic area of scrutiny. The question isn’t only whether the price is right, but whether the service was actually provided and benefits the Serbian company. A monthly invoice with the same vague description and nothing behind it is hard to defend.
• Transfer pricing. Transactions with related companies have to be priced as if between independent parties, and documented. We cover the documentation side on our transfer pricing reports page.
• Payments abroad. Withholding tax on certain payments to foreign recipients (see how withholding tax works on payments from Serbia) and VAT on services bought from abroad (see reverse-charge VAT in Serbia).
• VAT deductions. Input VAT you’ve deducted has to be supported by the right documents and a genuine business use.
• Contractor arrangements. If people who work like employees are engaged as contractors, the relationship can be reclassified — a risk we explain in hiring in Serbia.
• Cost documentation in general. An expense needs more than an invoice: it needs evidence of what was received and why the business needed it.

The practical side:

• Language. The inspection is conducted in Serbian. Intra-group agreements, policies, and correspondence are often in English, and documents in another language may need to be translated. A translation prepared in a hurry — or by someone who doesn’t know the context — is a needless risk.
• Distance. The people who understand why a transaction happened are often abroad. Explanations have to travel to Belgrade and be translated before they can be given.
• A non-resident director. If your director isn’t in Serbia, someone local needs to be properly authorised to deal with the inspector — something worth arranging long before it’s needed, as we discuss in running a Serbian company as a non-resident director.

Before: being inspection-ready

The single most effective thing you can do about a tax inspection happens long before one starts. Inspection-readiness isn’t a project; it’s a standard your accounting keeps every month.

• Document in form and in substance. Every significant cost — especially intra-group — should have a contract, evidence of what was delivered, and a clear business reason.
• Keep transfer pricing documentation current, so it describes the business as it actually operates today.
• Review your recurring payments abroad once, so each is treated correctly for VAT and withholding tax.
• Translate key contracts in advance. The intra-group agreements that underpin your biggest charges are worth having in a reliable Serbian version before anyone asks for them.
• Name a local point of contact and make sure someone in Serbia is properly authorised to represent the company if the director is abroad.
• Correct known errors early. If you’re aware of a mistake in a past filing, deal with it now. Once an inspection has started, your options to correct earlier filings yourself narrow considerably — and errors you fix on your own are viewed very differently from errors an inspector finds.

When the letter arrives

Whatever the letter says, the first days matter more than they seem to.

1. Tell your accountant or tax advisor immediately — the same day, not after an internal discussion at headquarters.
2. Establish the scope. Which taxes, which periods, desk review or field inspection, and what has been requested so far.
3. Decide who speaks to the inspector. One person, locally, properly authorised. Not a chain of people across time zones.
4. Start gathering documents for the periods in scope, and identify what will need translating.
5. Brief headquarters clearly and early, including the timeline — so internal approvals don’t become the bottleneck.
6. Don’t improvise explanations. It’s better to say you’ll provide an answer than to give a quick one that later needs correcting.

During the inspection

The tone you set during the inspection shapes how it goes.

• Keep one point of contact. Consistent answers come from one channel.
• Answer what’s asked — accurately. Complete, factual answers, supported by documents. Not speculation, and not more than the question requires.
• Hand over documents in an organised way — and keep a log of exactly what was provided and when.
• Handle translations deliberately, especially for agreements whose wording matters.
• Be cooperative, not defensive. An inspection is a process with rules on both sides; a professional, organised approach is your best ally.
• Don’t sign or confirm anything you don’t fully understand. Ask for time and advice.
• Never create or alter documents after the fact. Gaps in documentation are a problem that can be explained; backdated paperwork is a far worse one.

After: the report, the decision, and fixing the cause

When the inspection ends, the work isn’t over.

Read the inspection report carefully. It records what the inspector found and why. If you disagree with something — the facts, or how the rules were applied — that’s the moment to say so, through objections within the deadline. Missing that window is one of the most costly and avoidable mistakes in the whole process.

If a tax decision follows, assess it calmly with your advisor: what’s assessed, on what grounds, and whether an appeal is worth pursuing.

Then fix the cause. Whatever the outcome, a finding is information. If intra-group charges lacked evidence, change how they’re documented. If a payment type was treated wrongly, correct the process. The aim is that the same issue never appears in the next inspection — and that headquarters understands what changed and why.

Common mistakes (a quick checklist)

• Treating a tax inspection as if it were a statutory audit.
• Having headquarters respond directly, in English, without local context.
• Intra-group invoices with no evidence of what was provided.
• Missing the deadline to object to the inspection report.
• Rushed or informal translations of key agreements.
• “Tidying up” records during the inspection — never alter or create documents after the fact.

How HLB TM helps

A tax inspection goes best when the company was ready before it began — and when someone who knows both the Serbian process and the foreign owner’s perspective is in the room throughout.

That’s the role we play. We review how inspection-ready your Serbian entity is — documentation, intra-group charges, transfer pricing, payments abroad — and help you close the gaps before anyone asks. When an inspection does come, we support you through each stage: understanding the scope, preparing documents and explanations, reviewing the findings, and helping you respond. We work with foreign-owned companies in Serbia, we’re part of the HLB Global network, and companies like POWERCHINA, Toshiba, Trinasolar, and Paysend rely on us for exactly this kind of clarity. You can see how our advisory work is structured on our tax consulting page, with day-to-day compliance covered by our accounting services.

Frequently asked questions

Is a tax inspection the same as an audit?
No. A statutory audit is carried out by an independent auditor and looks at whether your financial statements are fairly presented. A tax inspection is carried out by the Tax Administration and looks at whether your taxes were calculated and paid correctly — and it can result in additional tax, interest, and penalties.

How will we know an inspection is starting?
Through formal communication from the Tax Administration. A field inspection is opened by a written inspection order setting out what’s being inspected. Make sure official mail reaching your Serbian address is seen and acted on promptly — especially if no one works there day to day.

Can our accountant or advisor deal with the inspector on our behalf?
A company can authorise a representative to act for it in the process. If your director is abroad, arranging this in advance is strongly advisable, so someone local can respond properly and on time.

What if our intra-group agreements are in English?
The inspection is conducted in Serbian, and documents in other languages may need to be translated. It’s far better to prepare reliable translations of key agreements in advance than to rely on rushed translations under time pressure.

What happens if the inspector finds a problem?
The findings are recorded in an inspection report. If additional tax is due, a formal tax decision follows, which can include interest and penalties. Before that stage, you have the opportunity to object to the report if you disagree.

Can we disagree with the findings?
Yes. You can submit objections to the inspection report within the deadline, and if a tax decision is issued, legal remedies — starting with an appeal — are available. Acting within the deadlines is essential.

Talk to us

Whether you want to check how inspection-ready your Serbian company is, or a letter from the Tax Administration has just arrived, we can help you understand where you stand and what to do next.