Caterers in BiH under stricter control of the Indirect Taxation Administration

(Patria) - The Indirect Taxation Administration will begin intensified controls of taxpayers engaged in catering in BiH from May 15, 2019, it was announced from this institution.

"Therefore, we invite all taxpayers from the aforementioned field to once again check their previously submitted VAT returns in the coming period and whether they have reported all realized turnover and correctly calculated their VAT liability. If they discover any errors, we invite them to submit amended VAT returns themselves, in order to fully fulfill their legal obligation and thus avoid penalties during the control process. The reasons for intensified controls of taxpayers engaged in catering in BiH are analyses conducted by the ITA, which have shown certain inconsistencies," the ITA announced.

The activities of preparing and serving food and beverages are one of the significant economic branches in BiH from the perspective of the number of taxpayers engaged in this activity. On the contrary, analyzing this area from the perspective of reported turnover in VAT returns, it was determined that the activity in question has a very low share in the total reported turnover, only 0.57%.

"Also, by relating the number of registered VAT taxpayers and the reported turnover, an extremely negative correlation coefficient is obtained, which determines the lowest turnover per taxpayer precisely in this activity. In the mentioned area, a certain degree of non-compliance with regulations has been identified, which is reflected in incorrect and/or untimely fulfillment of obligations in four basic areas: registration, filing of returns, accurate reporting, payment.

Conducted analyses, third-party data, historical data, information from external sources, as well as empirical data from other tax administrations indicate a wide range of possible tax frauds. Risks that stand out in this area are: VAT evasion, non-reporting of turnover, dominant share of cash flows, manipulations related to input tax deduction, illegal production and sale of excise products, as well as many risks in the area of direct taxes (e.g., non-reporting of employees etc.).

As a potential, tax-relevant risk in the given activity, which can result in tax evasion, is cash payment by consumers, which is difficult to track due to the lack of adequate documents (invoices, etc.)," the ITA points out.

Also, due to the specifics of the activity, some products used as raw materials are procured from individuals, and therefore, in that segment as well, there is a risk of potential tax evasion, through avoiding the recording of purchases of products that will be sold in the next phase, usually in cash without recording the write-off.