Statutory annual reporting is a legal obligation of every limited liability company (d.o.o.) in Serbia, regardless of whether the company had business activity, employees, or generated profit during the year.
As part of statutory annual reporting for a d.o.o., a balance sheet and income statement are prepared, together with a tax balance and a corporate income tax return.
A lack of understanding of these reports is the most common reason why company owners feel that “something is wrong” — especially in situations where a company reports a profit but has no cash on its bank account, or when it records a loss yet still pays corporate income tax.
In this article, we explain statutory annual reporting for a d.o.o. — from basic concepts to practical examples drawn from everyday accounting practice.
What is statutory annual reporting for a d.o.o.?
Statutory annual reporting is a set of financial and tax reports that present:
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how the d.o.o. operated during the year,
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the revenues and expenses it generated,
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the position of assets, liabilities, and equity,
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the amount of corporate income tax payable.
Statutory annual reporting always relates to the calendar year (January 1 – December 31).
Does every d.o.o. have to prepare statutory annual reporting?
Yes.
The obligation to prepare and submit statutory annual reporting also applies to companies registered at the very end of the year. If a company was registered with the Serbian Business Registers Agency on December 30, it is still required to prepare and submit statutory annual reporting for that year.
Statutory annual reporting for a d.o.o. is mandatory:
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even if the company had no turnover,
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even if it had no employees,
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regardless of whether it generated a profit or a loss.
So-called “inactive” companies are not exempt from statutory reporting obligations. If statutory conditions are met, they may submit a Statement of Inactivity instead of financial statements.
Conditions for submitting a Statement of Inactivity
A Statement of Inactivity may be submitted instead of a balance sheet and income statement only if the company:
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had no business transactions during the year, and
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has no assets or liabilities recorded in its accounting records.
These conditions are rarely met in practice, as most companies have at least one transaction or some form of assets, even during periods of complete inactivity.
If a company had no business activity but owns any assets, it does not qualify for a Statement of Inactivity and must submit financial statements.
Companies eligible to submit a Statement of Inactivity must still file a corporate income tax return (PP PDP), even if the return contains no amounts.
What does statutory annual reporting for a d.o.o. include?
Financial statements:
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Balance Sheet
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Income Statement
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Statistical Report
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Notes to the Financial Statements
Tax documentation:
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Tax Balance
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Corporate Income Tax Return (PP PDP)
Balance Sheet of a d.o.o. – what does it show and why is it important?
The balance sheet presents the financial position of the company as at December 31.
It answers three key questions:
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what the company owns (assets),
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what the company owes (liabilities),
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the amount of equity attributable to the owners.
The balance sheet does not show movements during the year, but the situation at a specific point in time.
Income Statement of a d.o.o. – revenues, expenses, and business result
The income statement shows:
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revenues — permanent increases in value,
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expenses — permanent decreases in value,
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profit or loss — the financial result achieved during the year.
The financial result is calculated by deducting expenses from revenues. If revenues exceed expenses, the company generates a profit; otherwise, it records a loss.
Revenues arise when invoices are issued, not when they are collected. The same principle applies to expenses.
For this reason, revenue is not the same as cash inflow, and profit is not equal to the bank account balance.
How to understand income statement items
Operating revenues
Revenues arising from core business activities:
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sale of goods,
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provision of services,
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production,
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other operating revenues (for example, tax incentives related to employee contributions).
These are most commonly customer invoices issued during the year.
Financial revenues
Revenues outside regular operations:
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interest income,
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foreign exchange gains.
Other revenues
Revenues not arising from regular business activities:
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sale of fixed assets,
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write-off of liabilities,
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collection of previously written-off receivables.
These revenues are often one-off or extraordinary and do not indicate sustainable profitability.
Operating expenses
Regular business expenses such as:
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cost of goods sold,
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office rent,
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depreciation of fixed assets,
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production services,
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intangible costs.
Production service costs
These include:
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subcontractors producing part of your product or service,
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marketing services,
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transportation,
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telecommunications,
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equipment maintenance.
Intangible costs
These include:
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accounting fees,
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representation expenses (business meals and gifts),
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bank fees and payment transaction costs,
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chamber membership fees,
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environmental taxes, municipal fees, property tax, and similar charges.
How to identify what is included in each balance sheet position
Balance sheet positions represent aggregates of individual general ledger accounts.
To see which accounts make up a specific position, a trial balance or closing ledger is required.
Depreciation – an expense without cash outflow
Depreciation represents the allocation of the cost of high-value assets over multiple years.
For example, if a production line worth RSD 1,000,000 is acquired in October and is expected to be used for ten years, the full amount is not recognized as an expense immediately. Instead, 10% is expensed annually over ten years.
Depreciation reduces profit without causing cash outflows in subsequent years.
The cash outflow occurs in the year of acquisition, while expenses are recognized over time.
Profit of a d.o.o. is not equal to the bank balance on December 31
Profit is not the same as cash held in the bank.
Profit represents:
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an accounting result (revenues minus expenses),
while the bank balance represents:
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actual cash flow at a given moment.
Some cash outflows are not expenses. For example, rental deposits result in cash outflow but are not expenses, as they are refundable and do not represent a permanent loss of value.
Depreciation, on the other hand, creates expenses without corresponding cash outflows.
Is corporate income tax paid on accounting profit?
Not exactly.
Accounting profit is only the starting point. Corporate income tax is calculated based on the tax balance, which adjusts accounting profit in accordance with tax regulations.
Tax balance of a d.o.o. – determining the corporate income tax base
Taxable profit is calculated as adjusted accounting profit:
Accounting profit
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non-deductible expenses
= taxable profit (tax base)
Common adjustments include:
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representation expenses exceeding 0.5% of total revenue,
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penalties and fines,
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personal expenses of owners,
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expenses without proper documentation,
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unpaid social contributions,
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unpaid employee reimbursements,
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depreciation differences.
Can representation expenses exceed 0.5% of total revenue?
Yes.
Only up to 0.5% of total revenue is tax-deductible. Any excess is tax-neutral and does not reduce taxable profit.
How do non-deductible expenses affect taxable profit?
They are neutralized for tax purposes.
Example:
If a company generates RSD 1,000,000 in revenue and incurs a RSD 100,000 penalty, accounting profit is RSD 900,000. The tax balance adds back the penalty, resulting in taxable profit of RSD 1,000,000 and corporate income tax of RSD 150,000.
What happens if a company records a loss?
Two scenarios are possible:
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accounting loss + non-deductible expenses = tax loss
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accounting loss + non-deductible expenses = taxable profit
In the first case, no tax is payable, but the tax return must still be filed. The tax loss may be carried forward for up to five years.
In the second case, tax is payable despite the accounting loss.
Accounting loss but taxable profit – example
Accounting:
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revenue: RSD 3,000,000
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expenses: RSD 3,200,000
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loss: RSD 200,000
Tax adjustments:
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excess representation: +150,000
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personal expenses: +100,000
Taxable profit: RSD 50,000
Corporate income tax is payable despite the accounting loss.
Which tax return does a d.o.o. file?
A limited liability company files PP PDP – the corporate income tax return.
The corporate income tax rate is 15%.
What happens to a d.o.o.’s profit?
Profit may:
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remain undistributed,
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cover previous losses,
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be distributed as profit participation (“dividend”), provided no prior losses remain uncovered.
Profit distribution is not automatic.
Profit distribution in a d.o.o. – when and how?
To distribute profit, the company must:
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adopt a shareholders’ resolution,
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calculate and pay dividend tax at a rate of 15%.
The effective tax burden on distributed profit is approximately 27.75%. This is not considered double taxation, as the company and the shareholder are taxed separately.
Inventory of assets and liabilities – a mandatory preparatory step
Inventory serves to reconcile actual and accounting data before preparing financial statements.
It is not submitted to the Business Registers Agency, but it is legally required.
Where and when is statutory annual reporting submitted?
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Financial statements are submitted electronically to the Serbian Business Registers Agency by March 31
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Corporate income tax return is submitted electronically to the Tax Administration by June 29
(June 28 in leap years, as the statutory deadline is defined as 180 days from December 31)
Who submits statutory annual reporting?
Financial statements are prepared and uploaded by the accountant, but must be electronically signed by the legal representative.
The tax return is prepared and submitted by the accountant, who may be authorized to file it without the legal representative’s electronic signature.
Notes to the Financial Statements
Notes form an integral part of statutory annual reporting.
They provide explanations of accounting policies and detailed disclosures of individual balance sheet and income statement items.
Accounting policies are defined in the Accounting Policy Rulebook, an internal document that every company must maintain.
Transfer pricing
Transfer prices are prices applied in transactions between related parties.
Related parties are entities with the ability to control or significantly influence each other (for example, companies with the same owner holding more than 25%).
If a company engages in transactions with related parties, it must disclose them in the tax balance and submit a transfer pricing report to the Tax Administration.
Frequently Asked Questions about statutory annual reporting for a d.o.o.
Does a d.o.o. have to submit statutory annual reporting if it had no turnover?
Yes, statutory annual reporting is required regardless of business activity.
What is the corporate income tax rate for a d.o.o.?
The rate is 15%.
Is profit automatically distributed to owners?
No, a shareholders’ resolution and dividend tax are required.
Does a loss mean no corporate income tax is payable?
Not necessarily — taxable profit may differ from accounting profit.
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