If you’re a flat-rate entrepreneur, the KPO book is probably the only business record the law requires of you. It sounds serious, but it’s essentially a simple list of your income. In this article we explain exactly what goes into it, when, and how to keep it electronically without any hassle.

What the KPO book is

KPO is the abbreviation for the “Business book on turnover earned by flat-rate taxpayers.” It is a prescribed form in which flat-rate entrepreneurs record all of their earned turnover, that is, their income. The obligation to keep it stems from the Rulebook on Business Books and the Law on Personal Income Tax (ZPDG, Article 43), and its purpose is simple: so that at any moment you can track how much turnover you have generated during the year.

The most important rule to remember right away: only income is entered into the KPO book. Expenses are not recorded. Since, as a flat-rate entrepreneur, you are taxed on a lump-sum determined base, the state is not even interested in your actual expenses — only turnover matters.

What gets entered into the KPO book

The KPO form has a simple structure. The header contains basic information about the entrepreneur (the taxpayer’s name, the name and registered seat of the business, the PIB and the business activity code), followed by columns in which you chronologically record each earned income:

Sequential number of the business transaction from the start of the year
Date and description of the entry (e.g., invoice date and number)
Income from the sale of products
Income from services rendered
Total income (sum)

Most flat-rate entrepreneurs who provide services (freelancers, IT, consulting, design) fill in only the services column. In practice, every invoice issued becomes a single row in the book. The sequential number starts from 1 at the beginning of each calendar year.

Deadlines: the year, entries and closing

The KPO book is kept for the calendar year — from January 1 to December 31. Turnover is recorded chronologically, as income arises, so it’s not wise to leave everything for the end of the year. The safest practice is to record each income immediately, as soon as you issue an invoice or get paid for a service, so that the book is always up to date.

At the end of the year you close the book by adding up the total turnover. If you keep it electronically, print it out at the end of the year, check all the entries and sign it. That annual total is also the figure that shows whether you have stayed within the legal limits.

Turnover limits you monitor through the KPO book

Precisely because it tracks turnover, the KPO book serves as a tool for monitoring the limits for retaining flat-rate status. There are two thresholds:

6,000,000 dinars — turnover in a single calendar year (Jan 1 to Dec 31)
8,000,000 dinars — turnover over a rolling 365-day period (it does not have to follow the calendar year)

Exceeding either of these two limits means the loss of the right to flat-rate taxation and the obligation to switch to double-entry bookkeeping. If you regularly record your income in the KPO, you’ll easily see in time that you’re approaching the threshold and avoid an unpleasant surprise.

Keeping it electronically and the question of certification

You can keep the KPO book in two ways: in paper form (bought at a bookshop) or electronically — in an Excel spreadsheet, an online service, or specialized software. The format is not strictly prescribed; what matters is that the electronic version contains all the prescribed columns and data and that you can print it and submit it at any moment at the request of the Tax Administration.

There is a point of confusion around certification worth clarifying. The Rulebook on Business Books provides that business books are to be certified at the competent tax authority before bookkeeping begins, which formally includes the paper KPO form as well. In practice, however, many Tax Administration branches no longer carry out certification of the KPO book, so with electronic record-keeping it is, as a rule, not done. To avoid confusion, it’s best to check the practice of your competent branch before you start.

For most flat-rate entrepreneurs, especially freelancers, keeping it electronically is the most practical option: fast, clear and easy to store. Keep the book and the supporting documentation (invoices) in good order, because the Tax Administration may ask to inspect them.

Key points

The KPO book records only income (turnover) — expenses are not entered.
Columns: sequential number, date/description, income from products, income from services, total.
It is kept for the calendar year, chronologically; record income immediately, not at the end of the year.
Limits: 6 million dinars (calendar year) and 8 million (rolling 365 days).
It can be kept electronically; at the end of the year print it out, check it and sign it.
Check certification of the KPO book with your branch — practice varies.

If you need help with keeping the KPO book or tracking limits, get in touch with us.