The very beginning of 2023 marked the beginning of the implementation of the Law on Amendments to the Law on Personal Income Tax (“Official Gazette of RS”, No. 138/2022), which was adopted in December of the previous year. (more…)

On November 26th 2020, the National Assembly of the Republic of Serbia adopted Laws on amendment to the Law on Tax Procedure and Tax Administration and Law on the amendments to the Law on Property Taxes, both published in the “Official Gazette of the RS”, No. 144/2020. (more…)

The last two decades were marked by growing business opportunities in the IT domain, softer R&D, advertising, graphic design, etc, which were all supported by the development of digital platforms on the Internet. In this environment it spontaneously became common practice for domestic residents to be employed by foreign companies which are not registered in the Republic of Serbia with the Business registers agency. (more…)

Test of Entrepreneur’s  Independence and Other Novelties incorporated in the Draft Law on Amendments to the Law on Personal Income Tax

The Government of the Republic of Serbia proposed amendments to the current Law on Personal Income Tax (hereinafter: LPIT) which should be adopted by the end of this year. These amendments bring many novelties to our legal system and the most important ones are related to the system of flat-rate taxation of self-employed income, increase of non-taxable amount of earnings and introduction of new employment benefits for certain categories.

Changes to the system of flat-rate taxation of self-employed income

The most significant change that has attracted a lot of public attention in the previous period is the announced change to the system of flat-rate taxation of self-employed income. Namely, the announced changes to the law introduce a so-called test of entrepreneur’s independence.

In cases where an entrepreneur / lump-sum entrepreneur is remunerated on the basis of carrying out activities with a remuneration by the same employer or an employer’s affiliate, criteria for determination of the level of independence of the entrepreneur / lump-sum entrepreneur is introduced.

The criteria mentioned in the draft law are as follows:

1. the employer / employer’s affiliate determines the working hours of the entrepreneur / lump-sum entrepreneur and the employer / employer’s affiliate determines when the entrepreneur will take a vacation;
2. the entrepreneur / lump-sum entrepreneur uses premises and equipment of the employer / employer’s affiliate for work;
3. the employer / employer’s affiliate organizes vocational training for the entrepreneur / lump-sum entrepreneur;
4. the employer / employer’s affiliate has hired an entrepreneur / lump-sum entrepreneur by the usage of an advertised job vacancy or through an intermediary (e.g. employment agency);
5. the entrepreneur / lump-sum entrepreneur frequently carries out his work in cooperation with other entrepreneurs hired by the same employer / employer’s affiliate;
6. the entrepreneur / lump-sum entrepreneur earns a predominant level of income over a 12-month period from one employer / employer’s affiliate;
7. the entrepreneur / lump-sum entrepreneur performs activities in the field of the employer’s / employer’s affiliate’s business, and for such activities his hiring contract does not contain a clause under which the entrepreneur / lump-sum entrepreneur bears the usual business risk for the job delivered to the employer’s / employer’s affiliate’s client;
8. the entrepreneur’s / lump sum entrepreneur’s hiring contact contains a partial or complete prohibition on the entrepreneur / lump-sum entrepreneur to provide contractual services to other employers; and
9. the entrepreneur / lump-sum entrepreneur carries out remunerated activities for the same employer / employer’s affiliate, continuously or intermittently for 130 or more workdays over a period of 12 months.

According to the draft law, if it turns out that the entrepreneur fulfils most of the criteria, or at least five of the nine, then the entrepreneur in this case will pay the tax according to the rules for other income, i.e. in the amount of 20%. Namely, by introducing such legal solution, the legislator has opted to tax the income of these entrepreneurs / lump-sum entrepreneurs through “other income”, where the rate of 20% applies, as opposed to the situation when the employee’s income is taxed through earnings where the rate is 10%. If, however, the entrepreneur does not meet five of the above nine criteria, then the general taxation regime applies.

Increase in non-taxable amount of earnings

One of the significant novelties expected to be introduced by the draft Law on Amendments to the LPIT is the increase of the non-taxable amount of earnings. If the proposed changes are to be adopted, the non-taxable amount of earnings will be RSD 16,300.00 per month compared to the previous RSD 15,300.00. This will reduce the income tax base and therefore the amount of tax.

Employment stimulation

Lastly, the proposed changes are intended to stimulate employment. In this context, employers are expected to get benefits in the following cases:

• employers representing newly established companies engaged in innovation will get benefits since the proposed changes prescribe exemption from payment of income taxes of founders who are employed in their own newly created companies engaged in innovation, and
• employers who employ a qualified newly employed person will get benefits since the proposed changes prescribe exemption from payment of income taxes of a qualified newly employed person.

In addition, a reduction of the income tax base for persons who get employed and are considered as newly “born” taxpayers in the territory of the Republic of Serbia is proposed. The income tax base in this case is reduced by as much as 70%. This change is intended to motivate natural persons living abroad and whose work, due to their special education, requires domestic employers to settle in Serbia and get employed by a domestic employer.

In the end, the new changes would bring an increase in the non-taxable amount of scholarships and loans for students up to RSD 30,000 per month.

If you have any questions or need further information please contact Ivana Kamenovic, Chief accountant at ZS TAX & Consulting doo, at ivana.kamenovic@zstax.rs.

After Ministry of finance has issued ruling no. 011-00-12/2019-04 on February the 1^st 2019 on the tax treatment of reimbursement of commuting expenses, American Chamber of Commerce in Serbia has sent a letter to the Ministry of finance in order to clarify certain part of issued ruling with respect to the determination of what should be considered as a credible accounting document for the purpose of proving commuting costs’ reimbursement. (more…)

Rulebook on tax exemption from salary tax with respect to organizing recreational, sport and other activities for the employees

On 12 July 2019, Minister of finance has issued Rulebook on tax exemption from salary tax with respect to organizing recreational, sport and other activities for the employees, which more closely defines the application of the exemption from Article 18a of the Personal Income Tax Law. (more…)

2018 Non-taxable threshold for annual income tax purposes

Based on the published data in Official Gazette no. 13/2019 from February 28th2019 regarding average annual salary per employee paid out in 2018 in the Republic of Serbia, the non-taxable threshold relevant for determining 2018 annual personal income tax filing liability is set at RSD 2,470,644. (more…)