Amendments to the Personal Income Tax (PIT) Law has been published in the Official Gazette of the Republic of Serbia No. 86/2019 dated 6 December 2019. The most important changes are presented below.
A new article prescribed an exemption from taxation of the income of a non-resident taxpayer who spends up to 90 days in Republic of Serbia in 12 months if that income is derived from a non-resident principal who does not perform the business activity or other activity in the territory of Serbia.
The amendments increased the non-taxable amount to RSD 16.300 for a person who is working full time.
A new article was prescribed which stipulates that the salary tax base for the new immigrant taxpayer will be reduced by 70% for a period of 5 years from the date of conclusion of a permanent employment contract with a qualified employer. The right to reduce the base relating to the new immigrant taxpayer shall be exercised independently of the change of employer, if certain conditions are met. The above tax relief applies primarily to newly engaged persons, not older than 40 years, who have resided outside the territory of Serbia in the previous period, primarily for the purpose of education or professional development.
Also, a new article was prescribed, which refers to the exemption from payment of tax on founder’s salary who are employed in a newly established company that performs an innovative business activity. The tax exemption may be applied to a monthly salary up to the amount of RSD 150,000 for the founder, for a period of 36 months from the date the company was established. The tax exemption can be obtained by an employer established as of 31 December 2020.
The tax exemption for documented transportation costs for going and coming from work was prescribed – up to the amount equal to the price of the monthly public tickets in public transport, or up to the amount of actual transport costs, up to 3,914 RSD per month.
It is prescribed that an employer who employs a qualified new employee is entitled to exemption from paying calculated and withheld tax for the salary paid as until 31 December 2022. Qualified new employee is a person who was not insured based on employment, nor he/she was insured as a self-employed as a founder or the member of his/her company with concluded employment agreement in 2019 and who acquires the status of an insured employee or self-employee as a founder or the member of his/her company with concluded employment agreement in the period from 1 January to 30 April 2020. Qualified employee is also a person who, from 1 January 2019 to 30 April 2020, did not have status of an employee, entrepreneur or self-employed person as a founder or a member of his/her company with concluded employment agreement, and who acquired the status of insurance during the period from 1 May to 30 December 2020 by employment. It is envisaged that the tax deduction will be applied as follows:
- 70% of salary taxes paid between 1 January and 31 December 2020;
- 65% of salary taxes paid between 1 January and 31 December 2021; and
- 60% of salary taxes paid between 1 January and 31 December 2022.
Person who enjoyed retirement (receiving old age, temporary or disability pension) in the period from 1 January 2019 to 30 April 2020 is not considered as qualified new employee.
An employer using these tax exemptions is not entitled to other benefits for the same employee, including the use of employment and self-employment subsidies, except for the exemption for mandatory social security contributions related to tax exemption in accordance with the amended law.
The possibility of lump-sum taxation has also been introduced for taxpayers who perform activities in the field of accounting, bookkeeping, auditing and tax advisory activities.
The next significant change in the Law regulates that other income is considered to be income of a lump-sum entrepreneur or entrepreneur (hereinafter: entrepreneur), generated by the same principal, or its related entities (hereinafter: the principal), if the entrepreneur fulfills 5 of the 9 prescribed criteria, as follows:
The principal decides on working hours, vacations, absence of entrepreneur, as well as whether the contractual remuneration is reduced proportionally on the basic of absences or vacations;
- The entrepreneur normally uses premises provided by the principal or performs business in a place determined by the principal;
- The principal carries out, or organizes professional training of entrepreneurs;
- The principal has hired an entrepreneur by the usage of advertising job vacancy or usage of employment agency;
- The principal provides its own basic tools, equipment or other basic material or intangible assets needed for the regular work of the entrepreneur or finances their procurement, except for specialized tools, equipment or other specialized assets that may be necessary for the execution of a specific job or order;
- At least 70% of the total revenue generated over a 12-month period is from one principal;
- The entrepreneur performs activities which are part of principal’s business activity and the contract does not contain a clause defining that the entrepreneur bears the usual business risk;
- The contract contains a partial or complete prohibition for the entrepreneur to perform services contractual to other clients, with the exception of a partial prohibition on the provisions of services to a limited number of a direct principal’s competitors;
- The entrepreneur carries out activities for which she/he receives a fee from the same principal continuously or intermittently for 130 or more working days for a period of 12 months. Whereby performing activities in one working day is considered to be performing activities in any period during the working day between 00 and 24 hours.
Income generated by entrepreneur is gross income that is taxed as other income (20%) without the right to deduct standardized costs. The provisions provide that the income paid to the entrepreneur as of 31 March 2020 will be considered to be income from self-employment, regardless of the nature of the entrepreneur’s relationship with the principal.