New incentives in Serbia for employers who employ newly settled persons

On the basis of Article 15v of the Law on Personal Income Tax and Article 15a of the Law on Contributions for Mandatory Social Security, it is possible to obtain relief for the so-called newly settled taxpayers.

With the adoption of the Rulebook on the method of exercising the right to a reduction of the salary tax base for newly settled taxpayers, which entered into force on November 14, 2020, the method of exercising the right to this relief is more closely prescribed.

In Fig. the Gazette of the RS, number 67/22 of June 17, 2022, published the Regulation on the criteria for awarding incentives to employers who employ newly settled persons in the Republic of Serbia and it entered into force on June 18, 2022.

The incentive in accordance with the Regulation can be used by an employer who does not use (nor has used) the relief from Article 15v of the Law on Personal Income Tax and 15a of the Law on Contributions for Mandatory Social Insurance.

The regulation specifies the criteria for awarding incentives to employers who employ newly settled persons in the Republic of Serbia for whom there is a need that cannot be easily met in the domestic labor market.

Incentives are paid in the amount of:

• 70% of the calculated and paid salary tax for one or more employed newly settled persons, and
• 100% of calculated and paid contributions for mandatory pension and disability insurance,

for payments made for an employed newly settled person in a period of a maximum of 60 months, starting from July 1, 2022, and ending on December 31, 2028.

The employer who: does not have the right to use incentives.

1. in the period from the submission of the first application and ending with the end of the calendar year in which he received the last incentive payment, he pays dividends, i.e. realized profits, except for dividends or profits that are paid from the part of the profit that is higher than the amount received in the name of incentives;
2. is a beneficiary of state aid in connection with which he has an employment obligation, except for obligees who have already fulfilled this obligation as of July 1, 2022;
3. for an employed newly settled person for whom he receives the incentives prescribed by this regulation, he uses or has used the right to reduce the base for that person in accordance with Article 15v of the Law on Citizens’ Income Tax

Who is the employer?

The employer is domestic or foreign:

• individual,
• legal entity or entrepreneur registered to perform activities in the Republic of Serbia,
• branch and representative office of a foreign employer registered to perform activities in the Republic of Serbia.

Who is a newly settled person?

A newly settled person is a natural person:

• who, in the period of 24 months preceding the day of concluding the employment contract with the employer, did not stay in the territory of the Republic of Serbia for more than 180 days and
• with whom the employer concluded a full-time permanent employment contract and
• has a contracted monthly basic salary in accordance with the regulation governing work of at least 300,000.00 dinars.

Conditions for awarding incentives

The right to grant incentives is exercised by an employer whose number of permanent full-time employees on the date of submission of the application for the award of incentives is the same or greater than the number of permanent full-time employees on the date of entry into force of this regulation (June 18, 2022.) increased by the number of employed newly settled persons for whom he submits an application.

Employers established after June 18, 2022, are considered to have had no full-time permanent employees on June 18, 2022.

The right to the award of incentives is exercised by the employer at most for the number of employed newly settled persons which, together with the number of employed persons for an indefinite period with full-time workers who cannot be considered as employed persons newly settled on the date of submission of the application, is greater than the number of employed persons for an indefinite period with full-time work. during working hours on the day of entry into force of this regulation.

The right to the award of incentives for an employed newly settled person is realized if the newly settled person is continuously employed by the employer in the period between the date of submission of the application and December 31 of the year in which the application was submitted. The fulfillment of this requirement is checked by the Ministry of Economy.

The right to grant incentives is realized only for newly settled persons who are employed by the employer by December 31, 2023.

For applications submitted starting in 2024, the employer can exercise the right to incentives if, in the period after December 31, 2023 and ending with the end of the year in which the incentives were last paid, the employer did not reduce the total number of permanent full-time employees at the time determined ex officio by the Ministry of Economy on the last day of each quarter of the year in which incentives are paid to him.

Submitting an application for the grant of incentives

The content and method of submitting the application are prescribed by Article 4 of the Regulation.

The application is submitted to the Ministry of Economy once a year in the period between September 15 and September 30, whereby each application is submitted for wages paid in the period preceding the submission of the application for a maximum of 12 months. The application is submitted on the Form that is an integral part of the Regulation.

The Ministry of Economy decides on submitted applications within 120 days of the deadline for submitting the application.

The Ministry of Economy compiles and submits lists of employers who have exercised the right to grant incentives, with the number of allocated funds per employer, and transfers the funds to the Treasury Administration to a special dedicated account.

The Treasury Administration transfers incentive funds to employers to specially dedicated accounts opened for these purposes at the Treasury Administration.

Loss of the right to incentive

The employer loses the right to the incentive and is obliged to return the funds if:

• pays a dividend contrary to the provisions of Article 3, Paragraph 8, Point 1) of the Regulation;
• for employed newly settled persons for whom he receives incentives, use the right to reduce the base for newly settled persons in accordance with Article 15v of the Law on Personal Income Tax and Article 15a of the Law on Contributions for Mandatory Social Insurance;
• in the period after December 31, 2023, reduce the number of permanent full-time employees.

Feel free to contact us for more information and further assistance.

Autor: AKTIVA sistem team