Tax benefits in Serbia for employment of newly settled taxpayers-employees

Based on Article 15v of the Law on Personal Income Tax (hereinafter: the Law), which applies from March 1, 2020, it is possible to obtain tax relief for the so-called newly settled taxpayers.

The method of exercising this right was unknown until the day of the adoption of the Rulebook on the way of exercising the right to a reduction of the salary tax base for a newly settled taxpayer (hereinafter: Rulebook), which was published in the “Official Gazette of the RS”, number 13720, 6/23, and which entered into effective November 14, 2020.

The tax relief consists of a 70% reduction in the base for tax and contributions on wages.

In order to obtain relief, the newly settled taxpayer must:

• establishes a working relationship with a qualified employer for an indefinite period of time;
• establishes an employment relationship at a workplace for which there is a need for a person to have a special professional education and for which there is a need that cannot be easily satisfied in the domestic labor market.

Who is a qualified employer?

The employer in question:

• who is a resident of the Republic of Serbia and
• who, in terms of corporate income tax law, cannot be considered a person related to the employer where the newly settled taxpayer was previously employed.

Exceptionally, any employer resident in the Republic, who establishes an employment relationship with a newly settled taxpayer who, in the period of 25 years preceding the year in which he establishes the employment relationship from paragraph 1 of this article, has fulfilled the conditions from article 7 for at least three years is considered a qualified employer. paragraph 2. item 1) of the Law to be considered a resident of the Republic, i.e. that he had a place of residence or a center of business and life interests in the territory of the Republic.

Who is a newly settled taxpayer?

A newly settled taxpayer is a taxpayer who:

1. in the period of 24 months preceding the day of the conclusion of the employment contract with a qualified employer, he did not mainly reside in the territory of the Republic, or
2. at the time of concluding the employment contract with a qualified employer is less than 40 years of age, and who in the period of 12 months preceding the conclusion of the employment contract with a qualified employer mostly stayed outside the territory of the Republic for further education, i.e. professional development.

The newly settled taxpayer from the first point fulfills the condition regarding the workplace and professional education if he earns a monthly salary of more than 300,216 dinars (notice: amount increasing a bit every year).

The newly settled taxpayer from the second point fulfills the condition regarding the workplace and professional education if he earns a monthly salary greater than 200,144 dinars (notice: amount increasing a bit every year).

The right to a reduction of the base is granted to a newly settled taxpayer who, at the same time as establishing an employment relationship or within a reasonable period of time after establishing an employment relationship, settles in the territory of the Republic and who fulfills the condition to be considered its tax resident based on the center of business and life interests in the territory of the Republic, as and its tax resident for the purposes of applying the double taxation avoidance agreements that the Republic applies with other countries.

The right to a reduction of the base is realized for a period of five years from the date of conclusion of the employment contract, if all prescribed conditions are met during that period, regardless of the change of employers.

The right to a reduction of the base is exercised by the newly settled taxpayer starting from the first salary paid for the month in which evidence of the fulfillment of the conditions established by this article was obtained from the competent authority.

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

Autor: AKTIVA sistem team