Tax incentives for employers - pay less in line with regulations

21.08.2023

Employers have at their disposal a number of tax benefits that can reduce their obligations for taxes and contributions based on earnings. Below you can check whether you meet the conditions for applying some of the currently valid benefits.

Poreske olaksice

Tax exemption for employers who conduct research and development

As of March 1, 2022, there is an exemption for employers who, as part of their activities, conduct research and development on the territory of the Republic.

Namely, in accordance with Article 21i of the Law on Personal Income Tax and Article 45z of the Law on Contributions, an employer – a legal entity, who carries out research and development within the scope of his activity on the territory of the Republic of Serbia, is released from the obligation to pay:

70% of the calculated and withheld income tax, and
100% of contributionsfor pension fund at the expense of the employee and at the expense of the employer,

for the earnings of persons who are directly engaged in research and development, in proportion to the time that such persons spend on research and development in relation to full-time work.

You can find more about this relief in the following texts:

Employee equity

The reward mechanism for employees, management and third parties (investors, consultants, etc.) is provided for in the Companies Act (Articles 159a to 159ž).

A new financial instrument called the “right to acquire a share” was introduced within the reserved own share of a limited liability company.

Article 18 of the Personal Income Tax introduced a tax exemption so that an employee’s receipt of shares, stock options and shares from the employer or a person related to the employer free of charge or at a preferential price is exempt from taxes and contributions.

The income is subject to capital gains tax at the time of disposal.

Exemption from taxes and contributions on earnings of founders – innovation companies

According to Article 21e of the Personal Income Tax and 45d of the Law on Contributions (applied from March 1, 2020), the employer – a newly established business company that carries out innovative activities (in the sense of Article 50j of the Profit Tax Law) can exercise the right to exemption from paying taxes and contributions from wages founders who are employed in that newly founded company.

The right to this exemption can be exercised by the employer:

for the founder’s wages paid in a period of 36 months from the day the company was founded;
for each founder on the basis of his monthly salary, namely salary whose amount is not higher than 150,000 dinars per month (gross amount), and if it is higher, then on the basis of a part of the salary in the amount of up to 150,000 dinars.

The right to tax exemption is exercised by the employer under the following conditions:

that the natural person – the founder, that is, each of the founders if there are more than one, has established a working relationship with the newly established business company;
that during the period for which the right to exemption is exercised, the founder has at least 5% of the shares or shares in the newly established business company.

The right to tax exemption can be exercised by an employer – a company that is not related to any legal entity in the sense of the law governing the tax on profits of legal entities and that does not generate more than 30% of its total income from other entities that are considered to be related to any by which founder of the employer – company.

Based on the earnings of persons for whom one newly established employer has obtained tax exemption from this article, another newly established employer cannot obtain this exemption for those persons.

Benefits for employment of new persons

1. Benefit under Article 21v of the Personal Income Tax Law and Article 45 of the Law on Contributions implies that the employer (legal entity, entrepreneur, lump-sum entrepreneur or farmer entrepreneur) initially pays full taxes and contributions, and then submits a request for a refund of part of the paid taxes and contributions on earnings for newly employed person, paid no later than December 31, 2023.

A newly employed person is considered to be:

a person with whom an employment contract was concluded and who was registered for mandatory social insurance (CROSO);
a person who, was continuously registered as unemployed for at least six months with the National Employment Service, before starting an employment relationship, and a person who is considered a trainee for at least three months.

The condition is that the employer with new employment increases the number of employees compared to the number of employees on March 31, 2014.

If the newly employed person previously worked for a legal entity or an entrepreneur who is a related entity to the employer, you cannot obtain relief for him.

The employer can achieve:

65% return if he employs from 1 to 9 people,
70% return if he employs from 10 to 99 people and
75% return if he employs more than 100 people.

2. Relief under Article 21d of the Personal Income Tax and Article 45v of the Law on Contributions implies the establishment of an employment relationship with at least two new persons, exclusively for employers of legal entities classified as micro and small, as well as entrepreneurs, lump-sum entrepreneurs and agricultural entrepreneurs.

This tax relief can be obtained by the employer if, by establishing an employment relationship with a newly employed person, the number of employees increases by at least two compared to the number of employees the employer had on October 31, 2015.

The employer is entitled to a refund of 75% of paid taxes and contributions.

Other conditions from Article 21c are also applicable in this case.

3. Article 21z Personal Income Tax and Article 45đ of the Law on Contributions imply exemption from 70% of taxes and 100% of pension contributions for employers who employ candidates who, in the period from 01.01.2019. until 28.02.2022. were not employees, entrepreneurs or founders of companies who are employed in their companies.

It applies to persons employed in the period from 01.03.2022. until 31.12.2022. year and earn a monthly salary of more than 76,500 dinars.

This benefit cannot be used by persons who have the status of pensioners as of January 1, 2019.

The employer is considered to be a legal entity, an entrepreneur, a lump-sum entrepreneur, an agricultural entrepreneur, a representative office and a branch of a foreign legal entity.

Benefits for the employment of disabled persons

Article 21g of the Personal Income Tax and Article 45b of the Law on Contributions stipulate that an employer who employs a person with a disability for an indefinite period in accordance with the law regulating the prevention of discrimination against persons with a disability, for whom the disability can be proven with the appropriate legally-medically valid documentation, is released obligations to pay taxes and contributions at the expense of the employer, for a period of three years from the date of establishment of the employment relationship.

A newly employed person with a disability in the sense of this exemption shall not be considered a person who, prior to establishing an employment relationship, was employed by the employer who is the founder or a person related to the employer with whom he establishes an employment relationship, regardless of whether there was a termination of the employment relationship.

Novi zaposleni

Benefits for qualified new employees

An employer who:

had no more than 30 employees on December 31. 2020. and
who at any time during the period from January 1. 2020 to December 31. 2021. concluded, i.e. from between January 1. 2022 and December 31. 2025. conclude an employment contract with a qualified newly employed person and register that person for mandatory social insurance.

is released from the obligation to pay calculated and withheld tax from the wages of a qualified newly employed person, for wages paid up to and including December 31st 2025.

The employer cannot exercise the right to benefits for a person with whom he concluded an employment contract after June 30th 2021 and which is at any time after 1.1.2020. was employed by an employer who, according to the regular annual financial report for 2020, has an average of more than 30 employees.

An employer who was established after December 31, 2021 and who, at any time from January 1, 2020 to December 31, 2025, concludes an employment contract with a qualified newly employed person, can use the benefit for wages paid up to and including 31 in December 2025 if there are no related legal entities during the period of exemption.

A qualified newly employed person is considered to be:

a person who throughout 2019 did not have the status of insured employee, i.e. self-employed insured as a founder/member of a company who is employed in that company, and who acquired that status in the period from January 1, 2020 to on April 30, 2020, by establishing an employment relationship;
a person who, in the period from January 1, 2019 to April 30, 2020, did not have the status of employee insured, self-employed insured as an entrepreneur, or self-employed insured as a founder/member of a company who is employed in that company , which is the insured status of an employee, i.e. the insured status of self-employed activities as a founder/member of a company acquired in the period from May 1, 2020 to December 31, 2020 by establishing an employment relationship;
a person who, in the period from January 1, 2019 to December 31, 2021, did not have the status of insured employee, i.e. self-employed insured as a founder/member of a company who is employed in that company, and who in that period had the status of self-employed insured person as an entrepreneur, if he acquires the status of employee insured person, i.e. self-employed person insured person as a founder/member of a company who is employed in that company, in the period from January 1, 2022 to April 30, 2022. by establishing an employment relationship with an employer that had a maximum of 30 employees on December 31, 2020.

For the first two aforementioned categories of qualified newly employed persons, the employer is released from the obligation to pay calculated and withheld tax from wages, as follows:

50% tax and 75% contributions for pension fund – for wages paid in 2023,
40% tax and 65 % contributions for pension fund – for wages paid in 2024,
30% tax and 55 % contributions for pension fund – for wages paid in 2025.

For the third category, the aforementioned percentages of exemptions are applied, minus three percentage points for each year of application.

Read more about this relief and conditions in the following texts.

Tax incentives for newly settled taxpayers

Incentives for employers who employ newly settled persons can be realized on the basis of:

Article 15v Personal Income Tax Law or
Regulation on criteria for awarding incentives to employers who employ newly settled persons in the Republic of Serbia.

In the first case, the tax relief consists of a 70% reduction in the base for tax and salary contributions.

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

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

The following are considered as newly settled taxpayers:

returnees – persons who, in the period of 24 months preceding the day of conclusion of the employment contract with a qualified employer, did not mainly reside in the territory of Serbia. An additional condition is that the gross salary of this person must be at least RSD 243,450;
young returnees – persons who are less than 40 years old at the time of concluding an employment contract with a qualified employer, and who, in the period of 12 months preceding the conclusion of an employment contract with a qualified employer, mainly stayed outside the territory of Serbia for further education, ie professional improvement. An additional condition is that the gross 1 salary is a minimum of RSD 162,300.

In the second case (Regulation), 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 the calculated and paid contributions for pension fund for payments made for an employed newly settled person in a maximum period of 60 months , starting on July 1, 2022 and ending on December 31, 2028.

Based on the payment to the employee, the employer calculates and pays tax on wages and contributions to the mandatory social insurance in full, and with the fulfillment of the prescribed conditions, the employer can exercise the right to a refund on the basis of an application that is submitted once a year, in the period between the 15th and September 30.

A newly settled person in the sense of the Regulation 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,
with whom the employer concluded an employment contract for an indefinite period full-time and
has a contracted monthly basic salary of at least 300,000.00 dinars.

Read more about the mentioned benefits in the following texts.

You can find additional information regarding benefits and subsidies for business support at the following links:

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