Tax Exemptions for Business People Which Aim to Incite Employment and Economic Growth to Come Into Effect on January 1

On January 1, the non-taxable wage sum will increase from the current RSD 18,300 to RSD 19,300, and the Ministry of Finance says that this change will unburden business people, incite employment, inflow of investments and economic growth.

At the same time, the contribution rate for the Pension and Disability Insurance Fund paid by the employer is lowered by 0.5%. This measure reduces the tax burden on an average net salary by around one percentage point, which, for the economy, makes for total savings of around RSD 17.2 billion, because the state has waived the revenues, the Ministry of Finance says.

In order to incite employment, two new tax exemptions are introduced, as is the extension of the period of the application of the existing tax exemptions for the employment of certain categories of persons.

The first exemption pertains to an employer which employs a new person, who, in the period between January 1, 2019, and February 28, 2022, was not insured as an employee/entrepreneur/founder or an employee in their own business entity.

The employer is exempt from the obligation of the payment of 70% of the calculated and withheld tax on the salaries of that person, which is higher than RSD 76,500 a month, for salaries paid as of December 31, 2024.

The second exemption pertains to employers – legal persons that, within their activity in the territory of Serbia, carry out research and development, in the form of the exemption from the payment of 70% of the calculated and withheld tax on the salaries of persons who are directly hired for research and development jobs.

The extension of the period of the implementation of the existing tax exemptions is set for the employment of new persons in the form of the right to a recovery of a part of the paid tax based on the earnings of the newly employed person, of 65-75%, from December 31, 2021, to December 31, 2022.

Also, the extension of the validity of the exemption for the employers that employ a qualified new person, in the form of the exemption from the payment of the wage tax for those persons, and the specification of additional conditions for the extension of the exercising of the right to an exemption based on the earnings of a qualified new employee until 2025 is determined.

The employer is exempt from the obligation to pay wage taxes in 2023 by 50%, in 2024 by 40% and in 2025 by 30%.

The right to the extension of the application of an exemption can be exercised by an employer which, on the day of December 31, 2020, had up to 30 employees.

To the end of increasing incentives for innovation activities, within the tax exemption for employers, based on wage taxes of founders who are employed in a newly founded business entity which carries out an innovation activity, the removal of the conditions for the usage of the exemption which pertains to the period in which the employer was founded is proposed, with the aim of making tax exemptions a permanent measure.

According to the current stipulation, the right to a tax exemption can be exercised by an employer founded as of December 31, 2021.

Also, from January 1, there will be exemptions from capital gains tax based on an entry of author’s and related rights and the right of industrial property as a whole, as a non-monetary investment in the capital of a business entity of a Serbian resident.

From next year, the compensations realized by students who study through work, as a material and financial security in line with the law which regulates the dual study model, are exempt from taxation.

To the end of enabling an additional deadline for the full regulation of the status of persons who carry out non-standard forms of work (online workers, freelancers), the existing taxation model will continue being implemented until new rules are in effect.

It is, therefore, proposed to extend the period within which the revenues realized based on the agreed compensation for author’s and related rights and the agreed compensation for the work done, to which tax is paid through self-taxation, to have the tax treatment as revenues for which the tax obligation is determined by the decision of the taxation organ.

Tax is not paid to income realized within the calendar year in the amount of 384,000 dinars a year, with recognition of the recognized expenses in the amount of 50% of the realized income.

This is the way that income realized as of December 31, 2022, is taxed.

The National Assembly of Serbia adopted the Law on Amendments to the Law on Personal Income Tax at the session held on November 26, 2021.

Ministarstvo finansija Republike Srbije

Narodna skupština Republike Srbije

taxes

employers

tax exemptions