Digital nomads, as well as the period of the Covid-19 pandemic, started a process on a global scale that set a serious task for every tax system to find a solution for taxing freelancers. The tax system in Serbia faced this task as well. Negotiations and agreements between representatives of the freelance community in Serbia and representatives of the Ministry of Finance resulted in creating two models of taxation for the freelance community in Serbia. The models differ in the level of standardized costs, tax rates, options with and without payment of contributions for pension, disability and health insurance.
Self-taxation of freelancers in Serbia is regulated by amendments to the Individual Income Tax Law (“Official Gazette of RS” No. 138/22), as well as by Article 28 of the Law on Mandatory Social Security Insurance Contributions. The very concept is not defined by any law, but the term “freelancer” itself is informally used for all those natural persons who earn income from legal entities and natural persons who, when paying income, do not calculate and do not pay taxes and withholding contributions in Serbia.
As of July 1, the Ministry of Finance created a special portal for freelancers for electronic reporting of taxes and contributions on incomes that were not taxed by the payer of those incomes.
Natural persons who have income in Serbia can be resident or non-resident persons. In the instructions on the portal it is stated that:
“foreign natural person is a non-resident, who earns income by working in the Republic of Serbia, from the payer of income from abroad (legal entity, entrepreneur or natural person) or domestic natural person, i.e. person who, during the payment of income, does not calculate and does not pay obligations based on taxes and contributions in the Republic of Serbia.”
This indicates that taxpayers and non-residents who earn income in Serbia, regardless of whether the payer is from abroad or from Serbia, must check whether the legal or natural persons who paid them the income on their behalf have calculated and paid the tax and contribution obligation and provided them with a certificate of this. That is, everyone who earns income and has contracts for services provided, first of all must check whether the obligations regarding taxes and contributions are regulated by the contract or not. If this is not regulated, foreign natural persons must register on the portal of the Tax Administration for freelancers, choose one of the two self-taxation models, submit an application and receive payment instructions.
It is important to note that the Legislator through this method of taxation
had in mind the inclusion of all those incomes:
– that are included or not in written or oral contracts,
– that can be in money, goods, services, etc.
– originating from all countries of the world (it is important that it is in the foreign currency that is exchanged, and if the National Bank of Serbia does not have an exchange rate for that country, the exchange rate of that country is applied in relation to USD and then the dinar county of USD is taken)
– that you earn as electricians, plumbers, carpenters, sculptors, architects, designers, individual fitness instructors, teachers who give “private lessons”, etc.
Income is reported and paid quarterly. This means that the income in one quarter is summed up and reported as such. For all those who are not established in another way, they have the possibility to have health insurance through this model of income taxation, but also the possibility to provide insurance for their family members. Also, through this model of income taxation, the possibility (depending on the model) of pensionable service is realized. This means that they must apply through the CROSO portal – the central register of compulsory social insurance. It should be emphasized that by registering on the freelancer portal, you are not automatically registered on the central registry, but must be done separately. The condition for applying to the central registry is that you are a resident who has an electronic certificate, and if you are a non-resident, you must authorize a person who is a resident to do it on your behalf.
It means that all foreign natural persons, i.e. non-residents, who earn income in Serbia can submit an application for self-taxation of that income through the portal: www.frilenseri.purs.gov.rs. In Serbia, it is often said that one “but” spoils luck, so this is also the case with the application of non-residents, and it is a requirement for all non-residents to have a registration number for foreigners or a TIN tax identification number. In other words, it is necessary for non-residents to have an approved temporary residence in Serbia or to register with the Tax Administration as taxpayers through a tax attorney.
How complex are the procedures related to obtaining a registration number for foreigners and a tax identification number, you can best get information from colleagues from our umbrella organization https://welcometoserbia.org/en/home/.
The self-taxation model is a challenge not only for non-residents but also for residents, so it is important to understand what this model means. Self-taxation is a tax model according to which, based on the application you submitted, the Tax Administration does not make a decision according to which you will make the payment, but you calculate, report and pay the tax on the income by yourself.
The legislator has foreseen that if you have not made the report within the prescribed legal deadlines, you can, in accordance with Article 182b of the Law on Tax Procedure and Tax Administration, report yourself for delay and calculate interest from the next day of the day the obligation is due until the day of payment and pay tax on this income. The possibility of self-declaration for delay according to Article 182b is possible only if the tax control procedure has not already started. This Law on Tax Procedure and Tax Administration, more precisely in its provisions in Article 180, Paragraph 1, Point 6, stipulates a penalty for untimely submission of a tax return from 5 to 150 thousand dinars.
As usual, our CREATIVE FINANCE TEAM is available to all those who follow us for any doubts and help in choosing a model and submitting tax returns.