Reimbursement of Expenses to Individuals Not Employed by the Payer

Reimbursement of expenses and other costs to individuals who are not employed by the payer are considered other income subject to tax, in accordance with the provisions of Article 85, paragraph 1, item 13) of the Law on Personal Income Tax.
Under the provisions of Article 85, paragraph 6 of the Law, a tax exemption is prescribed for documented expense reimbursements. If the conditions for tax exemption are not met, tax on other income is paid at a rate of 20%, on a tax base that consists of the gross amount of reimbursed expenses, reduced by standardized expenses of 20% (the conversion coefficient is 1.190476).
No contributions are paid on expenses reimbursed to an individual, provided that the individual has not received any other form of remuneration for work on this basis.
Tax Obligations for Reimbursement of Expenses
When the payer of the expense reimbursement is obligated to calculate and pay tax on other income, they must submit the PPP-PD tax return, indicating the type of income with the following codes:
- Code 613: when tax and pension contributions (PIO) are paid.
- Code 614: when tax, PIO contributions, and health insurance contributions are paid.
- Code 615: when only tax is paid.
Non-Resident Individuals
If a non-resident individual, in addition to expense reimbursement, also receives remuneration for work, the tax treatment of reimbursed expenses is the same as the tax treatment of remuneration for work.
If expenses are reimbursed to a non-resident individual who does not receive any remuneration for work, and the conditions for tax exemption under Article 85, paragraph 6, item 3 of the Law are not met, but there is a double taxation avoidance agreement with the country of residence of the individual, such income is considered other income under the agreement and is taxable only in the country where the income recipient is a resident.
Tax Exemption for Reimbursement of Expenses to Individuals Not Employed by the Payer:
Tax exemption applies to individuals who are:
- Sent or invited by a state authority or organization, with the right to reimbursement of expenses, regardless of the source of payment.
- Members of representative and executive bodies of the Republic of Serbia, territorial autonomy, and local self-government, in connection with performing their functions.
- Sent to work in Serbia by order of a foreign employer, in connection with the activities of the domestic payer.
- Sent by their employer, in connection with the employer’s business activities.
- Members of governing bodies of legal entities, in connection with the activities of the legal entities that send them on business trips.
- Voluntarily or by invitation cooperating for humanitarian, health, educational, cultural, sports, scientific research, religious, and other purposes, without receiving any other remuneration, except for reimbursement of participation fees.