Relief measures for employment
The Government of the Republic of Serbia has set the task to encourage employment and lower the tax burden for employers. So as to achieve this goal, the provisions of the Individual Income Tax Law (Serbian: ZPDG), the Law on Mandatory Social Security Insurance Contributions (Serbian: ZDOSO), as well as other bylaws, were amended in 2022.
The current 8 relief measures are as follows:
- Relief measures for salaries of the newly-settled taxpayers
- Relief measures for the employer – a newly established company that engages in innovative activities (relief measures for startups, IT companies)
- Relief measures for hiring new employees beginning on March 1, 2022 (relief measures for salaries beginning on March 1, 2022)
- Relief measures for the employer conducting research and development
- Relief measure for hiring qualified new employees
6. Relief measure for hiring people with disabilities
- Relief measure for hiring employees who were previously listed on the records of the National Employment Service (Serbian: NSZ) (worker registered on Bureau of Employment)
- Relief measure for hiring at least two employees who were previously listed on the records of the National Employment Service (Serbian: NSZ)
1. Relief measures for salaries of the newly-settled taxpayers
With the aim of stimulating the return of domestic citizens who work abroad as well as qualified foreigners who would permanently settle in Serbia, this tax relief was introduced in 2020, however it became effective after adjustments were made to Article 15v of the Individual Income Tax Law (Serbian: ZPDG) and Article 15a the Law on Mandatory Social Security Insurance Contributions (Serbian: ZDOSO).
In order to change Serbia’s demographic profile, the Government’s target in 2020 were those younger than 40 years old, who were encouraged to pursue better employment opportunities in their homeland, after completing their education abroad. However, as the proverb in our culture goes: Man proposes, (but) God disposes (Serbian: nije kome je rečeno, već kome je suđeno), and today in Serbia we encounter a frequently asked question, mostly by clients coming from eastern countries, but not a small number of those interested are from western countries as well, namely those so-called digital nomads who have entered the world of freelancing, which, after all, was the subject of our interview with BBC news.
The significance of this action is supported by the fact that on June 17, 2022 the Government enacted the Decree on the criteria for awarding incentives to employers who employ newly-settled persons in the Republic of Serbia, published in the “Official Gazette of the RS” 67/22. It should be borne in mind that this is a state-funded incentive in the form of a subsidy given to the employers who hire newly-settled taxpayers.
The distinction between a relief measure and a subsidy is that the relief measure is accomplished by a deduction from the base of taxes and contributions for the newly-settled taxpayer, whilst the subsidy is accomplished by a refund (return) of the already paid taxes and contributions. The relief measure and the refund are mutually exclusive; therefore, an employer who utilizes an incentive does not have the right to receive relief.
What requirements must be met in order to use the relief measures for the salaries of the newly-settled taxpayers?
- an employment contract on a permanent basis must be established between a qualified employer and a newly-settled employee;
- the employment relationship is established on a job position for which a person requires specialised vocational education and for which there is a demand that cannot be easily met on the domestic labour market;
- the monthly salary for an employed newly-settled taxpayer who has not resided on the territory of the RS in the previous 24 months must be greater than 264,684 dinars;
- the monthly salary for an employed newly-settled taxpayer must be greater than 176,456 dinars, the taxpayer must be under 40 years old, and the taxpayer must have spent the majority of the previous 12 months outside of the Serbian territory for further education or advanced training.
When considering the relief measures for the salary of the newly-settled taxpayer, the following must be determined:
- a) the salary tax base for the newly-settled taxpayer
- b) the contributions base for the salary of the newly-settled taxpayer
- c) who is considered a qualified employer
- d) who is considered a qualified newly-settled taxpayer
- e) duration of the tax relief
- f) proof of meeting the requirements for exercising the right to tax relief
- g) example of tax and contributions calculation for a newly-settled taxpayer
All of this indicates the complexity and scope of the process of determining the relief measures for the salaries of the newly-settled taxpayers, and necessitates a segment-by-segment evaluation. Shall you have any doubts, the Creative Finance team is at your disposal to help resolve them.