Salary payment in foreign currencies in Serbia
SALARY PAYMENT IN FOREIGN CURRENCIES IN SERBIA
In recent years, the economic environment of doing business in Serbia has raised a number of questions related to the possibilities and impossibilities related to salary payment in foreign currencies. A question often asked by employed foreign citizens (who have a work permit) is if they can pay salaries in foreign currencies or in compliance with the agreements on regulating the rights and duties of a non-resident manager or they can pay salaries to the employees of foreign representative offices, branches, etc. The answer to all these and many other questions can be found in the Law on Foreign Currency Transactions as well as by-laws conducting the enforcement of this law.
The above mentioned Law on Foreign Currency Transactions and the following by-laws:
– Decision on Terms and Conditions of Performing Foreign Payment Transactions and
– Guidelines for Implementing the Decision on Terms and Conditions of Performing Foreign Payment Transactions
stipulate the situations in which it is possible to perform payments i.e. salary payments in foreign currencies.
In the Article 34 of the aforementioned law, the legislator has stipulated that all payments performed in Serbia, including transfers between residents and transfers between a resident and a non-resident, shall be performed in RSD. According to the Article 2 Item 1 of the Law on Foreign Currency Transactions, the following are considered to be residents:
1) a legal person registered and headquartered in Serbia
2) entrepreneur – a natural person registered in Serbia, performing an activity as its occupation to gain profit
3) a branch of a foreign legal person registered with the Business Registers Agency
4) a natural person, who has permanent residence in Serbia, except from the natural person, who has a temporary stay in a foreign country issued for a period longer than one year
5) natural person – foreign citizen, residing in Serbia longer than a year based on a residence permit i.e. work visa, except from diplomatic and consular representatives of foreign countries and their family members
6) users of the budget of the Republic of Serbia
7) diplomatic, consular and other government-funded Serbian representative offices in foreign countries and the residents of the Republic of Serbia employed by these representative offices, as well as their family members
Non-residents are all entities that are not listed in the Article 34 Item 1 of the Law on Foreign Currency Transactions.
There are only two special cases in which the payment of salaries in Serbia can be performed in foreign currencies, and this is regulated by the Article 34 Paragraph 2 Item 9 of the Law on Foreign Currency Transactions. These two cases refer to:
- the residents – natural persons sent abroad to work temporarily based on a contract for the execution of investment projects abroad
- the employees of the diplomatic and consular representative offices and organisations within the UN and international financial institutions in the Republic of Serbia
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When it comes to the salaries of the employees sent abroad to work temporarily, they can be payed both in RSD and foreign currencies, depending on the provisions of the contract for the execution of investment projects.
Furthermore, natural persons (residents of the Republic of Serbia), employed by diplomatic and consular representative offices and international institutions, can receive their salaries in foreign currencies or in RSD.
This means that, except from the two exceptions, it is a legal obligation to perform all other payments related to the payment of salaries, compensations for managers, etc. in RSD.
If an employed natural person is a foreign citizen and non-resident, the salary is transferred to the non-resident RSD account opened in compliance with the provisions of the Decision on the Conditions of Opening and Manner of Maintaining Foreign Exchange Accounts of Residents and Dinar and Foreign Exchange Accounts of Non-Residents. If a natural person, who is a foreign citizen, stays longer than a year based on the stay permit i.e. work permit, he is a resident and we are talking about the payment conducted between two residents.
In case of agreements on regulating the rights and duties of a manager who does not enter into a labour agreement but complies with the provisions of the Law on Employment of Foreign Citizens, this compensation is taxable as other types of income and is subject to the individual income tax payment in accordance with the Articles 85 and 86 of the Individual Income Tax Law; net compensation is paid in RSD in compliance with the aforementioned Article 34 Item 1 of the Law on Foreign Currency Transactions and the payments between residents and non-residents are performed in RSD.