10 YEAR CORPORATE TAX HOLIDAY
Companies are exempt from corporate profit tax for 10 years, from the first year in which they report a taxable profit, provided that they have invested an amount exceeding RSD 1 billion in fixed assets, and that they employed at least 100 additional employees on an indefinite contract.
CARRYING FORWARD OF LOSSES 5 YEARS
Serbian tax law allows the tax loss stated in the tax return to be carried forward and offset against future profits over a period of up to 5 years.
REDUCTION OF UP TO 50% OF ANNUAL INCOME TAX.
The annual individual income tax base is the taxable revenue, which represents the difference between the taxable revenue and personal deductions up to 50%. SALARY TAX RATE IN SERBIA IS 10%.
Salary tax base deduction: In the fixed amount of RSD 18,300 per month for an employee working full-time hours.
Salary tax is not payable on any employee’s receipts based on the following:
1. Public transport allowance (to and from the place of work) up to RSD 3,988 per month
2. Per diem allowance on business trips in the country (up to RSD 2,394) and per diem allowance on business trips abroad up to 50 EUR
3. Accommodation allowance on business trips, against presented bills
4. Transport allowance on business trips against public carrier bills and when the use of the employee’s own motorcar for business trips or other business purposes is permitted under laws and regulations up to 30% of the gas cost, and not exceeding RSD 6,980 per month
5. Solidarity relief in the event of sickness, medical rehabilitation or disability of an employee or member of his/her family up to RSD 39,881
6. New Year & Christmas presents for employees’ children aged up to 15 up to RSD 9,970 per child
7. Jubilee awards for employees up to RSD 19,939 per year
8. Financial assistance used for the medical treatment of an employee either in the country or abroad, in the amount of the actual treatment costs
9. Taxation of own shares, stock options and shares of the employer or employer’s related entity, which employee receives free of charge or at a discounted price from the employer and employer’s related entity
10. Tax relief for solidarity aid in case of the birth of a child– up to the amount of average salary paid out in Serbia based on the last published data, per newborn child.
REIMBURSEMENT OF INCOME TAX AND SOCIAL INSURANCE CONTRIBUTIONS FOR NEW EMPLOYEES
An employer who employs a new employee is eligible for partial reimbursement of paid contributions for mandatory social security insurance and paid income tax for each newly employed person (the person registered at the National Employment Service as unemployed for at least 6 months continuously), paid out not later than December 31st, 2021
The rates for tax relief are as follows:
| 1-9 employees |
| 10-99 employees |
| Over 100 employees |
***An employer – a legal entity classified as micro or small legal entity in terms of the law governing accounting, as well as a sole proprietor, a sole proprietor subject to lump-sum taxation or a sole proprietor farmer that hires at least two new workers, shall be entitled to 75% return of the income tax on earnings and 75% of total contributions for a newly employed person, paid by 31st, December 2021. If the company becomes classified as middle or large, it can continue to use the exemptions valid for all types of companies.
EXEMPTIONS FOR START-UP COMPANIES AND ENTREPRENEURS
Founders of start-up companies and entrepreneurs can be exempted from salary tax and mandatory social contributions during their first 12 months of work. Tax exemption can be realized for the salary of the legal entity founder/salary of the sole proprietor/salary of the sole proprietor farmer, who are registered by the competent authority before December 31st, 2020. Monthly salary cannot be higher than 37.000 RSD, in order to be eligible for exemption.
Natural persons for which the exemption is used have to be registered as unemployed for 6 months prior to employment or to finish their education in the 12 months before registering a company.
PARTIAL EXEMPTION OF SALARY TAX AND PENSION AND DISABILITY INSURANCE CONTRIBUTIONS FOR QUALIFIED NEW EMPLOYEES
This exemption is introduced to support employment of people who were unemployed (not necessarily registered), persons who were founders/members of legal entities but not employed in their own companies, persons who were hired based on specific contracts, and persons who were engaged as entrepreneurs (the last category is considered „qualified“ only until April 30th, 2020). The term „qualified“ is not based on the level of employee education or skills.
The right to partial exemption of salary tax and contributions can be used by any employer from the private sector - legal or natural person, who concludes an employment contract based on the Labor Law with a qualified new employee in the period from January 1st, 2020 and December 31st, 2022 and who increases the number of employees compared to that number as of December 31st, 2019.
It is envisaged that the tax deduction will be applied as follows:
- 70% of salary tax and 100% of pension and disability insurance contributions paid in 2020;
- 65% of salary tax and 95% of pension and disability insurance contributions paid in 2021; and
- 60% of salary tax and 85% of pension and disability insurance contributions paid in 2022.
EXEMPTION OF SALARY TAX AND MANDATORY CONTRIBUTIONS FOR INNOVATIVE COMPANIES
Employer – a newly founded legal entity that performs an innovative business activity is entitled to exemption from payment of salary tax and mandatory contributions on the founder’s salary who are employed in that legal entity. The founder has to own at least 5% of shares or stake in the company and cannot be connected with any other legal entity. Tax exemption may be applied to a monthly salary up to 150,000 RSD for the founder, in the period of 3 years from the date of company establishment. Exemptions can be applied only for the founders of the company and not for the other employees.
Eligible are only companies (not entrepreneurs and other types) that have been founded by December 31st, 2020.
TAX INCENTIVE FOR EMPLOYMENT OF RETURNEES FROM ABROAD AND FOREIGNERS
Salary tax base and base for mandatory contributions can be decreased for 70% for returnees from abroad and foreigners, in the period of 5 years, for jobs requiring special education and for which there are not enough people at the domestic labor market. This tax relief is primarily intended for persons who had lived outside of Serbia in the previous time for the purpose of education or professional development.
Certain conditions in terms of salary range have to be fulfilled and the employer cannot be connected to the previous employer of the newly engaged employee.
***An employer using any of these tax exemptions and exemptions for mandatory social contributions is not entitled to other benefits for the same employee.
In addition to existing tax benefits, the Republic of Serbia is offering financial support to foreign and domestic investors.
Financial incentives from the state may be awarded for financing Greenfield or Brownfield investment projects in the Manufacturing sector, projects relating to Services provided by service centers, in Hotel accommodation services and food manufacturing business.
The awarded funds are up to 50 % - 70 %, (depending on the size of the company) of the investment amount, based on the investment value or based on the 2-year gross salary of the employees.
Incentives of AP Vojvodina – Vojvodina Development Agency; regional funds
Just as it is done on the national level, the financial incentives for investment projects in manufacturing are allocated on the regional level.
Two different types of incentives are:
• Subsidizing new employment • 10 - 100 new employees • 3,000 - 5,000 euros per worker
• Co-funding of new equipment • up to 50 % of total equipment value
Incentives for Employment Offered by the National Employment Service
The National Employment Service conducts various programs for support of employment.
Self-employment subsidy is intended for the unemployed who are registered at the National Employment Service and have completed training for entrepreneurship. The grant is awarded once in the amount of 250.000 – 270.000 RSD for the establishment of small business, cooperatives or other forms of entrepreneurship, as well as the establishment of the company if the founder of it will be employed in that company.
The implementation of the program is monitored for 12 months.
2. New employment
The subsidy for job creation is granted to employers in the private sector, who employ the following categories of unemployed persons registered at the National Employment Service:
• young people under 30 years of age
• persons older than 50 years
• unemployed due to redundancy
• members of Roma nationality
• persons with disabilities
• working-age beneficiaries of social assistance
• long-term unemployed
• victims of domestic violence
The level of subsidy depends on the level of development of the municipality in which the employer is registered or where the employer has an organizational unit and the category of persons who are employed, in the range from 200.000 to 300.000 RSD.
3. Program for acquiring practical knowledge
The program for acquiring practical knowledge involves the acquisition of practical knowledge and skills of the unemployed by performing specific jobs with an employer belonging to the private sector.
Persons with no secondary education or no qualifications may be included in the program, including persons who have completed functional basic adult education, persons in the category of redundancies and persons recorded on the list of National employment services for more than 18 months with at least a secondary level of qualifications.
The program involves a learning process aimed at acquiring practical knowledge and skills to work in specific jobs, for a period of 3 months, in accordance with the submitted program of the employer and is realized through:
1. fixed-term employment contract - the employer is entitled to reimbursement of salary costs for the person involved for a period of 3 months and is obliged to retain a person in employment for another 3 months after the end of the program (6 months in total)
2. permanent employment (at the beginning of the program or until the end of the third month, or the end of the program) - the employer is entitled to reimbursement of the salary costs for the person involved, for a period of 3 months and is entitled to reimbursement of the cost of earnings for another 3 months, respectively total of 6 months; the employer is obliged to keep the person in employment for at least 6 months after the expiry of the financing (12 months in total)
The National Employment Service reimburses, on a monthly basis, a person's net earnings of RSD 31,000 (for a full fund of working hours) and the associated taxes and contributions for compulsory social security, up to 3 or 6 months (depending on the type of employment.
4. Apprenticeship Program
The program is being implemented with the employer who belongs to the private sector.
- Apprenticeship Program for unemployed with secondary level qualification
The program includes professional training for unemployed to work independently in a profession in which they acquired appropriate qualifications, to perform an internship, to fulfill conditions for taking a professional exam if prescribed by the law as a special condition to work in certain jobs, with the conclusion of a labor contract.
Under this program, National Employment Service reimburses the monthly net earnings of persons in the amount of 31,000 RSD (full working classes) and related salary tax and contributions for mandatory social insurance, for up to 6 months.
An employer with up to 10 employees has the right to include a maximum of 2 unemployed persons into the apprenticeship program. The employer who has over 10 employees is entitled to include apprentices in the number that cannot exceed 20% of the total number of employees.
- Apprenticeship Program for unemployed with a high level of qualifications
The program includes professional training for unemployed to work independently in a profession in which they acquired a high level of qualifications to perform an internship, to fulfill conditions for taking a professional exam if prescribed by the law as a special condition to work in certain jobs, with the conclusion of the labor contract.
National Employment Service refunds the monthly net earnings of persons in the amount of 35,000.00 RSD as well as related salary tax and contributions for mandatory social insurance for up to 9 or 12 months.
5. Funding for training programs
- Training at the request of the employer
The program includes participation in the financing of the training program of the unemployed in order to acquire knowledge and skills required to perform duties for specific work if the National Employment Service has no persons with the necessary qualification and skills.
National Employment Service participates in the funding of training programs up to 120,000 RSD.
The training program can last up to 480 hours (depending on the degree of complexity of work and other elements of importance for the duration of the training).
The employer is obliged to employ at least 50% of persons who have successfully completed the training.
- Training for the needs of the employer to retain employment
The training program for the needs of the employer is carried out in order for the employee to acquire additional knowledge and skills, in order to improve the competence, to acquire the missing knowledge, abilities, and skills. The aim of the program is to retain employment.
National Employment Service is participating in financing the cost of training up to 100.000 RSD per participant.
The training can be conducted by officially approved organizations, with a license for adult education and training.