Personal Taxes

Proposed revenue tax breaks and capital positive aspects tax exemptions

The Government of the Republic of Serbia recently proposed amendments to the tax laws, including amendments to the Law on Income Tax (‘PIT law‘), Law on Social Contributions (‘SSC law‘) and the Corporate Income Tax Act (‘CIT law‘).

As part of the changes, several wage tax incentives as well as a tax exemption from capital gains tax in the event that IP rights are brought into the capital of a resident corporation are proposed.

Income tax and social security contributions

An extension of the deadline for the application of incentives for the employment of former entrepreneurs is proposed. Originally, the incentive for salaries paid was to apply until the end of 2022, but it is proposed that employers who were previously registered as entrepreneurs in 2020 can be exempted from paying wage tax and the pension and disability contribution by 2025 as follows:

  • 60% of wage tax and 85% of the contributions to the mandatory pension and disability insurance for salaries in 2022,
  • 50% of wage tax and 75% of compulsory pension and disability insurance contributions for salaries in 2023
  • 40% of wage tax and 65% of compulsory pension and disability insurance contributions for salaries in 2024
  • 30% of wage tax and 55% of compulsory pension and disability insurance contributions for salaries in 2025

The same exemption applies to the salaries of people who were registered as entrepreneurs from January 1, 2019 to December 31, 2021 and who are employed between January 1, 2022 and April 30, 2022.

The following changes to the PIT Act and the SSC Act are also proposed:

  • The employer is exempt from paying 70% of the wage tax and 100% of the contributions to the pension and disability insurance if he is by the 31st;
  • Employers engaged in R&D activities are also entitled to exemption from paying 70% of wage tax and 100% of pension and disability insurance contributions for the salaries of employees directly involved in the R&D process;
  • Employers are entitled to reimbursement of 65% to 75% of the wage tax and social security contributions paid on the salaries of employees who were previously unemployed up to December 31, 2022;
  • The deadline for exemption from income tax and social security contributions for shareholders who hold at least 5% of the shares in a newly founded start-up company will be extended and can be requested for start-ups founded after December 31, 2021:
  • The taxpayer who transfers his IP rights as a contribution in kind to the capital of a Serbian company is exempt from capital gains tax for this transfer;
  • The standard tax-free wage will be increased to RSD 19,300 per month;
  • The contribution rate for pension and disability insurance will be reduced from 25.5% to 25%;
  • Taxpayers under 40 years of age are entitled to a reduction in the assessment base for annual income tax by three average salaries;
  • It is proposed that payments to students and schoolchildren during employment should be exempt from income tax under the dual training law.

The amended provisions of the PIT Act and the SSC Act will apply from January 1, 2022, with the exception of the provisions that introduce new employment incentives that will apply from March 1, 2022.

Corporation tax

Pursuant to the proposed amendments to the CIT Act, the taxpayer may choose not to include in the corporate income tax base capital gains made by transferring their IP rights in the capital of a resident legal entity. This incentive is provided that the resident legal person does not dispose of these acquired rights within two years. In addition, the rights cannot be given to a related party for use at a lower price than the price determined according to the arm’s length principle during the same period. This incentive should be available for the tax period from 2022.

Related Articles