The Government of the Republic of Serbia issued the decree on the extension of the deadline for local companies that employ new individuals on 24 April 2020, in order to prolong their possibility to apply for tax exemptions introduced at the end of last year.
Originally, local companies that decided to enter into employment agreements with individuals who were registered as entrepreneurs in 2019 and to register them as employees with the social security fund, had to do so until 30 April 2020 in order to qualify for the tax exemptions.
Due to the ongoing COVID-19 outbreak that led to the declaration of a state of emergency in Serbia, the initial deadline for employment and registration with social security fund is extended to 60 days after ending the state of emergency in the Republic of Serbia. There is no official information about the exact date for termination of the state of emergency in Serbia yet.
As a reminder, the exemptions are designated to last until the end of 2022 and would include the following (being gradually decreased each year):
- for salaries paid in 2020 to newly engaged employees – exemption in the amount of 70% of salary tax and 100% of contributions for pension and disability insurance,
- for salaries paid in 2021 to newly engaged employees – exemption in the amount of 65% of salary tax and 95% of contributions for pension and disability insurance, and
- for salaries paid in 2022 to newly engaged employees – exemption in the amount of 60% of salary tax and 85% of contributions for pension and disability insurance.
Same exemptions are available for companies that employ individuals who were not unemployed and who were not registered as entrepreneurs in the period from 1 January 2019 until 30 April 2020. Exemptions are available if these persons would be employed between 1 May 2020 and 31 December 2020.
Employers are allowed to simultaneously apply for exemptions from payment of salary tax and pension and disability contributions for newly employed individuals and for specific tax benefits introduced lately by the decree on fiscal benefits and direct aid (if they satisfy conditions for both benefits).
By Branimir Rajsic, Senior Consultant, Karanovic & Partners