From personal income tax to compulsory social insurance and punitive measures for tax return submission failures, there is a plethora of tax legislation updates that are critical to stay apprised of in Serbia. Tax novelties are, as usual, numerous and perhaps complex to comprehend for someone who is not well versed in tax issues. However, those devoted to running a successful business can greatly benefit by keeping track of tax updates.
First, the Law on Amendments to the Law on Personal Income Tax (Official Gazette of RS, No. 138/2022) defines the tax treatment of freelancers, who pay taxes and contributions from income through self-taxation.
Specifically, a freelancer is a natural person who earns income from copyright and related rights and income based on the agreed fee for the work performed. Thus, the law determines the payment of taxes and contributions from income through self-taxation, and the income is defined as income from copyright and related rights and income based on the contracted fee for work performed, on which tax is paid through self-taxation.
Freelancers can opt for one of two new models for determining taxable income: Model 1 – recognition of standardized costs of RSD 96,000, on a quarterly basis; or Model 2 – recognition of standardized costs of RSD 57,900, on a quarterly basis, increased by 34% of the gross income realized in the quarter.
A freelancer has the obligation to submit a tax return and pay the tax within 30 days from the end of the quarter in which the income from the contracted fee was generated.
One of the novelties in this area relates to the fact that citizens who are engaged in some form of charitable work could be unpleasantly surprised once they receive money payments to their personal bank account from other citizens who support their work. The Tax Administration does not consider these payments, if they are frequent, as donations, but as taxable income. On the other hand, if they are not frequent, it could classify them as a gift and tax them on that basis. Either way, the tax authorities do not consider these types of income as “donations.” This is defined by the Law on Personal Income Tax and is classified under “other income” of citizens. In the first case, 20% of the income tax is paid, and in the second, 2.5% of the received monetary gift above the amount of RSD 100,000. The solution for citizens engaged in non-profit work is registering a non-profit organization.
Lastly, starting with the annual tax on incomes generated in 2022, the annual personal income tax of citizens will be reported and paid through self-taxation.
Second, in accordance with the Amendments to the Law on Contributions for Compulsory Social Insurance (Official Gazette of RS, No. 138/2022), the duration of benefits for new employees is being extended until the end of 2023. Namely, an employer that hires a new employee has the right to a refund of part of the paid contributions for mandatory social insurance at the expense of the employee and at the expense of the employer based on the salary of the new employee paid as of December 31, 2023. In addition, if the employer is classified as a micro or small legal entity as per the Accounting Law and establishes an employment relationship with at least two new employees, it has the right to a refund of 75% of the same contributions.
Another benefit for the employers is established by the Amendments to the Law on Contributions for Compulsory Social Insurance, which reduces the percentage of mandatory contributions for pension and disability insurance from 25% to 24% of the employee’s salary.
Lastly, the Law on Amendments to the Law on Tax Procedure and Tax Administration (Official Gazette of RS, No. 138/2022) determines the extension of the possibility of imposing punitive measures of banning the performance of business activities for a period of six months to three years. This refers to failure to submit a tax return and untimely submission of a tax return, non-calculation, non-payment, or late payment of tax obligations (VAT, contributions, income tax, etc.).
Fines for failure to submit a tax return are in the amount of 20% to 75% of the amount of tax owed determined in the tax audit, and not less than RSD 400,000 for a legal entity, or RSD 80,000 for an entrepreneur. If two misdemeanor reports are received due to late payment within two years, in addition to a fine, a ban on performing activities for a period of six months to three years will follow.
By Igor Zivkovski, Local Partner, Schoenherr Attorneys at Law
