The Government of the Republic of Serbia has recently proposed amendments to the tax laws, including amendments to the Law on Personal Income Tax (‘PIT law‘), law on compulsory social contributions (‘SSC law‘) and the corporation tax law (‘CIT law‘).
Several tax incentives on wages are proposed as part of the amendments as well as a tax exemption from capital gains tax in the event of the contribution of intellectual property rights to the capital of the resident entity.
Personal income tax and social contributions
An extension of the deadline for applying the employment incentive for former entrepreneurs is proposed. Initially, the incentive is expected to last for wages paid until the end of 2022, but it is proposed that employers who in 2020 employed persons previously registered as entrepreneurs may be exempt from paying tax. on salaries and contribution for pension and disability until 2025 as follows:
- 60% of payroll tax and 85% of contributions to compulsory retirement and disability insurance for salaries in 2022,
- 50% of payroll tax and 75% of compulsory pension and disability insurance contributions for salaries in 2023
- 40% of payroll tax and 65% of compulsory pension and disability insurance contributions for salaries in 2024
- 30% of payroll tax and 55% of compulsory pension and disability insurance contributions for salaries in 2025
The same exemption will apply to the salaries of natural persons who have been registered as entrepreneurs from January 1, 2019 to December 31, 2021 and who will be employed between January 1, 2022 and April 30, 2022.
The following changes to the PIT Law and the SSC Law are also proposed:
- The employer will be exempt from paying 70% of payroll tax and 100% of contributions for pension and invalidity insurance if he employs until 31 December 2024 an employee who was unemployed during the previous period, provided that the salary exceeds 76,500 gross RSD. ;
- The employer engaged in R&D activities will also be entitled to an exemption from the payment of 70% of payroll tax and 100% of pension and disability insurance contributions for the salaries of employees directly engaged in the process. R&D;
- Employers are entitled to reimbursement of 65-75% of payroll tax and social security contributions paid for the wages of employees employed until December 31, 2022 who were previously unemployed;
- The period of tax exemption from payroll tax and social contributions of the shareholder who owns at least 5% of the shares of a newly created company in creation is extended and it can be applied for creations created after the December 31, 2021:
- The taxpayer who transfers his intellectual property rights as a non-monetary contribution to the capital of a Serbian company is exempt from capital gains tax for this transfer;
- The standard non-taxable salary is increased to RSD 19,300 per month;
- The contribution rate for pension and invalidity insurance is reduced from 25.5% to 25%;
- Taxpayers under 40 will be entitled to a reduction in the annual personal income tax base of three average salaries;
- It is proposed that payments to students and pupils while working as part of a learning process under dual education laws may be exempt from income tax.
The amended provisions of the PIT Law and the SSC Law will apply from 1 January 2022, with the exception of the provisions which introduce new employment incentives which will apply from 1 March 2022.
According to the proposed amendments to the CIT law, the taxpayer can choose not to include in the corporate tax base the capital gain realized by transferring his intellectual property rights into the capital of a resident legal person. This incentive is available on condition that the resident legal person does not transfer these acquired rights within two years. Furthermore, during the same period, the rights cannot be assigned for use to a related party at a price lower than the price determined in accordance with the “arm’s length principle”. This incentive will be available for the fiscal period starting in 2022.