Salary taxes from an employer in Serbia
The taxation of personal income is regulated by the Income Tax Law (Закон о порезу на доходак грађана, hereinafter referred to as the Law). Under the general taxation system, income tax (PIT) is levied.
The procedure for paying PIT from income under an employment contract depends on three main factors:
- place of employment (on the territory of Serbia or abroad);
- the status of the employer (whether the employer is recognized as a tax agent);
- the tax status of the employee (whether the individual - the recipient of income is recognized as a tax resident in Serbia).
Remuneration for the performance of labor duties in Serbia is income from sources in Serbia (clause 1, article 13, article 8 of the Law). And remuneration for performing work duties outside Serbia is income from sources outside Serbia. At the same time, the place of performance of labor duties is determined not at the location of the employer, but at the place of work of the employee himself, taking into account the terms of his employment contract.
Recognition of wages as income from sources in Serbia or income from sources outside Serbia affects the procedure for taxation with income tax.
As a general rule, regardless of the place of employment, a Serbian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay to the tax budget (Article 99 of the Law).
At the same time, a foreign organization that has a branch or representative office or other subdivision subject to tax registration can also be recognized as a tax agent (Article 99 of the Law).
Formally, the personal income tax is divided into two parts: income tax (IT) and annual income tax (AIT). The latter is paid by the so-called. wealthy taxpayers.
Procedure for declaring and paying tax
The tax period for the taxpayer is the calendar year.
As a general rule, if there is only income from labor activity for a Serbian employer, if there is no obligation to pay the AIT, then filing a tax return is not required (Articles 96, 100a of the Law).
The employer must transfer the withheld tax to the budget no later than the day the income is paid (Article 101 of the Law).
Individuals - AIT taxpayers must submit a tax return by May 15 of the following year. At the same time, the tax authority, according to the data available to it, forms a preliminary declaration no later than April 1 of the next year. The taxpayer is obliged to make the necessary changes or additions to the declaration prepared by the tax authority and submit it electronically. If this is not done by the taxpayer himself, then the tax authority will submit a previously prepared declaration for him (Article 92 of the Law).
Every year, at the end of the year, the employer must issue a certificate of income paid and tax withheld (Article 106 of the Law).
In the presence of income received from a person who is not a tax agent, or when declaring tax deductions, employees must submit a tax return for IT purposes by May 15 of the next year and must pay tax within the same period (Article 114 of the Law).
Tax calculation
For taxation purposes, a number of tax exemptions and benefits are provided for, in particular (Articles 9, 14б, 18, 18a, 21a of the Law):
Thus, the incomes of the founders of new companies engaged in innovative activities are exempted from taxation within 36 months. The salary of founders who own at least 5% of the company is exempt from tax, within the limits of 150,000 dinars per month (Article 21e of the Law). 70% of the wages of employees engaged in R&D are also exempted from PT (in the manner provided for in Article 21и of the Law).
It also provides for an exemption from taxation of the wages of newly hired qualified specialists for employers who had no more than 30 employees as of December 31, 2020, in the following amount (in the manner provided for in Article 21g of the Law):
Exemptions for newly hired employees and qualified specialists also apply if the employer is an individual entrepreneur, branch or representative office of foreign organizations.
In addition, there are deductions, the application of which depends on the tax status of the employee (resident or non-resident), which is discussed in more detail below in the relevant section.
Income from employment is taxed at a rate of 10%, regardless of the tax status of both the employee and the employer (Article 16 of the Law).
However, if the income of individuals (both residents and non-residents) exceeds three times the average annual salary established by the state statistics agency, then annual income tax (AIT, art. 87-89 of the Law) is subject to payment.
AIT is calculated based on the amount of income received in excess of 3 average annual salaries. For the purpose of calculating this threshold, not only income from an employment contract is taken into account, but also a number of other incomes, including income from the rental of movable and immovable property.
For example, in December 2022, the value of 3 times the average annual salary was 3,658,572 dinars (3 x 1,219,524).
At the same time, it is important to note that the payment of the AIT does not replace the IT, - the AIT is calculated in addition to the IT. That is, the 10% income tax rate applies to the entire amount of income, and not just to income up to 3 average annual salaries. The AIT rate is additionally applied to the amount of income exceeding this threshold.
The following personal deductions may be applied from the income subject to taxation by the AIT (Article 88 of the Law):
- 40% of the average annual salary - deduction for the taxpayer;
- 15% of the average annual salary - deduction for a family member who is dependent on the taxpayer.
The total amount of personal deductions cannot exceed 50% of the taxable income under the AIT.
The tax base for AST determined in this way is taxed at a progressive tax rate (Article 89 of the Law):
From the salary of employees in Serbia (both residents and non-residents), unemployment insurance premiums - 0.75%, as well as mandatory health insurance premiums - 5.15% are withheld.
In addition, insurance premiums for mandatory pension insurance - 14% - are withheld from the salary of resident employees. See below for details.
See below the features of the taxation of the IT of wages, depending on the tax status of an individual. A summary of the criteria for tax residence in Serbia is also provided.
The procedure for paying PIT from income under an employment contract depends on three main factors:
- place of employment (on the territory of Serbia or abroad);
- the status of the employer (whether the employer is recognized as a tax agent);
- the tax status of the employee (whether the individual - the recipient of income is recognized as a tax resident in Serbia).
Remuneration for the performance of labor duties in Serbia is income from sources in Serbia (clause 1, article 13, article 8 of the Law). And remuneration for performing work duties outside Serbia is income from sources outside Serbia. At the same time, the place of performance of labor duties is determined not at the location of the employer, but at the place of work of the employee himself, taking into account the terms of his employment contract.
Recognition of wages as income from sources in Serbia or income from sources outside Serbia affects the procedure for taxation with income tax.
As a general rule, regardless of the place of employment, a Serbian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay to the tax budget (Article 99 of the Law).
At the same time, a foreign organization that has a branch or representative office or other subdivision subject to tax registration can also be recognized as a tax agent (Article 99 of the Law).
Formally, the personal income tax is divided into two parts: income tax (IT) and annual income tax (AIT). The latter is paid by the so-called. wealthy taxpayers.
Procedure for declaring and paying tax
The tax period for the taxpayer is the calendar year.
As a general rule, if there is only income from labor activity for a Serbian employer, if there is no obligation to pay the AIT, then filing a tax return is not required (Articles 96, 100a of the Law).
The employer must transfer the withheld tax to the budget no later than the day the income is paid (Article 101 of the Law).
Individuals - AIT taxpayers must submit a tax return by May 15 of the following year. At the same time, the tax authority, according to the data available to it, forms a preliminary declaration no later than April 1 of the next year. The taxpayer is obliged to make the necessary changes or additions to the declaration prepared by the tax authority and submit it electronically. If this is not done by the taxpayer himself, then the tax authority will submit a previously prepared declaration for him (Article 92 of the Law).
Every year, at the end of the year, the employer must issue a certificate of income paid and tax withheld (Article 106 of the Law).
In the presence of income received from a person who is not a tax agent, or when declaring tax deductions, employees must submit a tax return for IT purposes by May 15 of the next year and must pay tax within the same period (Article 114 of the Law).
Tax calculation
For taxation purposes, a number of tax exemptions and benefits are provided for, in particular (Articles 9, 14б, 18, 18a, 21a of the Law):
- insurance premium paid by the employer for a number of types of collective insurance, including voluntary medical insurance, voluntary pension insurance. The exemption is applied subject to the insurance of all employees, while limits on the amount of insurance premiums are applied (Article 14b of the Law);
- reimbursement of travel expenses for travel to and from work, but not more than 3,837 dinars per month;
- expenses in connection with business trips, within the established limits;
- gifts to children of employees under the age of 15 on the occasion of the New Year and Christmas - up to 9,592 dinars per year per child;
- financial assistance for the treatment of an employee in Serbia or abroad in the amount of the actual costs of treatment, as well as transport and accommodation costs during treatment;
- own shares of the employer or an organization related to it, acquired by the employee free of charge or at a reduced price;
- benefits for the birth of a child in an amount not exceeding the average salary according to official statistics;
- the employer's expenses for the construction of premises and / or the purchase of equipment for the recreation of employees, for the organization of sports events, events for the purpose of improving the health of employees and / or establishing better relations between employees and the employer, between the employees themselves;
- insurance premiums for voluntary health insurance and voluntary pension fund, which, in accordance with the established procedure, the employer pays from the employee's salary, but not more than 5,214 dinars per month.
Thus, the incomes of the founders of new companies engaged in innovative activities are exempted from taxation within 36 months. The salary of founders who own at least 5% of the company is exempt from tax, within the limits of 150,000 dinars per month (Article 21e of the Law). 70% of the wages of employees engaged in R&D are also exempted from PT (in the manner provided for in Article 21и of the Law).
It also provides for an exemption from taxation of the wages of newly hired qualified specialists for employers who had no more than 30 employees as of December 31, 2020, in the following amount (in the manner provided for in Article 21g of the Law):
- 50% of wages paid in 2023;
- 40% of wages paid in 2024;
- 30% of wages paid in 2025.
Exemptions for newly hired employees and qualified specialists also apply if the employer is an individual entrepreneur, branch or representative office of foreign organizations.
In addition, there are deductions, the application of which depends on the tax status of the employee (resident or non-resident), which is discussed in more detail below in the relevant section.
Income from employment is taxed at a rate of 10%, regardless of the tax status of both the employee and the employer (Article 16 of the Law).
However, if the income of individuals (both residents and non-residents) exceeds three times the average annual salary established by the state statistics agency, then annual income tax (AIT, art. 87-89 of the Law) is subject to payment.
AIT is calculated based on the amount of income received in excess of 3 average annual salaries. For the purpose of calculating this threshold, not only income from an employment contract is taken into account, but also a number of other incomes, including income from the rental of movable and immovable property.
For example, in December 2022, the value of 3 times the average annual salary was 3,658,572 dinars (3 x 1,219,524).
At the same time, it is important to note that the payment of the AIT does not replace the IT, - the AIT is calculated in addition to the IT. That is, the 10% income tax rate applies to the entire amount of income, and not just to income up to 3 average annual salaries. The AIT rate is additionally applied to the amount of income exceeding this threshold.
The following personal deductions may be applied from the income subject to taxation by the AIT (Article 88 of the Law):
- 40% of the average annual salary - deduction for the taxpayer;
- 15% of the average annual salary - deduction for a family member who is dependent on the taxpayer.
The total amount of personal deductions cannot exceed 50% of the taxable income under the AIT.
The tax base for AST determined in this way is taxed at a progressive tax rate (Article 89 of the Law):
- 10% - in relation to the tax base up to 6 times the average annual salary;
- 15% - in relation to the tax base exceeding 6 average annual salaries.
From the salary of employees in Serbia (both residents and non-residents), unemployment insurance premiums - 0.75%, as well as mandatory health insurance premiums - 5.15% are withheld.
In addition, insurance premiums for mandatory pension insurance - 14% - are withheld from the salary of resident employees. See below for details.
See below the features of the taxation of the IT of wages, depending on the tax status of an individual. A summary of the criteria for tax residence in Serbia is also provided.
Serbia tax residency criteria
As a general rule, tax residents are recognized (Article 7 of the Income Tax Law - Закон о порезу на доходак грађана, hereinafter - the Law):
Recognition of an individual as a tax resident of Serbia does not depend on his citizenship.
- individuals who have their place of residence or center of vital interests in Serbia;
- individuals who actually stay in Serbia for at least 183 calendar days within 12 calendar months beginning or ending in the respective year. At the same time, the time spent in Serbia in transit (transit) is not taken into account for the purposes of tax residency.
Recognition of an individual as a tax resident of Serbia does not depend on his citizenship.
So, taking into account your actual tax status (the status of your employee), click on the appropriate button below to familiarize yourself with the specifics of paying PIT by a tax agent or employee, including when changing tax status (resident / non-resident) during the year.
You can also see the visual taxation scheme at the bottom of the page.
Taxation of wages of a tax resident of Serbia
Income under an employment contract of a Serbian tax resident is taxed when performing work duties both in Serbia and outside Serbia.
If you perform work duties from outside Serbia, then your income will be taxed in Serbia only if you are recognized as a tax resident of Serbia.
There are no tax deductions on income from employment, applicable only to tax residents of Serbia.
If you perform work duties from outside Serbia, then your income will be taxed in Serbia only if you are recognized as a tax resident of Serbia.
There are no tax deductions on income from employment, applicable only to tax residents of Serbia.
If the tax was paid abroad
If you work abroad, you may be liable to pay tax in the relevant foreign country. When filing a tax return, a tax resident of Serbia has the right to reduce Serbian income tax by the amount of tax paid abroad (Art. 12 of the Law).
To apply such a deduction, you will need a certificate issued by a foreign tax authority or tax agent confirming the payment of tax abroad.
However, if the tax paid abroad exceeds the income tax liability in Serbia, the difference is not returned to the taxpayer.
It is necessary to take into account the provisions of Serbia's double tax treaties (DTT).
To apply such a deduction, you will need a certificate issued by a foreign tax authority or tax agent confirming the payment of tax abroad.
However, if the tax paid abroad exceeds the income tax liability in Serbia, the difference is not returned to the taxpayer.
It is necessary to take into account the provisions of Serbia's double tax treaties (DTT).
Taxation of wages of a tax non-resident of Serbia
The law provides for exemption from taxation of income of non-residents staying in Serbia for no more than 90 days within 12 calendar months starting or ending in the corresponding year if such income is received from foreign persons who do not operate in Serbia. This exemption is also available if the person paying the income carries out activities in Serbia, but the income received by the individual is not related to such activities (art. 9б of the Law).
This means, in particular, that remote work for a foreign employer, while staying on the territory of Serbia for a short time (time not sufficient for recognition as a tax resident of Serbia), does not entail taxation in Serbia.
As was the abolition above, a Serbian employer, including a subdivision of a foreign organization, calculates and withholds the PIT as a tax agent. Among other things, the duties of a tax agent arise if such a Serbian employer attracts labor according to the so-called. personnel lease agreement (clause 6, article 15a, clause 5, article 100a of the Law).
For a tax non-resident of Serbia working under an employment contract in Serbia, the same tax exemptions are available as for a resident of Serbia (see above).
This means, in particular, that remote work for a foreign employer, while staying on the territory of Serbia for a short time (time not sufficient for recognition as a tax resident of Serbia), does not entail taxation in Serbia.
As was the abolition above, a Serbian employer, including a subdivision of a foreign organization, calculates and withholds the PIT as a tax agent. Among other things, the duties of a tax agent arise if such a Serbian employer attracts labor according to the so-called. personnel lease agreement (clause 6, article 15a, clause 5, article 100a of the Law).
For a tax non-resident of Serbia working under an employment contract in Serbia, the same tax exemptions are available as for a resident of Serbia (see above).
Algorithm for paying PIT from income from an employer in Serbia
* regardless of the tax status of the employee (resident or non-resident)
**check tax liabilities in the country of tax residence
If tax status has changed during the year
Since tax residence is determined for a 12-month period starting or ending in the current year, the tax status determined in this way is established for the entire year.
For example, if a person is recognized as a tax resident of Serbia in 2021, but he was absent from Serbia in 2022, but spent more than 183 days in Serbia during the 12-month period - December 2022 - November 2023, then he will be recognized as a resident in the whole of 2022.
An exception is the entry into Serbia, when in the year preceding the year of entry, the person was not a resident of Serbia - in this case, the person can become a tax resident of Serbia from the date of entry. Conversely, when leaving Serbia, when in the year following the year of departure, the person was not a resident of Serbia - in this case, the person loses the tax residency of Serbia from the date of departure.
Was a resident, became a non-resident
If an employee becomes a non-resident within a year, then his income is subject to income tax in Serbia only when performing labor functions in Serbia. Income of a non-resident working outside of Serbia is not subject to taxation in Serbia.
Was a non-resident, became a resident
If an employee was a non-resident, but became a resident of Serbia due to the time spent in Serbia or at the place of residence, then his income will be taxed in Serbia, regardless of the place of performance of labor functions.
For example, if a person is recognized as a tax resident of Serbia in 2021, but he was absent from Serbia in 2022, but spent more than 183 days in Serbia during the 12-month period - December 2022 - November 2023, then he will be recognized as a resident in the whole of 2022.
An exception is the entry into Serbia, when in the year preceding the year of entry, the person was not a resident of Serbia - in this case, the person can become a tax resident of Serbia from the date of entry. Conversely, when leaving Serbia, when in the year following the year of departure, the person was not a resident of Serbia - in this case, the person loses the tax residency of Serbia from the date of departure.
Was a resident, became a non-resident
If an employee becomes a non-resident within a year, then his income is subject to income tax in Serbia only when performing labor functions in Serbia. Income of a non-resident working outside of Serbia is not subject to taxation in Serbia.
Was a non-resident, became a resident
If an employee was a non-resident, but became a resident of Serbia due to the time spent in Serbia or at the place of residence, then his income will be taxed in Serbia, regardless of the place of performance of labor functions.
IMPORTANT
From the salary of employees in Serbia (both residents and non-residents) insurance premiums are withheld (Article 44 of the Law on Compulsory Social Insurance Contributions):
Contributions are paid from those incomes under an employment contract that are subject to income tax but not exceeding 5 average annual salaries. The calculation and payment of contributions have a number of other features.
Foreign workers also pay contributions. An exception is provided for when working for a Serbian employer abroad if such an employee is subject to compulsory social insurance in the respective country (Article 6 of the Law on Compulsory Social Insurance Contributions).
The minimum base for calculating contributions is 35% of the average monthly salary in Serbia.
When working abroad and / or for a foreign employer, it is possible to withhold social contributions in the respective country. However, they are not deductible from contributions paid in Serbia (exceptions are possible).
The employer also pays the following insurance premiums at his own expense:
From the salary of employees in Serbia (both residents and non-residents) insurance premiums are withheld (Article 44 of the Law on Compulsory Social Insurance Contributions):
- unemployment insurance contributions - 0.75%;
- mandatory health insurance contributions - 5.15%;
- mandatory pension insurance contributions - 14%.
Contributions are paid from those incomes under an employment contract that are subject to income tax but not exceeding 5 average annual salaries. The calculation and payment of contributions have a number of other features.
Foreign workers also pay contributions. An exception is provided for when working for a Serbian employer abroad if such an employee is subject to compulsory social insurance in the respective country (Article 6 of the Law on Compulsory Social Insurance Contributions).
The minimum base for calculating contributions is 35% of the average monthly salary in Serbia.
When working abroad and / or for a foreign employer, it is possible to withhold social contributions in the respective country. However, they are not deductible from contributions paid in Serbia (exceptions are possible).
The employer also pays the following insurance premiums at his own expense:
- mandatory health insurance contributions - 5.15%;
- mandatory pension insurance contributions - 14%.
Until 2023, the salaries of qualified specialists were exempted from taxation in the following amounts (in the manner provided for in Article 21h of the Law):
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
- 70% of wages paid in 2020;
- 65% of wages paid in 2021;
- 60% of wages paid in 2022;
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
Changes are not expected.
Using the buttons below, you can check whether the conditions for recognizing you as a tax resident in the country where you actually work remotely are met, and whether you have an obligation to pay tax on your salary in this country. Also find out if Serbia has a double taxation treaty (DTT) and its conditions in relation to wages.