Serbia’s entering the EU will entail a new model of taxation of citizens

A proposal for the Law on Personal Income Tax has been published by the Ministry of Finance. It will come into force from the date of Serbia’s accession to the European Union.
According to the law, all natural persons who generate income (wages, income from self-employment, copyrights, capital, real estate, capital gains) pay the tax. It regulates exclusively taxation income. Nevertheless, only its provisions can introduce tax reliefs and exemptions.
Also, Serbian residents pay tax on income earned in the country and abroad. Meanwhile, non-residents pay tax only on income earned in Serbia.
Officials of the institutions of the European Union, members of their families, as well as for diplomatic and consular personnel of Serbia fall under special rules.
Social benefits, child allowances, unemployment benefits, pensions, disability benefits, scholarships up to the prescribed amount, assistance due to natural disasters, subsidies and incentives in agriculture, volunteering fees, certain one-off benefits and other public interest benefits are exempted from taxation. Also, non-residents who stay in Serbia for up to 90 days do not need to pay taxes on certain incomes.
The income that residents of Serbia earn abroad and pay tax on it in another country can be included as a tax credit in Serbia. Nevertheless, the amount must not exceed the amount of tax they would pay on the same income according to domestic regulations.
However, they recognize expenses of 110.647 dinars per quarter for income from copyright and related rights. Meanwhile, 66.733 dinars are recognized for income based on the contracted remuneration for work. They apply standardized deductions if a person earns both types of income.
Also, the law defines various benefits that the employee receives from the employer, compensation for temporary and occasional jobs, personal earnings of the entrepreneur as wages. They also include in the earnings vouchers, goods, services, debt forgiveness, use of an official car for private purposes, an official apartment.
However, the monthly amount of 34.221 dinars for full-time employees is non-taxable. Also, newly settled taxpayers and highly qualified experts who come to work in Serbia can enjoy an income tax reduction by 70 percent for five years. This measure aims to attract professional staff and return people from abroad.
A flat tax rate of 10 percent is stipulated for wages.
Moreover, certain allowances for transportation costs, per diems for business trips in the country and abroad, accommodation and transportation costs on business trips, as well as on certain types of assistance to employees are exempted from taxation. Exemptions include solidarity aid due to illness, disability or the birth of a child, aid in the event of the death of a family member, New Year’s and Christmas gifts for employees’ children, jubilee awards, as well as funds intended for the treatment of an employee.
Special regulations concern the treatment of shares and shares that employees receive from the employer or a related person for at least two years. Benefits provided by the employer for the purpose of recreation and improving the health of employees also fall under tax exemption.
The law exempts some employees in diplomatic and consular missions, international organizations and institutions of the European Union, persons with disabilities employed in companies for their work training and employment from paying salary tax. Voluntary health insurance and voluntary pension funds do not pay taxes on income below 8.677 dinars per month.
Also, the law exempts newly founded innovative companies from paying taxes on the salaries of their founders during the first three years of operation, for salaries up to 150.000 dinars per month.
A special benefit is provided to people under 40 years of age. The base for calculating the annual tax is additionally reduced for them.

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