Taxes in Serbia are among the lowest in Europe. No wonder a large number of people are considering the opportunity to relocate to Serbia and start paying less in taxes. The FAQ format is very useful for explaining the key elements of a certain topic. Below we are answering some of the most popular questions about the taxation system in Serbia
When do I become a tax resident of Serbia?
A natural person is considered a tax resident of Serbia if any of the two conditions below is satisfied:
- The person is physically present in the country for at least 183 days in a calendar year;
- The center of his/ her life’s interests is in Serbia.
Any of the following circumstances will contribute to justifying the fact that the center of the person’s vital interests is in Serbia:
- The person owns real property in Serbia;
- The person’s family lives in Serbia;
- The person’s underage children go to school in Serbia.
Residents of Serbia are taxed on their global income while non-residents are taxed only on the income that they make locally.
I have made a job agreement and started working in Serbia. Where do I pay the taxes and how much?
Non-residents pay the personal income tax in Serbia only if they work for a Serbian-based company. At the same time, they may have to pay taxes in the country of their tax residence. If you work for a Serbian company remotely and you are a tax resident of the Czech Republic, for example, you will be taxed in your home country. If non-residents of Serbia work for a foreign company, they may have to pay taxes in the country where the company is registered in addition to paying the taxes in the country of their tax residence.
Residents of Serbia pay the personal income tax there even if they have a job agreement with a foreign company. If this is the case, the worker may also be taxed in the company’s home country.
The first 19,000 dinars per year are tax-free in Serbia. When the income exceeds the threshold, a progressive scale is applied. The minimal rate is 10%. On the amount that exceeds three times average salary (around US$ 30,000), an additional 10% is paid (that is, you pay a 20% tax on this amount).
What is important, the obligation to pay the tax rests with the taxpayer: the fiscal authorities of the country are not responsible for citizen’s tax obligations. If the amount of your income exceeds six times the average salary (around US$ 60,000), an additional 15% is paid (that is, you pay a 25% tax on this amount).
The tax rates are the same for both residents and non-residents.
The social security contribution consists of two parts: 1) Взнос на социальное обеспечение состоит из двух частей: 1) the amount withheld by the employer from the employee’s wages and 2) the amount paid by the employer out of his/ her own funds.
Rates for the employee:
- Pension and disability insurance – 14%;
- Medical insurance – 5.15%;
- Unemployment insurance – 0.75%.
Rates for the employer:
- Pension and disability insurance – 11%;
- Medical insurance – 5.15%.
Social security contributions total 36.05% in Serbia.
I work as a freelancer in Serbia. Where do I pay the taxes and how much?
Freelancers pay taxes in Serbia at the same rates as hired workers do.
Non-resident have to pay the personal income tax if they are paid by Serbian clients. Non-residents also may be taxed in their home countries if they are tax residents there even though they live in Serbia. If non-residents work for foreign customers, they may be taxed in the countries where their customers are located.
Resident freelancers have to pay an income tax in Serbia regardless of whom they work for. If a freelancer works for a foreign customer, he/ she may be taxed in the foreign country too.
Freelancers also make social security contribution:
- Pension and disability insurance – 25.5%;
- Medical insurance – 10.3%;
- Unemployment insurance – 0.75%.
Are there any tax incentives for foreigners launching business ventures in Serbia?
If your annual income is equivalent to three to six average salaries in Serbia and if you are below 40 years of age, you are eligible not to pay the additional 10% tax that we have referred to above. Thus, your fiscal burden will be 10% instead of 20% until you stay within the limits.
If you open an innovative startup in Serbia and you also work for your company, 1,800,000 Serbian dinars (around US$16,000) are tax free for up to e years. Besides, no social security contributions are due either.
Newcomers to Serbia who are highly qualified specialists and whose salaries are three times as high as the average salary are eligible for tax deductions too. 70% of their income can be tax free for 5 years. As the employer has to withhold less of the worker’s money, he or she benefits directly while the worker benefits indirectly because the employer can pay him/ her a higher salary.
I have property in Serbia that I let on a lease. Where do I pay the taxes and how much?
The income from rented property is taxed at a flat rate of 20% in Serbia. Because the property owner incurs some maintenance costs (he/ she has to do the repairs, for example), a 25% tax deduction is available.
Non-residents pay the tax if they rent out Serbian property. Non- residents may also by taxed in the countries of their fiscal residence. If non-residents of Serbia rent out property located in a foreign country, they may also be taxed in the foreign country.
Residents pay the tax on any property that they let on a lease. If the property is located in a foreign country, they may also be taxed there.
We have given you some basic facts about the tax rates in Serbia and we hope that now you have a general understanding of how the Serbian taxation system works. There are numerous other details, however, and you certainly should see professional advice if you are planning to relocate to Serbia thus saving on taxes.
