Employers in Serbia have the responsibility of withholding employee taxes and directly paying a portion of social contributions.

Social Security Contributions

Employers contribute to the Pension and Disability Insurance fund at a rate of 10%. This fund is also contributed to by employees.

Health Insurance provides healthcare coverage for employees. Both employers and employees contribute to this at a rate of 5.15%.

Unemployment Insurance supports unemployed individuals. Employers do not contribute to this fund, but employees do at a rate of 0.75%.

Personal Income Tax

Serbia has a flat personal income tax rate of 10%. The responsibility of withholding this tax from employee salaries falls on the employers.

Payment Deadlines

Tax and social contribution payments are due by the 15th of the month following the month in which the salary was paid. All tax returns must be filed electronically through the Tax Administration's web portal.

In Serbia, taxpayers are entitled to certain employee tax deductions. These deductions are designed to reduce the taxable income base.

Standard Personal Allowance

All taxpayers can claim a standard personal allowance equal to 40% of the average annual salary. This is a significant deduction that can greatly reduce an individual's taxable income.

Dependant Allowances

Additional allowances can be claimed for each supported dependent family member. The amount is equal to 15% of the average annual salary per dependent. However, the criteria for who constitutes a dependent may have specific requirements such as age and income limit.

Eligibility Criteria

All resident taxpayers in Serbia are eligible for the standard personal allowance. For the dependant allowance, the specific requirements for who constitutes a dependent must be met.

Calculation Methods

Deductions are calculated and applied to reduce an employee's total annual taxable income. This means that they are factored in during the annual tax filing, rather than applied to each individual paycheck. However, even though they affect annual tax, deductions are taken into account when determining the monthly withholding of income tax from salaries. This ensures that the tax burden is spread evenly throughout the year, rather than being concentrated in a single lump sum payment.

In Serbia, the standard Value Added Tax (VAT) rate is 20%, which applies to most services. However, certain services are subject to a reduced VAT rate of 10%. These include public transportation, utilities such as water and electricity, certain foodstuffs, daily newspapers, and medicines.

VAT Exemptions

There are also services that are exempt from VAT in Serbia. These include financial services like insurance and banking, medical and healthcare services, educational services, and the supply of services meant for official use by diplomatic or consular representatives.

Filing Procedures

If your annual taxable turnover exceeds 8 million Serbian dinars (RSD), you are required to register for VAT. VAT returns are generally filed monthly and must be submitted by the 15th of the following month. It's important to note that all filings must be done electronically through the Tax Administration's web portal.

Serbia offers a variety of tax incentives to stimulate business investment and economic growth. These incentives come in different forms, have specific eligibility requirements, and require a formal application process.

Types of Tax Incentives

• Corporate Income Tax Relief:

  • Tax Holiday: Businesses that invest a minimum of RSD 1 billion (approximately €10.5 million) in property, plant, and equipment (PPE) may be eligible for a ten-year exemption on profit taxes.

• Research and Development (R&D) Incentives:

  • Double Deduction: Companies engaged in R&D activities can deduct twice the actual R&D expenses from their taxable income, providing a significant tax advantage.

• Payroll Tax Incentives:

  • Exemption for Innovative Startups: Founders of newly established, innovative companies may be exempt from taxes and social security contributions on their salaries for up to 36 months. However, this incentive might have limitations based on the enactment date, so verification is crucial.

• Investment Incentives:

  • Tax Credit for Innovative Companies: Investors in newly formed, innovative companies can receive a tax credit of up to 30% of the investment amount, capped at RSD 100 million (around €1 million). This program encourages investment in cutting-edge ventures.

Qualification Criteria

Each incentive program has specific eligibility requirements. Here's a general breakdown:

• Minimum Investment Amounts: Tax holidays and investment tax credits often require significant upfront investments.
• Job Creation: Some programs might prioritize businesses that create a certain number of new jobs, boosting employment opportunities.
• Industry Focus: Certain incentives may target specific sectors, like technology or manufacturing, to promote growth in strategic areas.

Application Process

The application process typically involves submitting a formal request with the relevant Serbian government agency. This often requires detailed documentation to demonstrate your eligibility for the chosen program. For specifics, it's recommended to consult with the Development Agency of Serbia (RAS) and the Tax Administration of the Republic of Serbia.