AMENDMENTS TO TAX LAWS
On 22 November 2018 the Government of the Republic of Serbia published draft amendments to the Individual Income Tax Law and the Law on Mandatory Social Security Contributions.
The most important proposed amendments are provided in the text below.
AMENDMENTS TO THE INDIVIDUAL INCOME TAX LAW
Introduction of a new tax exemption basis
The payroll tax on employee income from the employer shall not be paid on:
- own stocks, own stock options or employer’s own shares or stocks, stock options or shares with the related party employer, which the employee acquires without a compensation or at a preferential price from the employer. The conditions under which the payroll tax is paid have been stipulated;
- solidarity allowance in case of child birth in the amount of up to the average salary, per newborn baby, paid in the Republic of Serbia according to the latest published data of the Statistical Office of the Republic of Serbia.
The aforesaid shall be applied as of 1 January 2019.
Tax treatment of employee recreation
The payroll tax shall not be paid on:
- employer’s costs of creating and maintaining conditions for employee recreation at workplace (costs of building or procuring recreation equipment at workplace),
- remuneration of costs of collective employee recreation, and/or
- the organisation of sports events and activities for employees with the aim of improving employees’ health and developing better relations among the employees, i.e. employees and the employer.
A tax exemption can be achieved if the collective employee recreation activities are conducted in accordance with employer’s bylaws and if all employees are entitled to the same type, scope and quality of recreation.
The right to a tax exemption can be exercised in case of organising sports events provided that explained decisions are implemented and that a significant number of employees employed with the employer use the right to participate in such events. The draft law does not specify what “a significant number of employees“ implies.
Amendments to the payroll tax exemption for start-ups
- The tax exemption shall be revoked for at most nine newly employed persons, i.e. the tax exemption is solely related to the founders of start-ups, who are employed at the said start-up, and/or entrepreneurial start-ups (entrepreneur’s personal income) and entrepreneurial farmers;
- A monthly amount of the tax exemption for each person during the exemption usage period cannot exceed RSD 37,000 (the amount itself does not include the accompanying payroll liabilities);
- The employer that employs the person who uses such a tax exemption shall not be entitled to other reliefs (aside from the law that governs mandatory social security contributions which stipulates the same exemption), including the use of employment and self-employment subsidies.
Such an employer that gained the right to the tax exemption until the effective date of the new law based on the provisions of the old Law shall continue using such an exemption pursuant to the old Law.
Setting up the tax treatment of the income that a natural person earns from providing hospitality services
The reason for defining this matter is efficient eradication of “grey economy“ in the hospitality industry in which natural persons perform their activities.
Income from providing hospitality services shall be such income that a natural person, in accordance with the laws that govern hospitality industry and tourism, earns from providing accommodation services in domestic hospitality facilities and rural tourist households in a period of up to 30 days.
A taxpayer on the income from providing hospitality services that starts providing such services during the year shall be obligated to submit a tax return within 15 days from the effective date of the decision according to which domestic hospitality facilities and rural tourist households are classified under an appropriate category in accordance with the law governing the hospitality industry.
The aforesaid shall be applied as of 1 July 2019.
Tax treatment of natural person’s income in case of writing off the remaining portion of the outstanding debt to a bank
It has been proposed that tax on other income should not be paid if a bank writes off a portion of its debtor’s credit liabilities when, in accordance with an out-of-court settlement, the debtor pays out a part of its outstanding debt and the bank writes off the remaining portion of such a debt.
Amendments to the tax exemption on capital expenditures
It has been proposed that the provision stipulating that in case when, during the ownership period, the nominal value of the right and/or the stake is changed, the tax exemption may be exercised on a portion of such a right and/or a share corresponding to the amount and/or the stake that was paid at least ten years before the sale of the right and/or the share, should be revoked.
A new provision shall be introduced stipulating that the right to a tax exemption shall not be exercised in case when a company member transfers the stake or the shares, i.e. a portion of the stake or the shares in the company, whereas the company shall acquire its own stakes or shares based on such a transfer in accordance with the law that governs companies.
Tax on income from games of chance
The tax on the income from games of chance shall not be paid in the future on the amount of up to RSD 100,000 instead of the currently valid amount of up to RSD 11,684. It shall be applied as of 2020.
AMENDMENTS TO THE LAW ON MANDATORY SOCIAL SECURITY CONTRIBUTIONS
Decrease in the unemployment insurance contribution rate
The unemployment insurance contribution rate has been reduced from 1.5% to 0.75%, i.e. an employer is exempt from paying a portion of contributions charged to and paid by the employer.
Change in the period for determining the lowest and the highest monthly contribution base and the highest annual contribution base
The starting point is the information on the average monthly salary paid in the period for the previous 12 months, starting from October instead of November.
The aforesaid shall be applied as of 1 January 2019.