Tax Highlights - November 2019
13 November 2019
ON 1 NOVEMBER 2019, THE GOVERNMENT OF THE REPUBLIC OF SERBIA PUBLISHED PROPOSALS OF THE LAW ON AMENDMENTS AND SUPPLEMENTS TO THE LAW ON TAX PROCEDURE AND TAX ADMINISTRATION, PERSONAL INCOME TAX LAW, AS WELL AS THE LAW ON CONTRIBUTIONS FOR MANDATORY SOCIAL INSURANCE
The laws will enter into force on the eighth day after their publication in the Official Gazette, while most provisions will be delayed until early 2020.
Below is an overview of the most significant amendments and supplements.
LAW ON TAX PROCEDURE AND TAX ADMINISTRATION
- It is envisaged that the tax document shall be delivered to the taxpayer's e-mail address, through the Tax Administration's portal, or via a unique electronic mailbox, in accordance with the law governing e-government;
- A tax document submitted electronically via the Tax Administration portal will be considered to be delivered on the date of posting it to the Tax Administration portal.
Parties to the tax proceedings
- The Tax Administration will take over the tasks of maintaining a unified information system of Local Tax Administrations no later than 1 January 2021, which will give the Tax Administration a unified insight into taxpayers' and other taxpayer's accounts.
PERSONAL INCOME TAX LAW
Exemptions from taxation
- Increase of the non-taxable amount of scholarships and loans of students up to RSD 30,000 per month;
- Fees for the stay of natural persons participating in the programs of the European Union and other international organizations are exempted up to RSD 100,000 per month;
- The income of non-residents who reside in the territory of Serbia up to 90 days during the 12-month period beginning and ending in the current tax year, when the income is earned from a non-resident employer, is exempted.
Amendment to the tax base for earnings
- The non-taxable amount is planned to increase to RSD 16,300;
- The payroll tax base can be reduced by 70% for the new resident - taxpayer (foreigner) upon fulfilling the prescribed conditions.
Amendments to tax exemption
- Transportation costs for commuting - up to the price of a monthly public transportation ticket, or up to the actual transport costs, up to a maximum of RSD 3,914 per month must be documented.
Tax incentives introduced for the employment of new employees
- A newly established company that performs an innovative activity may exercise the right to exemption from payroll tax for a period of 36 months from the date of incorporation for the founders employed by that company;
- An employer who starts an employment relationship with a “qualified new employee” by 31 December 2020 shall obtain tax benefits of 60% to 70% per year as of 31 December 2022.
- The existing tax incentives for the employment of new employees are extended until 31 December 2020.
Income from self - employment
- The income generated by an entrepreneur, which is taxed by tax on other income, is not included in taxable income for self-employment;
- Changes in activities that are not subject to lump sum taxation are envisaged - Provision of audit, accounting and tax advisory services can be subject to lump sum taxation;
- Introducing new criteria for the classification of entrepreneurs taxed on a lump sum basis into groups;
- Introducing new criteria for determining the starting point used to determine the amount of a lump sum income for entrepreneurs;
- Introducing a “test of independence” for lump sum entrepreneurs.
- Changing the deadline for applying for a lump sum taxation of entrepreneurs by 31 October 2019;
- Amendments have been proposed whereby a person who commences an activity and who registers in the SBRA can file a lump sum taxation request only at the moment of registration.
Determination of capital gain
- The provision relating to determining the cost of securities acquired by the taxpayer from the employer or the related party's employer at a preferential price or free of charge for the purpose of determining capital gain is specified.
LAW ON CONTRIBUTIONS FOR MANDATORY SOCIAL INSURANCE
- The payroll contribution base for employees and employers is reduced by 70% for the new resident – taxpayer, when the prescribed conditions are met.
- Amendments to contribution rates for pension and disability insurance payable by the employer for payments of salaries, from current 12% to 11,5%;
- Extension of current incentives until 31 December 2020;
- A newly established company carrying out an innovative activity may exercise the right to exemption from payment of contributions at the expense of the employee and at the expense of the employer from the earnings of the founder within 36 months from the date of incorporation, for the founders who are employed in that company;
- An exemption from the obligation to pay mandatory social security contributions for pension and disability insurance is envisaged at the expense of the employee and employer for the employer who makes payment of salaries to eligible new employees in the amount of 85% to 100% as of 31 December 2022.
Adoption of the above amendments to tax laws is expected in December.