- Who qualifies as a tax resident of Serbia?
- From which income sources is income tax withheld in Serbia?
- Taxable base
- Tax rates
- Tax deductions: age below 40 and investments
- Changes in personal income tax in Serbia in 2023
- Payment of annual personal income tax through self-assessment
- Penalties and sanctions for violations in payment of income tax in Serbia
- Administrative liability
- Criminal liability
All resident individuals in Serbia who meet the following criteria are subject to the annual personal income tax:
- They receive income from local and foreign sources.
- The amount of their income exceeds three times the average annual salary. For example, the average gross salary for 2021 was 1,089,408 Serbian dinars (approximately EUR 9,300), and three times that amount would be 3,268,224 dinars.
On the other hand, non-resident taxpayers are only required to pay tax on income earned from sources within Serbia.
Who qualifies as a tax resident of Serbia?
According to the Serbian Individual Income Tax Law, the following individuals are considered residents for tax purposes:
- Individuals who have their place of residence or center of business and vital interests in the territory of Serbia.
- Individuals who are present in Serbia continuously or intermittently for 183 days or more during any 12-month period that starts or ends in the respective tax year.
Discover how to obtain Serbian residence permits and tax residency by real estate investment.
From which income sources is income tax withheld in Serbia?
Income tax is withheld from the following types of income:
- earned under an employment contract
- from occasional and temporary work
- from copyrights, related rights, and industrial property rights
- from the lease of movable and immovable property
- from the sale of property
- from providing catering services
- other earnings specified by the Individual Income Tax Law.
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The basis for calculating the annual personal income tax for individuals is the taxable income, which represents the difference between earnings and personal deductions. The latter are calculated based on the following data:
- for the taxpayer – 40% of the average annual salary
- for one dependent family member – 15% of the average annual salary.
The calculations are based on the average annual salary reported by the statistical authority of Serbia for the corresponding tax year.
If two or more family members are liable for annual income tax, only one taxpayer can claim the deduction for dependent family members.
The annual personal income tax for individuals in Serbia is paid according to the following rates:
- for income up to six times the average annual salary – 10%
- if the income exceeds six times the average annual salary, the following algorithm is used: 10% for the income up to six times the average annual salary + 15% for the remaining amount.
Tax deductions: age below 40 and investments
Taxpayers who make investments in alternative investment funds (by purchasing investment units of alternative investment funds) are entitled to a tax credit against their annual personal income tax payment. The tax credit can be up to 50% of the investment amount.
To benefit from this incentive, it is necessary to make a full payment for the share or unit in the alternative investment fund. Additionally, the tax credit cannot exceed 50% of the established tax liability based on the annual personal income tax.
In Serbia, there are also benefits for individuals below the age of 40. These benefits were introduced in 2022 and initially applied to income earned in 2021. For this category of taxpayers, the non-taxable limit was doubled based on net income from employment, self-employment, or copyright and related rights. If they previously paid income tax on earnings exceeding 3.2 million Serbian dinars, the limit was increased to 6.4 million dinars in 2022 (equivalent to an additional 3 times the average annual salary).
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Changes in personal income tax in Serbia in 2023
On December 9, 2022, the National Assembly of the Republic of Serbia adopted amendments to the Laws on Personal Income Tax and Compulsory Social Insurance Contributions, which came into effect on January 1, 2023.
Here are the key changes:
- The contribution rate for mandatory pension and disability insurance has been reduced from 25% to 24%. The employee’s mandatory contribution remains unchanged at 14%, while the burden on employers decreases from 11% to 10%.
- The non-taxable amount used to determine the base for calculating income tax has increased from 19,300 to 21,712 dinars.
- The deadline for exercising the right to refund a portion of the paid personal income tax for newly employed individuals has been extended until December 31, 2023.
- The deadline for filing a unified taxation application and making a decision on the payment of personal income tax for individuals has been extended to December 31, 2023 (instead of 5 days from the date of registration with the tax authority).
- A tax for freelancers is introduced, which entails two calculation models.
Payment of annual personal income tax through self-assessment
Starting in 2023, annual personal income tax will be reported and paid through self-assessment rather than through the decision of the tax administration. What does this mean for taxpayers?
Now, the tax authority will annually, no later than April 1st, prepare a draft declaration based on the available data on an individual’s income for the previous year. The taxpayer is required to review the calculations in their electronic account and, in case of inaccuracies, make amendments before submitting the tax declaration. The tax declaration is exclusively submitted electronically through the tax authority website. From 2023 onwards, paper declarations will not be accepted.
The deadline for filing the tax declaration and paying the annual tax is May 15th of the following year for the previous calendar year.
If the taxpayer fails to make amendments to the tax declaration within the legally prescribed period, the tax administration will submit it on their behalf based on the available data and calculations.
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Penalties and sanctions for violations in payment of income tax in Serbia
In case of failure to provide or untimely submission of the tax declaration, taxpayers are subject to administrative and criminal liability.
Fines ranging from 15,000 to 150,000 dinars are applicable to individuals who are not entrepreneurs and are imposed for the following violations:
- failure to submit the declaration on time
- absence of a signature on the declaration
- provision of incorrect information that is not rectified within the prescribed period
- failure to provide documents and evidence that affect the tax calculation.
This liability is imposed if it is proven that the taxpayer intentionally provided false information or concealed information with the aim of evading tax payments and mandatory contributions. In such cases, the punishment depends on the amount of outstanding obligations:
- from 150,000 dinars – imprisonment for up to 3 years and a fine
- from 1,500,000 dinars – imprisonment from 1 to 5 years and a fine
- from 7,500,000 dinars – imprisonment from 1 to 8 years and a fine.
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Is there income tax in Serbia? If so, how is it calculated correctly?
Serbia is a European country classified as an offshore jurisdiction. This means that taxes are applicable here, but compared to the rates in other developed counties (especially in the European Union), the payments are relatively modest. The income tax covers the following basic sources of income:
– small business (without the formation of a legal entity)
– capital and capital gains
– real estate.
Criteria for determining tax residency (if you are unaware of your status, information regarding the existence of income tax in Serbia is not particularly relevant; fulfilling any of the conditions is required):
– place of residence, center of vital interests, or business jurisdiction – Serbia
– permanent residence in Serbia for more than 183 days per year without interruptions or for 12 consecutive months with possible temporary absences
– diplomatic work on behalf of Serbia.
If you are unsure about your tax residence or are unable to calculate your fiscal obligations, we invite you to schedule an individual consultation with our experts.