Tax Incentives for Employment of New Workers in Serbia

 

 

According to the clauses of the Personal income tax law and Law on contributions for mandatory social insurance different benefit are prescribed for self-employment and employing new workers. These new regulation starts to be valid from 1st of October 2018.

 

Benefits refer to tax reliefs for employers who start their own business and their new workers. Employers must achieve right on tax benefit from paying taxes based on their income and income of their employees. (for at most nine new workers with whom they start labour relation).


The employers who can meet their right on relief from paying taxes and contributions are new legal person, or new entrepreneurs, registered in Business Registers Agency. The employer can meet his right and be relieved from paying:

  • The tax and contributions based on salaries of founder of legal persons
  • The tax and contributions based on individual salaries of entrepreneur
  • The tax and contributions based on salaries of new workers with whom the labour relations is started (9 new workers at most)


Those who don't have right on tax benefit are: an entrepreneur lump, an agricultural entrepreneur and an entrepreneur second person.
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The conditions for the employers and new workers

 

In order to be relieved from paying taxes and contributions, an entrepreneur must meet certain conditions

 

  • The founders must start labour relation and be registered for social security
  • An entrepreneur must be registered for social security
  • Labour contracts must be concluded with new workers
  • Founders/entrepreneurs were unemployed persons/students or pupils during 12 months prior
  • New workers were unemployed persons or students and pupils during 12 months prior


Every member or founder of newly created legal person must start labour relation with that legal person and must be registered for social security in the Central registryof compulsory social insurance. A new entrepreneur must be registered for social security in the Central registry of compulsory social insurance.The employer must start labour relation and conclude employment contract with newly employed person in accordance with law, and after that, register all employees for social security in the Central registryof compulsory social insurance

 

The condition is also that founders of legal person (before the date of founding legal person, during at least 6 months at a time) were considered as unemployed persons with the National employment service or that during the twelve months before the date of foundation have acquired secondary education, two-year degree or university degree.

The same goes for entrepreneurs, that before the date of registration, during at least six months at a time they were registered with the National employment service as unemployed or that in period of twelve months before the date of registration have acquired secondary education, two year degree or university degree.

During the period of using benefit, you can gain right on maximum of nine new employees which meet all the conditions. One of the conditions is that before the date of starting labour relation, they were registered with the National employment service as unemployed service for at least six months at a time. The condition is met, if they have acquired secondary education, two year degree or university degree during twelve months before the date.
 

 

The period for using the benefit

 

The period for which the right on tax benefit can be gained (founders, an entrepreneur and employees) is twelve months from the day job started. The period starts on the day when legal person was founded or an entrepreneur was registered. During the period for using the benefit, the total of individual salaries for each person can't be more than three average salaries in the year before the year of foundation of company, or the year of employer's registration.
 

 

Applying tax benefits

 

Tax benefit from paying taxes and contributions starts with implementation on 01.october.2018. It applies for employers, or newly founded companies or entrepreneurs, which started their business the earliest on 01.october.2018., concluding with 31.december.2020.

Example: If employer is registered in november 2018., he can use tax benefits on the base of salaries paid in 2018. and 2019. If he starts his business in march 2019., he could use benefits during 2019. and 2020.

The employers which use the benefits will be freed from paying tax and contribution for themselves and employees. Respectfully, they won't have obligation to pay those commitments, or to submit the application for refunding. They can be freed from paying the complete amount of tax, or 100%. They can also be freed from paying the full amount of contribution for RDI, the contribution for health insurance and the contribution for unemployment on the burden of employer and employee.
 

 

Losing the right on using the benefit

 

The right on using the benefit and tax freedom stops when certain rules are met:

 

• After expiring of 12 months period from starting business
• When the total amount of paid salaries of the employer/entrepreneur and other employees is over non-taxable amount or when the total amount is bigger than three average salaries paid starting from the date of gaining on commitment benefit
 

 

Present tax benefits

 

There are tax benefits which can be used by registered employers, if they conclude labour contract with new worker. If they employ new worker , they can get the right on refund of 65%, 70%, 75% taxes and contributions. Using benefits based on income for new workers, employers can use concluding with 31.december.2019.

 

If employer gives a job to a new worker, he can gain right on

 

• Partial refund of paid tax on income, based on salaries for new worker
• Partial refund of paid contribution for compulsory social security, based on income for new worker
 

 

Conditions for gaining tax benefits

 

An employer can gain right on , if he concludes a labour contract with new worker, in accordance with law and register him on compulsory social security in the Central Registry of Compulsory Social Insurance

New worker must be registered in the record of the Business Registers Agency as unemployed person at most 6 months at a time before starting a labour relation. Also, in the period before starting a labour relation, he can't work at employer's. During the period prior, he can't be employed even with legal person who is connected with that employer.
 

 

The rates of tax benefits


Employers can get huge deduction of taxes and contributions for opening new workplaces

The benefits which they can get:

  1. 65% - if he employs at least one and at most nine workers
  2. 70% - if he employs at least ten and at most ninety nine workers
  3. 75% - if he employs at least one hundred workers
  4. 75 % - if he employs at least two workers and in that way increases the number of employees


An employer – a legal person, an entrepreneur, an entrepreneur lump , or an agricultural entrepreneur he can get refund of 65%, 70% and 75%. If employer starts a labour relation, with at least one, and with at most nine new workers, he can get 65% refund on paid taxes and contribution.When he starts a labour relation with at least ten, and with at most ninety nine new workers, he can get 70% refund. If he starts a labour relation with at least one hundred newly employed persons, he can get 75% refund.

An employer – micro and small legal person, an entrepreneur, a flat entrepreneur or an agricultural entrepreneur can get 75% refund on paid taxes and contributions, if he employs two new workers and in that way increases the number of employees compared to previous period. He can use his 75% tax benefit for both employees starting from the months when he gained right to be benefit.
 

 

The deadline of tax benefit validity

 

These benefits are for employers who pay the salaries for new worker concluding with 31.december.2019.

The employers who use deductions can get refund of paid taxes and contributions for new employees. They get refund only when they submit demand for return.

 

Example:If employer gives job to one person, he can get benefit of 65%. If he employs twenty persons, he can get benefit of 70%. If he employs two hundred persons, he can get refund of 75%.