This is the fourth year in which tax regulations are being reformed in the direction of supporting technological changes, improving the position of employees and encouraging Serbia's competitiveness in an increasingly complex game with developed countries. Among other things, it continues with a transitional regime that exempts employers from paying income taxes and compulsory social security contributions in 2023: effectively 50%, and 40% in 2024 and 30% in 2025.

The Republic of Serbia continues with measures that encourage innovation and the creation of its own products with intellectual property in domestic ownership. In addition, Serbia is going to increase the international competitiveness of companies operating in Serbia, insists on encouraging employment and investment in the development of young professionals, reducing the departures of the most qualified professionals, and providing additional support to small businesses facing the consequences of the expiration of temporary incentives for qualified new employees in the COVID-19 crisis.

The set of measures was adopted through amendments to the Corporate Income Tax Law and the Personal Income Tax Law.

Legal novelties

The measures are designed to help the development of the Serbian economy, ie to help transform the Serbian economy in a way that allows for its long-term and sustainable development and progress.

Support for research and development projects and innovations

Employers will be exempt from up to 70% of income taxes and compulsory social security contributions for employees directly engaged in research and development projects, in proportion to the time they spend on such projects.

Support for the first employment or employment after a long time

An employer who in the period between March 1, 2022 and December 31, 2022 employs a person who was not insured in the period from January 1, 2019 to February 28, 2022, if the gross 1 salary of such an employee is greater than RSD 76.500, 70% of the income tax and compulsory social security contributions can be exempted, concluding with the salary paid to that person on December 31, 2024.

Support for young professionals

For individuals who did not reach the age of 40 on December 31 of the year for which the annual tax return is submitted, the tax base calculation begins only over six times the amount of the average annual salary, assuming that they earned income through work. This measure will be valid for the annual income tax for 2021, and the non-taxable amount will be more than EUR 55.000 (net) for one year.

Exemption is extended for entrepreneurs and flat-rate taxed entrepreneurs who have acquired the right to partial exemption from taxes and contributions in 2020

The existing transitional regime that applies to employed former entrepreneurs or flat-rate taxed entrepreneurs, which was previously currently fixed at the end of 2022, is extended until the end of 2025. The condition for this extension is that the legal entity for which the person for whom the exemption is realized had 30 or less employees on December 31, 2020. This extension does not apply to employees hired after June 30, 2022 if they were previously employed at any time after January 1, 2020 with an employer that on December 31, 2020 had an average of more than 30 employees.

The continuation of the transitional regime exempts employers from paying income tax and compulsory social security contributions 50% effectively in 2023, 40% in 2024 and 30% in 2025.

Another "window" opens for those who did not take advantage of this transitional regime in 2020

For persons who failed to get a job in 2020 and continued to operate as entrepreneurs or flat-rate taxed entrepreneurs until December 31, 2021 a new window of employment opens in the period from January 1, 2022 to April 30, 2022. Such persons will also be able to join the transitional regime under the following conditions - their employers will be entitled to the exemption applicable to former employees benefiting from the transitional regime, less 3 percentage points.

The tax exemption for the founders of innovative startups continues

Exemption from the obligation to pay income tax and compulsory social security contributions for salaries of founders up to RSD 150,000, which is valid for a period of 36 months from the date of founding an innovative company, will also apply to companies established after December 31, 2021, but this time the deadline for establishment was not extended only to one year, but the deadline was deleted from the law.

Extension of the benefit for newly settled taxpayers to the annual personal income tax

Until now, tax exemption for newly settled taxpayers (foreigners or returnees) was provided only at the level of income tax and compulsory social security contributions, while the annual personal income tax covered the full salary Of the employee. Only the taxable part of the salary is included in the income for taxation with the annual tax, which essentially achieves the extension of this incentive to the annual personal income tax.

Exemption from payment of capital gain tax when introducing intellectual property into the capital of a company

Individuals or legal entities who increase the founding capital by entering intellectual property as a non-monetary contribution, may be exempt from paying capital gains tax. There are three conditions for using this incentive: a) the investment is made based on the assessment of a certified appraiser; b) the acquired property must not be alienated by the company in its entirety for a period of 2 years; c) the acquired property may not be transferred by the company to a related party for use unless at market price.