The regulation stipulating certain types of companies being exempt from paying salary tax and contributions on salaries up to 150,000 dinars for the next three years will come into force on March 1st.
Innovative companies, established after March 1st, will be exempt from paying taxes and contributions on any earnings up to 150,000 dinars gross per month for the three years from the date of incorporation. This is a new measure that should stimulate the opening and development of innovation businesses. In order for the founders of such companies to exercise this right, they must have at least 5% of the shares or interests in the company and must not be affiliated to any legal person.
This tax benefit is based on the incentive that NALED initiated with the Serbian government in 2018, which allowed tax exemptions and wage subsidies for start-ups, small business owners and farmers.
The intention was to encourage young people to start their own business and to facilitate their first year of business activity, in order to reduce the financial burden on new entrepreneurs when they enter the business after graduating school.
NALED says that the tax relief on net monthly salaries of up to 37,000 dinars in the first year of business activity can be used by the founders of companies or small business owners who have completed their studies in the last 12 months or who have been registered with the National Employment Office (NSZ) for at least six months.
This measure facilitates a new approach to promoting entrepreneurship in Serbia, which allows start-ups to be exempt from paying tax and contribution costs in their first year of operations, without any pre-financing obligation and excessive administration.
A new incentive measure, which will be applicable as of March 1st this year, also aims to reduce the salary tax base and contributions by 70% in terms of salaries of new employees (returnees to Serbia). The deduction is made for a period of five years, for jobs requiring special vocational education, if the monthly salary is higher than 145,104 or 217,656 dinars for new employees who have lived outside Serbia for 12 years before gaining permanent employment in Serbia.
Another tax and contribution exemption relates to the salaries of new employees who were previously unemployed or were lump-sum taxpayers. The measure is applied for a period of three years: in 2020, the employer is exempted from paying 70% of taxes and 100% of pension and disability insurance contributions, in 2021, 65% of taxes and 95% of pension and disability insurance contributions, and in 2022, 60% of taxes and 85% of pension and disability insurance contributions.