Serbia

Employment income is considered to be the agreed salary, as well as other earnings of the employee, arising from employment. Employment income remains subject to PIT at a 10% flat rate after deducting the RSD 25,000 non-taxable salary cap, payable by a method of withholding. The taxable base is gross salary, including fringe benefits.

Other types of income (e.g. royalties income, business income, investment income, real estate lease income, capital gains, and other income) are subject to a flat rate tax that ranges from 10% to 20%, depending on the type of income concerned.

Any taxpayer who earns a salary and other revenues in or from another state, a diplomatic or consular mission of a foreign state, or an international organisation, or representatives of such a mission or organisation, shall calculate and pay PIT in accordance with the Law, provided tax has not already been charged and paid by the payer of the revenue.

Employment income

The taxable person is the employee, but the employer is responsible for calculating and withholding PIT on behalf of its employees at the moment of salary payment.

The taxable base is gross salary reduced for the non-taxable salary cap of RSD 25,000 and includes fringe benefits such as company-provided housing and use of a company’s car. Use of a company’s car for both private and business purposes by an employee is taxed as salary, at a tax base equal to 1% of the car’s market value on 31 December of the previous year for each month of use. The taxable base for company-provided housing is the relevant rent fee available on the market in the location where the apartment in question is situated.

The taxable base also includes social security contributions on behalf of the employee.

Entrepreneurial income

Income from self-employment includes income generated from agriculture and forestry, business activity, and provision of professional and/or intellectual services, as well as revenue from other activities, unless such income was taxed on some other grounds under the present Law.

In addition, any individual who is a registered VAT payer is considered to be a taxpayer on income realised from self-employment.

If a sole-proprietor is unable to keep books, or in the case of certain other difficulties, the so-called ‘lump-sum’ tax will be applicable.

Capital gains

Income subject to tax as capital gains includes income generated by the sale or other transfer against consideration of the right of ownership to real estate, permanent right of use of an urban land building, intellectual property rights and share in the assets of legal entities, and shares and other securities, other than bonds, digital property, and certain investments units.

The taxable base is the difference between the sale price of rights, securities, shares, and their purchase price adjusted in accordance with the provisions of the PIT Law.

The tax rate applicable to capital gains is 15%.

Residents are eligible for an exemption from capital gains tax on the condition that the capital assets in question have been held for a period exceeding ten consecutive years.

Investment income

Income subject to tax as investment income includes interest on loans, savings, and other deposits, dividends/shares in profits, income from investment units of open investment funds, income based on the ownership of an investment unit of an alternative investment fund (except for the fee for the transfer of that investment unit), receipts on a profit sharing basis, and taking from the assets and using the services of the company by the company’s owner for one’s personal needs, as well as the revenues from real estate (immovable property).

Tax is not payable on the interest accrued from savings in Serbian dinars and on government bonds.

The tax base for all types of investment income is considered to be the total gross amount of such income.

The tax rate applicable to investment income is 15%.

Real estate lease income

Income subject to tax as real estate income includes revenues from lease or sub-lease of real estate.

The tax rate applicable to real estate income is 20%.

For certain types of real estate lease income, there are specific rules (e.g. one day rental).

Royalty income

Income subject to tax as royalty income includes revenue from copyrights, rights related to copyright, and industrial property rights.

The taxpayer is an individual who acts as a copyrighter, holder of rights related to copyright, or owner of industrial property rights and receives remuneration for any of these rights.

The tax base is the difference between gross revenue and cost incurred by the taxpayer in generating and preserving the income. Standard costs are used to reduce taxable base, and are equal to 50%, 43%, and 34% of the gross income, depending of the type of royalty.

The tax rate applicable to royalty income is 20% after deduction of standard cost.

Other income

Income subject to tax as other income includes income from leasing of equipment, transport devices, and other movable property, winnings from games of chance, income from personal insurance, income from athletes and sport experts, income from provision of hospitality services, and all other income that doesn’t fall into these categories. 

In addition to the above-mentioned, other income also includes:

• Income for persons who do contractual work (i.e. income from service contract, contracts for temporary and occasional jobs, supplementary work).
• Income and compensation for persons working for the state (i.e. MPs and councilors, performing tasks of defense, civil protection and natural disaster protection, bankruptcy trustees, court experts, lay judges, and court interpreters).
• Miscellaneous income (i.e. collection and sale of secondary raw materials, sale of agricultural and forest products and services, all other income that is not taxed on another basis or is not exempted from taxation or exempted from paying tax).

The tax rate applicable to other income is 20%, except for insurance, where the applicable tax rate is 15%. 

Exempt income

Certain types of income are exempt from the PIT (e.g. social welfare, pension).

However, in regards to employment income, special types of employment income, up to prescribed amounts, are also tax exempt. Such income includes public transportation costs incurred by an employee for home-to-office travel and daily allowances for business trips.

The following employee benefits are tax exempt:

• Recreation of employees at the workplace and recreation programmes for employees, such as sports events and other employee activities, organised with a view to enhancing employee health and/or building positive workplace relationships and cooperation among employees.
• Organised sporting events and other activities for employees.
• Write-off of a portion of the bank’s receivables from a natural person where out-of court settlement may be reached with a view to reducing the number of non-performing loans.
• Solidarity allowance awarded for giving birth to a child.

Employees are exempt from paying PIT where they have acquired shares in the company they work for either free of charge or at a discounted price, except where securities are considered to be taxable income due to:

• The timing of the disposal of shares:  When the employee disposes of shares before the end of the two-year period that marks the date when the employee acquires the right to dispose of shares.
• The timing of the buyback of shares:  When the company or its related party buys back its shares from the employee.
• The date on which the employee’s employment has been terminated:  Where termination of employment occurs before the end of the two-year period that marks the date when the employee acquires the right to dispose of shares, except where termination occurs irrespective of the will of either the employee or the employer.

In certain cases, non-residents working for diplomatic and consular missions or international organisations in Serbia are not taxed on their remuneration.