Serbia - Income Tax

Serbia - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

The annual tax return should be filed not later than 15 May of the following year. Starting from 1 April 2015 only electronic submission is allowed.

What is the tax year-end?

The tax year in Serbia ends 31 December.

What are the compliance requirements for tax returns in Serbia?

Residents

There is a prescribed tax return form that should be submitted to the tax authorities together with the official certificates issued by the payer of the income proving the amount of total income included in annual tax liability calculation, as well as documents proving the right to use deductions for dependent member(s) of family.

Tax rates

What are the current income tax rates for residents and non-residents in Serbia?

Residents in Serbia – Serbian and foreign citizen

Income tax table for 2014 (declared and paid in 2015)

There are two stages of taxation of individuals in Serbia: taxation of income at the moment of generation (so called “monthly” tax) and additional annual taxation. Serbia divides income into schedules and each schedule has its own tax rate which is applied on gross income. On an annual level income is aggregated on a net level and additional progressive taxation is introduced.

Salary tax withheld at the moment of generation is flat and amounts to 10%.

Tax rate is applied on gross salary decreased for non-taxable amount. Gross salary consists of net salary, personal income tax on salary and SSC on behalf of an employee. As of 1 February 2015 monthly non-taxable amount is RSD 11,433 (the non-taxable amount is annually adjusted for annual inflation each 1 February).

Additional annual tax rates are presented below:

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From RSD To RSD RSD Percent
2,211,336

4,422,672

0 10
4,422,672

Over Max 442,267 15

Non-residents in Serbia

Non-residents in Serbia are not liable to annual taxation.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Serbia?

An individual is deemed to be a resident of Serbia if he/she has a permanent home or center of business and vital interests in Serbia or if he/she stays in Serbia permanently or in intervals at least 183 days during the period of 12 months beginning or ending in the respective taxation year.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

There are special rules for counting the number of days when residency starts or ends. Namely, the departure and the arrival days are counted as the days spent in Serbia, as well as any other day spent in Serbia (except days spent in transit through Serbia). 

What if the assignee enters the country before their assignment begins?

The days the assignee is in the country before his/her assignment begins would not be counted for purposes of computing the 183-day period.

Termination of residence

Are there any tax compliance requirements when leaving Serbia?

Tax clearance does not have to be obtained on departure from Serbia.

What if the assignee comes back for a trip after residency has terminated?

The days spent on a trip after residency has terminated would not be included in the total number of days he/she spent in Serbia.

Communication between immigration and taxation authorities

Do the immigration authorities in Serbia provide information to the local taxation authorities regarding when a person enters or leaves Serbia?

The immigration authorities in Serbia do not have an obligation prescribed by the law to provide the tax authorities with the data related to persons who are entering or leaving Serbia. However, tax authorities may check the data with the immigration authorities. On the other hand, 13-digit unique personal identification number which is given by the immigration authorities represents tax identification number at the same time. Data on these numbers is forwarded by the immigration authorities to the tax authorities.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Monthly tax will have to be paid for all Serbian sourced income (even after repatriation). For annual tax purposes the tax return must be submitted only if the assignee’s income generated for the period he/she worked in Serbia (residents are taxed on worldwide income, whereas non-residents are taxed only on Serbian sourced income), exceeds the non-taxable amount.

Economic employer approach

Do the taxation authorities in Serbia adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Serbia considering the adoption of this interpretation of economic employer in the future?

The tax authorities in Serbia apply a sort of economic employer approach meaning that expenses recharged to a local entity are regarded as income from Serbian sources.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

No. There is no de minimum number of days before the local tax authorities will apply the economic employer approach. Further, please note that economic employer approach is not developed and is recognized only when recharging of expenses to the local company is performed.

Types of taxable compensation

What categories are subject to income tax in general situations?

As a rule, it can be stated that all types of remuneration and benefits received by an individual for services rendered constitute taxable income. These include, but are not limited to the following:

  • personal earnings (salaries and bonuses)
  • income from self-employment
  • royaltiesreal estate income
  • income from personal insurance
  • income of athletes and athletic specialists
  • other taxable income (remuneration received by members of boards of directors and supervisory boards, lottery prizes, and so on).

In Serbia, investment income (dividends and interest) and capital gains are not included in the annual tax return. However, they are taxed on a monthly basis.

Spouses are taxed separately and there is no group taxation of a family unit.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Serbia? If so, please provide a general definition of these areas.

The following benefits are not included in taxable income in Serbia:

  • reimbursement of expenses for accommodation on a business trip up to the amount of actual expenses
  • commuting costs up to the public transport monthly ticket price, but not more than RSD 3,612 (as of 1 February 2015)
  • allowances for the use of a private car for business purposes up to the amount of 30 percent of a petrol liter price per driven kilometer, but not more than RSD 6,322 per month (as of 1 February 2015)
  • pension severance payment in the amount of two average monthly salaries in Serbia
  • damages received from property and personal insurance 
  • death and funeral costs compensation up to limited amount
  • compensation for damages from natural disasters.

Certain expenses for accommodation

Not exempted.

Certain expenses for commuting costs

Commuting costs are recognized in Serbia up to the public transport monthly ticket price, but not more than RSD3,612. 

Allowances for ground transportation

Not applicable.

Certain funds from property and personal insurance

Property insurance damages, other than indemnity for lost profit, as well as personal insurance damages for damage suffered, unless damages were covered by the person who caused damage are recognized as tax-exempt income in Serbia.

Death/funeral compensation

Allowance given in the event of death of an employee to immediate members of his/her family or retired employee is tax-exempt income up to RSD 63,214.

Natural disaster compensation

Allowance given because of destruction of or damage to property as a consequence of natural disasters or other extraordinary occurrences is not recognized as taxable income in Serbia.

Expatriate concessions

Are there any concessions made for expatriates in Serbia?

There are no special tax regimes for expatriates in Serbia.

Salary earned from working abroad

Is salary earned from working abroad taxed in Serbia? If so, how?

Residents are subject to income tax on their worldwide income. Income tax has to be calculated and paid by the resident individual, unless the tax has been withheld by the payer of income (Serbian entity assigning individuals abroad). Non-residents are not subject to income tax on compensation attributable to services performed outside Serbia.

Serbian citizens assigned to work abroad are treated as residents, and as such are subject to monthly tax and annual income tax in accordance with tax brackets, unless otherwise stipulated by the double taxation treaty between Serbia and the country of assignment.

 

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Serbia? If so, how?

Capital income in Serbia includes the following: interest and other revenues from loans, savings and other deposits, bonds and related securities, and dividends and other revenues based on profit sharing. The tax rate is 15 percent.

Capital gains arising from sale of securities, real estate and other proprietary rights which were held in the portfolio for more than 10 years are exempt from tax. Gains on any transfer of property between relatives are also tax exempt.

 

 

Dividends, interest, and rental income

Dividends

Income from dividends is taxable at 15 percent tax rate in Serbia.

Interest

Income from interest is taxable at a 15 percent tax rate in Serbia. Interest on RSD deposits and on government bonds is exempt from taxation. 

Rental income

Revenue generated by rental of immovable and movable property is taxed at 20 percent tax rate in Serbia. The tax base is determined by applying 25 percent lump sum deduction in Serbia on the amount of rental income. 

Gains from stock option exercises

In Serbia, gains from stock option exercised related to stocks received from the employer or a company related to the employer is treated as salary (subject to tax at the rate of 10 percent) while gains from other stocks is treated as other income (and subject to effective tax rate of 16 percent).

Foreign exchange gains and losses

Not applicable.

Principal residence gains and losses

Serbia

Capital gain from a principal residence unit (flat or house) is determined as difference between the sale and purchase price of ownership rights on real estate. The income generated from the sale of a principal residence unit is exempt from tax on the capital gain if invested in purchasing a new principal residence unit within 90 days from the date of sale. If the purchase of a new principal residence is performed within 12 months, paid capital gain tax is refunded. If the real estate is held in the portfolio for more than 10 years, no capital gain tax is paid. Otherwise, capital gain is subject to 15 percent.

Tax liability should be paid based on tax authorities’ assessment.

Capital losses

Capital losses incurred through the sale of immovable property, securities, and royalties could be offset with a capital gain resulting from the sale of immovable, securities, and royalties in the same year. Capital losses may be carried forward for five years.

Personal use items

The sale of personal use items is not recognized as taxable income.

Gifts

Individuals who receive property as a gift are subject to gift tax. 

The following beneficiaries are exempt from the inheritance and gift tax:

  • a person related in the first degree, i.e. direct descendants, spouses and parents (only in case of inheritance);
  • a farmer receiving agricultural land if he is related in the second degree and has lived in the same household with the deceased/donor for a period stated by the law; and
  • a person receiving a dwelling if he is related in the second degree and has lived in the same household with the deceased/donor during the last year.

Resident recipients of gifts are subject to gift tax with respect to worldwide property; non-residents are subject to the tax only with respect to property acquired in Serbia.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Serbia? If so, please discuss?

No.

Are there capital gains tax exceptions in Serbia? If so, please discuss?

Please see above for more information.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in Serbia?

There is monthly non-taxable amount for salary income which is currently RSD 11,433 (the non-taxable amount is annually adjusted for annual inflation each 1 February).

In the assessment of annual taxable income in Serbia, the following annual deductions apply.

  • In Serbia, for the purposes of the annual income tax, taxpayers are exempt from paying annual income tax up to the amount of total annual net income of RSD 2,211,336 in 2014. There is basic personal allowance of RSD 294,845 for 2014. Please note that estimated data for each tax year is officially confirmed at the end of January of the current year for the then following year by the Ministry of Finance. 
  • Additional allowances for dependent family members were RSD 110,567 for each family member for 2014. However, personal allowances for the taxpayer and dependent family members cannot exceed 50 percent of the annual income tax base. 
  • Statutory contributions paid to Serbian state Pension and Disability Insurance Fund, Healthcare Insurance Fund and Unemployment Insurance Fund.

If both spouses pay income tax, only one spouse may claim allowances for dependent family members. 

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Serbia?

Tax reimbursement maybe obtained based on written request for refund of overpaid tax.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Serbia? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on. 

Pay-as-you-go (PAYG) withholding

In Serbia, the Pay-As-You-Earn (PAYE) method is applicable.

PAYG installments

Not applicable.

When are estimates/prepayments/withholding of tax due in Serbia? For example: monthly, annually, both, and so on.

Withholding tax is due at the moment when income is paid out.

Annual tax liability and other tax liabilities determined by the Serbian tax authorities are due within 15 days upon receiving the tax assessment.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Serbia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

If there is a double taxation treaty concluded between Serbia and the expatriate’s country, the provisions of the treaty will determine in which country the expatriate’s salary shall be taxable. The double taxation relief provided by a tax treaty prevails over the domestic relief. As of 1 January 2015, Serbia has 54 effective double taxation conventions on income and capital.

In the absence of a tax treaty, unilateral relief is granted in the form of an ordinary tax credit for income taxes paid abroad. The credit for tax paid abroad may not exceed the amount of tax due in Serbia on the foreign income (i.e. there is no possible refund).

Please note that currently foreign tax credit is given only for monthly tax, while for annual tax purposes foreign tax paid represents deduction from the tax base.

 

General tax credits

What are the general tax credits that may be claimed in Serbia? Please list below.

There is no tax credit except personal deductions and deductions for the dependant family members in Serbia.

Sample tax calculation for Serbia

This calculation assumes a married taxpayer resident in Serbia3 with two children whose three-year assignment begins 1 January 2013 and ends 31 December 2015. The taxpayer’s base salary is USD100,000 and the calculation covers three years.

  2013

USD
2014

USD
2015

USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,666 6,666

6,666
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = RSD108.5681.1

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Serbia.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income for residents – Serbian/foreign citizens

Year-ended 2013

RSD
2014

RSD
2015*

RSD
Days in Serbia during year 365 365 365
Earned income subject to income tax      
Salary  10.856.810

 10.856.810

 10.856.810

Bonus 2.171.362

2.171.362

2.171.362

Cost-of-living allowance 1.085.681

1.085.681

1.085.681

Net housing allowance 1.302.817

1.302.817

1.302.817

Company car 723.787

723.787

723.787

Moving expense reimbursement 2.171.362

0.00 2.171.362

Home leave 0.00 542.841

0.00
Education allowance 325.704

325.704

325.704

Total earned income 18.637.524

17.009.002 

18.637.524

Non taxable monthly amount 118.656

134.662

137.005

Salary tax(10%)** 2.019.065

1.687.434

1.850.052

Social security contributions on behalf of employee*** 635.906

733.426

742.228

Received net salary 15.982.552 14.588.142 16.045.244

 

1 Exchange rate from 18 August 2015

*Calculation is made based on assumptions for 2015

**17,9% SSC on behalf of employee up to May 2013

*** 12% salary tax up to May 2013

Calculation of annual tax liability

Year-ended 2013

RSD
2014

RSD
2015*

RSD
Total net worldwide income 15.863.896

14.453.480

15.908.239

Non-taxable amount 2.185.488 

2.211.336

2.237.872 

Income for taxation 13.678.408 

12.242.144 

13.670.367

Personal deductions (up to 50% income for taxation) 509.946 

515.979

522.170

for taxpayer 291.398 

294.845

298.383

for dependant member of family 218.548 

221.134

223.787

Income for taxation 13.168.462 

11.726.165

13.148.197

Income for taxation up to six average salary in Serbia 4.370.976 

4.422.672

4.475.744

Income for taxation above six average salary in Serbia 8.797.486 

7.303.493

8.672.453

Taxable income - taxed at rate of 10% 4.370.976 

4.422.672

4.475.744

Taxable income - taxed at rate of 15% 8.797.486 

7.303.493

8.672.453

Tax by 10% tax rate 437.098 

442.267

447.574

Tax by 15% tax rate 1.319.623 

1.095.524 

1.300.868

Total annual tax liability 1.756.721

1.537.791

1.748.442

 

*Calculation is made based on assumptions for 2015

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Serbia.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Footnotes

1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3Sample calculation generated by KPMG d.o.o Beograd, the Serbian member firm of KPMG International, based on the Serbian Law on Personal Income Tax of 2001.

4Sample calculation generated by KPMG d.o.o Beograd, based on the Serbian Law on Personal Income Tax of 2001.

© 2016 KPMG d.o.o Beograd, a Serbia and Montenegro limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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