Taxation of international executives
Income tax information based on the Serbian Law on Personal Income Tax of 2001 and latest changes on 1 February 2015.
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?
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.
What are the current income tax rates for residents and non-residents in Serbia?
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|
Non-residents in Serbia are not liable to annual taxation.
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.
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.
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.
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.
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.
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.
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:
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.
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:
Commuting costs are recognized in Serbia up to the public transport monthly ticket price, but not more than RSD3,612.
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.
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.
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.
Are there any concessions made for expatriates in Serbia?
There are no special tax regimes for expatriates in Serbia.
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.
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.
Income from dividends is taxable at 15 percent tax rate in Serbia.
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.
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.
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).
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 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.
The sale of personal use items is not recognized as taxable income.
Individuals who receive property as a gift are subject to gift tax.
The following beneficiaries are exempt from the inheritance and gift tax:
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.
Are there additional capital gains tax (CGT) issues in Serbia? If so, please discuss?
Are there capital gains tax exceptions in Serbia? If so, please discuss?
Please see above for more information.
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.
If both spouses pay income tax, only one spouse may claim allowances for dependent family members.
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.
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.
In Serbia, the Pay-As-You-Earn (PAYE) method is 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.
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.
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.
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.
|Moving expense reimbursement||20,000||0||20,000|
|Interest income from non-local sources||6,000||6,000||6,000|
Exchange rate used for calculation: USD1.00 = RSD108.5681.1
Calculation of taxable income for residents – Serbian/foreign citizens
|Days in Serbia during year||365||365||365|
|Earned income subject to income tax|
|Net housing allowance||1.302.817
|Moving expense reimbursement||2.171.362
|Total earned income||18.637.524
|Non taxable monthly amount||118.656
|Social security contributions on behalf of employee***||635.906
|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
|Total net worldwide income||15.863.896
|Income for taxation||13.678.408
|Personal deductions (up to 50% income for taxation)||509.946
|for dependant member of family||218.548
|Income for taxation||13.168.462
|Income for taxation up to six average salary in Serbia||4.370.976
|Income for taxation above six average salary in Serbia||8.797.486
|Taxable income - taxed at rate of 10%||4.370.976
|Taxable income - taxed at rate of 15%||8.797.486
|Tax by 10% tax rate||437.098
|Tax by 15% tax rate||1.319.623
|Total annual tax liability||1.756.721
*Calculation is made based on assumptions for 2015
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.
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