Serbia Individual Tax Guide

Serbia, Republic of

Belgrade

EY

Antifašističke borbe 13a

11070 Belgrade Serbia

Executive and immigration contact

Ivan Rakic

A. Income tax

+381 (11) 209-5804

Fax: +381 (11) 209-5891 Email: ivan.rakic@rs.ey.com

Who is liable. Residents are subject to tax in Serbia on their world wide income. Nonresidents are subject to tax on Serbian-source income only.

Individuals are considered to be resident for tax purposes if they have a domicile, residence or center of business and life interests in Serbia or if they spend more than 183 days within a 12-month period, which begins or ends in the tax year (that is, the calendar year). In addition, the applicable legislation prescribes a split tax residence concept (that is, it would be possible to consider the assignee as Serbian tax resident for only part of the year).

Income subject to tax. Tax is levied on the types of income described below.

Employment income. Salary tax is payable at a rate of 10% on income from permanent or temporary employment, benefits received in money and in kind, paid leave and other employment remuneration that exceeds a prescribed level.

Self-employment income. Tax is levied on the net earnings of selfemployed individuals at a rate of 10%. For this purpose, taxable income is accounting profit adjusted in accordance with the tax regulations. The tax authorities may grant certain self-employed individuals the right to not maintain books; lump-sum tax is lev ied on these individuals.

Investment income. Tax is imposed at a rate of 15% on the following types of investment income:

• Interest

• Dividends and participation in profits

• Income derived from investment units

• The taking of a company’s assets and the use of a company’s services by founders for their private purposes free of charge

Interest derived from government bonds and deposits and savings in local currency is exempt from tax under the personal income tax law.

Income from property leasing and subleasing is taxed at a rate of 20%. A standard deduction of 25% may be claimed with respect

to this leasing income. Under an exception, for leases up to 30 days in the tourist industry, the tax base is 5% of the average monthly salary in Serbia multiplied by the number of rented beds and the appropriate coefficient (the tax is determined by the tax authority’s ruling).

Withholding tax is imposed at a rate of 20% on royalties from copyrights, rights related to copyrights and industrial property rights. Deductions from royalty income may vary between 34%, 43% and 50% of the total royalty income, depending on the source of income. Actual expenses incurred by an author or inter preter are deductible if they are properly documented.

Directors’ fees. Fees received by members of a board of directors or supervisory board of a legal entity are taxed at a rate of 20%. A standard deduction of 20% may be claimed with respect to such income.

Other income. Income from insurance, reduced by paid premi ums, is taxed at a rate of 15%.

Other types of income, including winnings from games of chance, are subject to tax at a rate of 20%. Certain standard deductions are allowed with respect to such income.

Capital gains and losses. Capital gains derived from the sale of real estate, industrial property rights, securities and digital assets are subject to tax at a rate of 15%. Capital losses incurred in a calendar year may offset capital gains derived in that year or in the following five years.

Annual personal deductions. Taxpayers may claim a personal deduction in the amount of 40% of the average annual salary per employee paid in Serbia in the year for which the tax is assessed. In addition, individuals may claim a deduction in the amount of 15% of the average annual salary per employee paid in Serbia in the year for which the tax is assessed for each dependent family member. The total amount of deductions claimed may not exceed 50% of taxable income.

Other deductions. There are certain annual tax deductions for individuals who invested in alternative investment funds in Serbia.

Annual tax rates. Annual tax in Serbia is not a reconciliation of taxes paid during a year, but rather an additional tax for individu als whose income exceeds a prescribed threshold. Progressive income tax rates of 10% and 15% apply to the income of indi viduals exceeding the threshold.

For Serbian tax resident and nonresident individuals (both Serbian and foreign nationals), the 10% rate applies to net income from sources specified in the tax law exceeding three times the amount of the average annual salary per employee paid in Serbia in the year for which tax is assessed, but not exceeding nine times such average annual salary in total. A 15% rate applies to income exceeding nine times the average annual salary.

The above thresholds are modified each year in accordance with the annual fluctuation of average salary in Serbia.

Relief for losses. Losses incurred in self-employment activities may be carried forward for up to five years.

B. Other taxes

Property tax. Residents and nonresidents are subject to property tax at rates that may not exceed the maximum rates set by the Property Law. Each municipality may determine the rates up to these maximum rates. The maximum rates range from 0.4% to 2% on real estate owned in Serbia. The rates depend on the kind of property (land or building), kind of owner (company/entrepre neur or physical person) and, for physical persons, the value of the property. Shares and stakes in legal entities are not subject to property tax.

Inheritance and gift tax. Inheritance and gift tax is levied on the market value of property at rate of 1.5% for taxpayers who are second relations to the testator or donor and 2.5% for taxpayers who are third relations or are not related to the testator or donor. Shares and stakes inherited, or received free of charge, are not subject to inheritance and gift tax.

Transfer tax. The rate of the transfer tax is 2.5%. The tax base is the higher of the contract price or market price. Sales of shares and stakes in legal entities are exempt from transfer tax.

C. Social security and other contributions

Contributions. Social security tax is imposed on salaries received by individual employees. Employers and employees each pay contributions at the rates noted to the following.

Employer Employee Fund rate (%) rate (%) Pension and Disability Fund 11.50 14.00 Health Care Fund 5.15 5.15 Unemployment Fund 0.75

Contributions to the Pension and Disability Fund at a rate of 25.5% and contributions to the Health Care Fund at a rate of 10.3% (for individuals without any other insurance) are payable by individuals on income received under contracts relating to royalties, services, additional work, agency and sports, as well as under similar contracts involving the payment of remuneration for services performed.

For expatriate employees, social security contributions may also be payable on salaries received outside Serbia. Under certain bilateral conventions, expatriates may pay social security contri butions in their country of residence only.

Coverage. An employee who pays Serbian social security contri butions is entitled to benefits, including health insurance for the employee and dependent family members, disability and profes sional illness insurance, unemployment allowances, retirement and other benefits.

Totalization agreements. To prevent double taxation and to assure benefit coverage, the Republic of Serbia currently applies social security totalization agreements with the following jurisdictions.

Austria France Panama

Belgium Germany Poland

Bosnia and Greece Romania

Herzegovina Hungary Russian Federation

Bulgaria Italy Slovak Republic

Canada Libya Slovenia

China Mainland Luxembourg Sweden

Croatia Montenegro Switzerland

Cyprus Netherlands Turkey

Czech Republic Norway United Kingdom

Denmark North Macedonia

These agreements generally provide a 12-month exemption, which may be extended. Certain agreements provide an exemption for the full term of the individual’s assignment.

D. Tax filing and payment procedures

The tax year is the calendar year. Annual tax returns must be filed by 15 May of the year following the tax year. Withholding tax is levied on most types of income, including salaries. Individuals who are liable for income tax must make advance payments of income tax in monthly or, in certain cases, quarterly installments (subject to a ruling of the tax authorities).

E. Double tax relief and tax treaties

Although Serbia professes to honor the tax treaties concluded by the former Yugoslavia, the applicability of these treaties is in doubt in several instances. In the event of the inapplicability of a treaty, Serbian tax legislation provides for the unilateral avoid ance of double taxation through tax credits.

The Republic of Serbia, as the legal successor of the Union of Serbia and Montenegro, applies treaties with countries that were entered into by the former Yugoslavia and the former Union of Serbia and Montenegro. Tax treaties with the following jurisdic tions are being applied.

Albania Greece

North Macedonia

Armenia Hong Kong SAR Norway

Austria Hungary Pakistan* Azerbaijan India Poland Belarus Iran Qatar*

Belgium Indonesia Romania

Bosnia and Ireland* Russian Federation

Herzegovina Israel San Marino

Bulgaria Italy Slovak Republic

Canada Kazakhstan Slovenia

China Mainland Korea (North) Spain

Croatia Korea (South) Sri Lanka

Cyprus Kuwait Sweden

Czech Republic Latvia Switzerland Denmark Libya* Tunisia

Egypt* Lithuania Turkey

Estonia* Luxembourg Ukraine

Finland Malta* United Arab

France* Moldova Emirates*

Georgia Montenegro* United Kingdom*

Germany Netherlands Vietnam*

* These treaties cover the avoidance of double taxation on income only.

F. Temporary visas

Valid passports and visas are required for foreign nationals of many countries to enter Serbia. Foreign nationals from countries with which Serbia has a visa-free regime (for example, citizens of the European Union, Australia, Canada, the United Arab Emirates and the United States) who are on vacation or visiting family may remain in the country just on the basis of a valid passport for 90 days in a six-month period, starting from the date of the first entry. Foreign nationals from countries with which Serbia does not have a visa-free regime need to obtain a visa prior to entering Serbia. Foreign nationals wishing to stay longer than 90 days or for business purposes for which a work permit is required (regardless of the period of stay) should have a residence permit or visa D.

The procedure for obtaining a temporary residence permit or visa D takes approximately 30 days.

The government of Serbia adopted the decision on visa-free entry to Serbia for holders of a foreign passport with a valid Schengen, UK or other EU member state visa, or a United States visa, and for holders of a foreign passport with a residence permit in the countries of the Schengen area or the EU, or the United States. By this decision, the abovementioned categories of foreign nationals may, without prior visa application, enter, travel through or stay in Serbia up to 90 days during a six-month period, but not exceeding the expiration date of the visa or residence permit. Such individuals may enter Serbia for non-work purposes (business meetings are allowed); however, if they need to apply for a residence and work permit later, they need to first obtain a visa.

G. Work permits

Before applying for a work permit, a foreign national must have a temporary residence permit or visa D.

The procedure for obtaining a work permit takes up to 15 days.

H. Residence permits and visa D

Temporary and permanent residence permits are issued by the Republic Police Department.

To obtain a temporary residence permit, a foreign national applies to the local Republic Police Department by stating the reasons for the temporary stay and, if requested, providing documents justi fying the reasons. The applicant must also prove that he or she has health insurance and sufficient financial means for his or her support during the stay in Serbia. A temporary residence permit is issued for of a period of up to one year (initially may be issued for up to six months on a case-by-case basis) and may be extend ed for similar periods if sufficient reasons exist.

For a permanent residence permit, a foreign national applies to the Republic Police Department enclosing evidence of sufficient financial means for his or her support in Serbia. A permanent

residence permit is issued to an applicant who meets one of the following conditions:

• The applicant has lived for at least five years continuously in Serbia, based on a temporary resident permit.

• The applicant has been married or in a common-law union for at least three years to a Serbian citizen or to a foreign national with a permanent residence permit.

• The applicant is a minor with a temporary residence permit, one of his or her parents is a Serbian citizen or a foreign national with a permanent residence permit, and he or she has the consent of the other parent.

• The applicant is of Serbian origin.

A visa D is issued abroad in the jurisdiction where the applicant resides (Embassy or Consulate General of the Republic of Serbia in that jurisdiction) prior to entering Serbia.

I. Family and personal considerations

Work permits for family members. Work permits are not automatically granted to the family members of a foreign national who receives a work permit.

Forced heirship. Serbia’s forced heirship rules prevent the disin heritance of the closest relatives of the decedent. The decedent’s descendants, whether biological or adopted, and spouse comprise forced heirs in the first line, who are entitled to one-half of their intestate share of the decedent’s estate. Other forced heirs are entitled to one-third of their intestate share. Forced heirs have all the rights and duties of other heirs.

Driver’s licenses. Foreign nationals may drive in Serbia with their home country driver’s licenses for six months. After this period, they must apply for Serbian driver’s licenses.