As announced by the Government of the Republic of Serbia, the amendments to the Law on Personal Income Tax, which would enter into force on January 1, 2020, in the next few weeks will be brought before the National Assembly. A proposal of a set of measures for youth employment would include amendments to the law, as and tax incentives for the companies that employ them. One of the most significant changes being proposed is the introduction of a independence test for entrepreneurs. The tax administration will be tasked with determining whether hiring an entrepreneur is a simulated job, or whether hiring an entrepreneur creates a employer/employee relationship.

The introduction of eleven criteria for the independence test has been announced, and if six out of eleven are fulfilled, the entrepreneur will be deemed not to meet the independence requirement:
1. The principal defines working hours.
2. There is a competition clause in the contract.
3. The entrepreneur is entitled to holidays and absences for a fee and is approved by the principal.
4. The principal advertises the positions for which he / she hires an entrepreneur or for that purpose he / she recruits employment agencies.
5. The entrepreneur performs work for the principal by working in a team with employees or other entrepreneurs.
6. The entrepreneur uses the premises provided or owned by the principal.
7. The principal trains entrepreneurs and manages the work process.
8. The entrepreneur uses tangible and intangible assets for the work provided by the principal.
9. The entrepreneur generates at least 70% of the income in 12 months from the principal.
10. The entrepreneur performs business activities of the principal and does not assume business risk towards clients of the principal.
11. The entrepreneur has been engaged by the principal for more than 130 days in 12 months.

If a company employs a person who she/he had previously hired as a entrepreneur and the person was not employed during 2019, a partial exemption is provided for payment of salary taxes and social contributions:
1. 70 During 2020, 70% of taxes and contributions
2. 65 During 2021, 65% of taxes and contributions
3. 60 During 2022, 60% of taxes and contributions

Government adopts proposal of law on accounting

The Government of Serbia adopted Proposal of the Law on Accounting on 16.9.2019.

According to the Report on the Public Hearing on the Draft Law on Accounting, published by the Ministry of Finance, the following comments or suggestions are accepted fully or partially:

  • Clearer wording in certain definitions in Article 2 of the Draft Law (other legal entities, extraordinary financial statement, shares, material item, date of approval for disclosure of financial statements),
  • Specifying that the Central Registry, Depository and Clearing of Securities (Central Registry) is considered a large legal entity and that the Securities Commission prescribes by-laws governing the Chart of Accounts and the contents of the Account in the Chart of Accounts, as well as the content and form of financial forms reports compiled by the Central Registry.
  • Comments from civil sector representatives related to other legal entities within the meaning of Article 2, item 2) of the Draft Law on Accounting (associations, foundations, endowments, etc.), which will continue to apply the special by-laws governing them, are also accepted. Chart of Accounts and Forms of Financial Statements (provisions as in the current Law on Accounting).
  • The remark specifying Article 9, paragraph 3 of the Draft Law was adopted, in the sense that compulsory creation and submission of invoices in electronic form refers to legal entities and entrepreneurs obliged to apply this Law, and the deadline for compliance with this provision of the Draft Law (mandatory implementation starting January 1, 2022).
  • Remarks regarding the obligation to draw up a Note to the financial statements for other legal entities referred to in Article 2, paragraph 2 of the Draft Law, which are classified in the category of micro legal entities, were also accepted.
  • An objection was also accepted regarding the establishment of the Accounting Services Provider Register (starting from January 1, 2021).
  • In the part related to non-financial reporting, proposals were adopted to further specify the obligation to prepare and how to prepare these reports.

Other suggestions, suggestions and objections of the participants in the public hearing process submitted to this Ministry after the analysis were not accepted because no specific explanations were given for them, or the proposals are contrary to the positive legal regulations, i.e. are not subject to the regulation of this law, or are contrary to the provisions of the relevant EU regulations (Directive 2013/34 / EU and Directive 2014/95 / EU as well as EU Regulation 1606/2002) with which they are harmonized.


Proposal for amending the vat law

The Law on Amendments to the Law on Value Added Tax is currently in the parliamentary procedure. It is stipulated that this Law will enter into force eight days from the day of its publication in the Official Gazette of the Republic of Serbia, and its implementation will commence on 1.1.2020 except for the provisions relating to Article 24 (tax exemptions for the circulation of goods and services with the right to deduct prior tax) and Article 26 (tax exemptions for the importation of goods) of the present Law and provisions containing the powers to adopt by-laws to be applied from the day the entry into force of this Law.

These are some of the changes proposed in the Value Added Tax Act and also you can download our Tax alert:

Value Vouchers – It is proposed to divide the vouchers into one-purpose and multi-purpose ones and to determine the difference between the tax treatment of their transfer.
One-purpose vouchers are those for which the place of delivery of goods / services is known at the time of the value voucher. All other vouchers are multi-purpose vouchers. The obligation to calculate VAT will exist at the moment of issue with single-purpose vouchers, while the obligation to calculate VAT on multi-purpose vouchers will exist at the moment of their realization.

Turover of goods carried on board, in an aircraft or train – It is suggested that the place of turnover of goods carried on board, in an aircraft or train during the transport of passengers is considered the place of departure of the ship, aircraft or train and the place of departure, departure place is the first scheduled place for embarking passengers. It is suggested that the return journey is considered a separate transport.
Also, in determining the place of turnover in the services of sale of food and drinks for consumption, which are actually provided on board, that is, in an aircraft or train during the transportation of passengers, it is proposed to apply the above rule.

Residence / abode – It is also envisaged to add a paragraph defining that if the residence and abode of the provider or recipient of the service are not in the same place, the place of turnover of the service is determined according to the place of abode.

Turnover of telecommunication, radio and television broadcasting services and services provided electronically – in case of turnover of telecommunication, radio and television broadcasting services and services provided electronically, place of establishment, permanent establishment, residence or abode of the recipient of services shall be considered to be a place determined on the basis of criteria and assumptions for determining the place of establishment, permanent establishment, residence or abode of the recipient of those services.

Tax liability – It is stipulated that a tax liability will occur on the earliest date, inter alia, the invoicing of the services referred to in Article 5, paragraph 3, item 1) of the VAT Law is made, including services directly related to those services as well as technical services support for the use of software, hardware and other equipment for a specified period of time.

Tax exemptions for the circulation of goods and services with a right to deduct previous tax – The amount of the total value of the goods delivered (through which VAT can be refunded) that the passenger takes abroad in personal luggage, for non-commercial purposes, changes to RSD 6.000 from previous EUR 100.

Implementation of highway construction infrastructure projects – Provision is made for a tax exemption with the right to deduct previous VAT on goods and services performed within the

framework of the implementation of highway construction infrastructure projects for which a public interest has been established by a special law.

Pre-tax split and prorated tax deduction – Specifies which sales of goods and services are not considered in determining the prorated deduction percentage and specifies that a taxpayer is not required to split the pre-tax under this law if the prorated deduction percentage is at least 98 %.

A complete change to Article 44, which now reads – If the VAT payer in the invoice for goods and services supplied shows a higher amount of VAT than the one who owes in accordance with this law, i.e. the amount of VAT without having to pay the obligation in accordance with this law, the stated VAT is to be paid.
The VAT taxpayer referred to in paragraph 1 of this Article shall have the right to correct the VAT amount if he has issued a new invoice with a corrected VAT amount, that is, an invoice without VAT and if he has a document of the recipient of the invoice stating that the VAT stated in the original invoice was not used as previous tax.
The new invoice referred to in paragraph 2 of this Article must contain a note that the invoice replaces the previously issued invoice.
The person who declares VAT in the invoice, who is not liable for VAT, is obliged to pay the declared VAT.
The person referred to in paragraph 4 of this Article shall not have the right to correct the stated amount of VAT.


Minimum wage

The minimum wage, excluding taxes and contributions for compulsory social security, for the period January – December 2020 will be 172.54 RSD (net) per hour. The current minimum labor cost is 155.30 din per hour. Therefore, the net minimum wage for payments during 2020 will be:

  • 27.606,40 RSD per month with 160 working hours
  • 28.986,72 RSD per month with 168 working hours
  • 30.367,04 RSD per month with 176 working hours
  • 31.747,36 RSD for the month with 184 working hours

The gross minimum wage depends on the non-taxable amount that will change from 1.2.2020. It was announced that the social contributions the expense of the employer would be reduced.

All payments that will be made from 1.1.2020 should be calculated at 172,54 RSD per hour, regardless of the month to which the calculation relates.

Opinion of the Ministry of Finance about tax exemption

In accordance with the opinion of the Ministry of Finance No. 011-00-920 / 2018-04 of 10.7.2019. the tax exemption with the right to deduct the previous tax for the shipment of goods abroad, i.e. for the export of goods, can only be obtained by the taxpayer – the owner of the goods being exported, if he / she possesses evidence of the export of goods. Namely, it is a person who ships goods abroad and is listed in JCI for export of goods (box 2) as the sender / exporter – the person on whose behalf the declaration is submitted and who, at the time of accepting the declaration, owns the goods or has similar rights to dispose of goods.

The Ministry of Finance, in collaboration with USAID, has prepared a draft Rulebook on services provided electronically

The Ministry of Finance, in collaboration with USAID, has prepared a draft Rulebook on services provided electronically, within the scope of VAT Law. The aim of the new Rulebook is to align legislation with new services and new ways of providing services in the digital age.

The draft supplements the provisions of the existing Rulebook defining services provided electronically, and introduces provisions on determining the place of supply for telecommunications, radio and television broadcasting services and services provided electronically when such services are provided to a entity which is not taxpayer.

“My LPA” mobile phone application

From 8/13/2019 taxpayers may inquire about the status of property tax liability for the territory of the Republic of Serbia through the application for mobile phone “My LPA”, which is free and available in versions for Android and iOS operating system.I

In order to complete the inquiry, it is necessary to obtain a username and password, for which the taxpayers personally submit a request to the competent local tax administration (LPA). Individuals should contact the local tax administration by place of residence, while legal entities should contact the local tax administration by registered headquarters address.

List of documentation required to pay sick leave over 30 days at the expense of the RFZO

The National Health Insurance Fund (RFZO) has published on its website a list of required documentation for exercising the right to remuneration for the period of temporary absence from work for more than 30 days, to be paid at the expense of RFZO before and after April 11, 2019.
The list of required documentation can be seen at the following link.