PROPOSAL FOR AMENDING PERSONAL INCOME TAX LAW

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

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