Serbia payroll and tax overview.

Serbia is an Eastern European country landlocked by Hungary to the north, Romania and Bulgaria to the east, North Macedonia, Kosovo, and Montenegro to the south, and Croatia and Bosnia and Herzegovina to the west. Serbia’s location makes it a gateway between central and south eastern Europe and it has strong economic ties with its neighbours, including a free trade agreement with the European Union. After emerging from the global crisis, Serbia’s government worked to drive economic growth by supporting local and international entrepreneurs interested in investing in the country. Since then, Serbia’s economy has trended positively and in 2019 its estimated GDP reached $51.5 billion with a growth rate of 4.2%. An emerging market economy, Serbia’s leading sectors include agriculture, financial services, energy, IT and communications, and oil and gas. As part of its commitment to stimulating investment, the Serbian government has introduced a number of economic reforms and incentives including government grants, tax relief, and domestic free trade zones. Serbia is a member of the UN, the OSCE, and CEFTA and is in negotiations to join the European Union and the WTO. In 2019, the World Bank ranked Serbia 44 on its Ease of Doing Business Survey.

Why Invest in Serbia?

Investors interested in Serbia should consider the following factors:

• International Profile: Located in a strategic geographic position, Serbia is continuing to grow its international political and economic profile. On a path towards full EU membership by 2020, Serbia also enjoys a favoured relationship with the Russian Federation in the form of an advantageous free trade agreement.
• Business Landscape: Serbia offers investors plenty of opportunities across a varied industrial landscape. Well known for its agricultural and mining industries, key industries also include automotive, electronics, IT and communications, food, and textiles. In 2014, the IBM Institute ranked Serbia as the top international investment destination.
• Labour Force: Businesses in Serbia enjoy access to a pool of skilled labourers. The country hosts 5 major universities, with over 240,000 active students specialising in STEM fields. Serbia’s labour force is highly literate with a strong rate of English language proficiency.
• Operating Costs: Serbia offers its businesses one of the lowest cost operating environments in Europe in terms of electricity, fuel, and communications. Serbian labour, transport and real estate costs also offer significant savings compared to the other EU nations.
• Government Incentives: To encourage investment and competition, Serbia’s government offers a range of incentives to businesses, including cash grants for start-ups, subsidies for construction, corporate income tax relief, and payroll tax incentives. Serbia also hosts several free trade zones.

Foreign Direct Investment in Serbia

The Serbian Government welcomes inward investment, with an array of incentives to attract investors in key future industries for the economy.

Company Registrations and Incorporation of a Legal Entity in Serbia

The company should register with the Pension Insurance Fund, Business Registers Agency and Tax Administration.

The key legislative authority in Serbia is the Republic Tax Administration, situated at Save Maškovića 3-5, Belgrade.

Business Banking in Serbia

In Serbia, it is mandatory to make payments to employees and authorities from an in-country bank account in RSD.

Generally, banks are open from 0800 to 1700 hours Monday to Friday and 0900 to 1300 hours on Saturdays. Only some designated banks are open on Sundays.

What Are the Working Days and Working Hours in Serbia?

The working week in Serbia is Monday to Friday. The general working hours for commercial offices in Serbia is between 0900 and 1700 hours.

Basic Facts about Serbia

The territory which became Serbia lies in the heart of southeastern Europe, and was first settled by the Slavs in the 6th century. Over the following centuries, Serbia was inhabited and governed by a variety of powers, and became part of the Ottoman Empire in the 15th century. In 1830, a revolution led to the establishment of the Principality of Serbia, and membership of the Austro-Hungarian Empire - before the country became part of Yugoslavia in 1918. After the turbulent dissolution of Yugoslavia in the late 20th century, Serbia became an independent republic and took steps to join the wider international community: today, the country is member-state of numerous global organisations, and is in the process of joining the European Union. Serbia is a mountainous country with numerous fertile agricultural regions, and enjoys a temperate continental climate throughout the year.

General Information

Full Name: Republic of Serbia

Population: 8.762 million (UN, 2018, including Kosovo)

Capital: Belgrade

Primary Language: Serbian

Main Religion: Christianity

Monetary Unit: Serbian Dinar (RSD)

Main Exports: Electrical machinery, insulated wire, vehicles, rubber, frozen fruits and nuts

Internet Domain: .rs

International Dialing Code: +381

The Tax Year in Serbia runs from 1st January to 31st December.

Pension insurance on behalf of the employee - 14,00%

Pension insurance on behalf of the employer - 11,50%

Unemployment on behalf of the employee - 0,75%

Health insurance on behalf of the employee - 5,15%

Health insurance on behalf of the employer - 5,15%

Payroll providers do not need to be licenced to make any tax or social security fillings on behalf of their client in Serbia.

Income Tax in Serbia

Annual individual’s income tax is collected from resident individuals, including foreign nationals with a residency status, whose income for the calendar year under review exceeds the sum of three average annual salaries per employee disbursed in Serbia in the year for which tax is assessed, using the statistical data of the relevant state institute.

If the net income of a taxpayer is between RSD 2,470,644.00 and RSD 4,941,288.00, a 10% tax on income is levied. On the annual income above RSD 4,941,288.00 a 15% tax rate is charged.

A taxpayer of annual income tax is entitled to a personal allowance of RSD 329,419.00 for himself/herself and RSD 123,532.00 for any of his/her dependent family members. The tax-free amount cannot exceed 50% of the person's taxable income.

The deadline for the submission of annual income tax returns is May 15.

The penalty for late payment ranges from RSD 100,000.00 up to RSD 2,000,000.00.

Social Security in Serbia

Monthly social security contributions are paid on the 30th of the current month for the previous month.

The penalty for late payment ranges from RSD 100,000.00 up to RSD 2,000,000.00.

Micro entities or small companies that employ at least 2 workers and started operating after 31st October 2015 will be eligible for a refund of up to 75% of the taxes and contributions paid until 31st December 2017 on behalf of their newly employed workers.

Reporting Tax in Serbia

Monthly

PPP-PD form

This form is required to report paid taxes and social insurance (on a monthly and annual basis)

Yearly

PPP-PO form

The deadline for PPP-PO form is 31st January for the previous year. These forms are issued to employees and are used for the calculation of the annual income tax.

All documents are to be sent to the Tax Administration and can be submitted by the client or by a partner. It is mandatory for the forms to be signed by the client.

New Employees in Serbia

New starts have to be registered with the Pension and Insurance Fund and Health Insurance. The deadline for new starts to be registered with the authorities in Serbia is at the latest, prior to commencing employment.

For setting up a new start the details required include:

• ID
• Employment Agreement

Leavers in Serbia

All dues to a leaver have to be affected within 30 days from termination of the Employment Agreement.

A leaver in Serbia must be de-registered from the Health and Pension Insurance Funds within three days.

Employers in Serbia must withhold employees’ income tax at source as part of the payroll process. The payroll process must take employee residency into account - that is, residents are taxed on income earned worldwide, while non-residents are taxed only on income earned within Serbia.

The personal income tax rate in Serbia is 10% for income up to RSD 4,570,128,00. An additional 15% is charged on income above that threshold.

Social security contributions must also be withheld during the payroll process. Social security in Serbia includes pension funds, health insurance, and unemployment insurance - employees must contribute around 30% of their salary, while employers contribute around 17.9%.

Serbia’s payroll landscape involves strict regulations - and foreign businesses operating in the country must be able to navigate the rules, or face compliance penalties. Expatriate organisations operating within Serbia often engage a third-party payroll provider in order to ensure payroll compliance.