ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

     The Regulation on Criteria for Granting Incentives to Employers Employing Newly Registered Residents in the Republic of Serbia has been the center of attention for many employers in Serbia over the past couple of months.
This Regulation entered into force on 18 June 2022, and it defines the conditions for obtaining new tax benefits from the Government.

What is it about?
The Government adopted the Regulation encouraging and facilitating the employment of newly registered persons for whom there is a demand on the domestic labor market. This is why the Regulation is important for all employers who plan to employ newly registered residents in Serbia, whether they are foreigners or Serbian citizens returning from abroad.

What are the incentives?
In particular, employers who meet the requirements of the Regulation can exercise the right to an incentive in the form of a reduction in salary taxes and mandatory pension and disability insurance contributions. The employer is to pay full taxes and the state will make a return payment to the employer who has submitted the application and meets the requirements. The payment amounts to:
-    70% of the calculated and paid salary tax for one or more newly registered residents 
and
-  100% of the calculated and paid contributions for mandatory pension and disability insurance.

The employer has the right to subsidies for a maximum of 60 months, in the period from 1 July 2022 to 31 December 2028.

 

Who are newly registered residents in the sense of this Regulation?
First, a newly registered resident must be an employee for whom the need in the domestic labor market cannot be easily met.
Second, the condition is that this person has not stayed in the territory of Serbia for more than 180 days over a period of 2 years, counting from the day when the employer concludes the employment contract with that person.
Third, the employer and employee must exclusively conclude a full-time employment contract for an indefinite period of time.
And finally, the Regulation prescribes a condition concerning the basic salary of a newly registered resident - it must amount to a minimum of 300,000.00 dinars on a monthly basis.

Which employers are entitled to the incentive?
An employer in the sense of this Regulation can be any person who does business in Serbia:

- Domestic or foreign natural or legal person
- An entrepreneur registered to carry out activities in Serbia
- A subsidiary of a domestic or foreign company
- A branch of a foreign company

Attention: In which case is the employer not entitled to the incentive?
First of all, the employer must meet the condition regarding the number of employees who are employed on an indefinite and full-time basis. This number must be equal to (or greater than) the number of employees on the date of entry into the force of this Regulation, increased by the number of employed newly registered residents, i.e. on 18 June 2022. 
Therefore, the employer does not have the right to incentives if, in the meantime, the number of full-time employees employed for an indefinite period of time has decreased.

In addition, the employer does not have the right to incentives in the following cases:
-    If a fixed-term employment contract is concluded with a newly registered resident;
-    If a part-time employment contract is concluded with a newly registered resident;
-    If the employer pays dividends or realized profits, in the period from the submission of the first application for the allocation of incentives to the end of the calendar year in which the employer has received the last payment (except for dividends or profits that are paid from the portion of the profit that is higher than the amount received on behalf of incentives);
-    If, for the same newly registered resident, currently uses or used to use other benefits to reduce the tax base and salary contributions by 70%;
-    If the employer is a beneficiary of state aid, on the basis of which has the obligation to hire new workers (unless this obligation had been fulfilled by 1 July 2022).

Additional restrictions on the granting of this incentive:
-    The right to this incentive is realized only for newly registered residents who are employed prior to 31 December 2023;
-    For applications submitted as of 2024, the employer can exercise the right to incentives if in the period from 31 December 2023 and to the end of the year in which the incentives were last paid to him, the total number of full-time employees for an indefinite period has not decreased.
-    The maximum number of employees for the incentive granting is calculated in relation to the number of employees on the date of entry into force of this Regulation, e.i 18 June 2022. The right to the incentive can be exercised for the number of employed newly registered residents by which the total number of full-time employees for an indefinite period has increased in relation to the mentioned date.

In what situations can an employer who has the right to the incentive lose that right? And what are the consequences?
-    If the employer pays a dividend, i.e. a realized profit contrary to this Regulation, the employer is to return those funds;
-    If the employer uses the right to reduce the base for newly registered residents in accordance with the Law on Personal Income Tax and the Law on Contributions for Mandatory Social Security, the employer is to return the received funds;
-    If in the period after 31 December 2023, the employer reduces the number of full-time permanent employees, the employer loses the right to incentives and cannot submit an application for incentives again. If the employer obtained the right to incentives based on an application for incentives that was filed in the year in which the employer reduced the number of full-time permanent employees, the employer is to refund the full amount of incentives received based on that application.

In the event that the employer loses the right to incentives, and is obliged to return the total amount of funds received, the employer must do so within 5 days from the day of the loss of the right to incentives, which is decided by the competent Ministry.

What does the application and incentive payment procedure look like?

Here is an outline of the application process, as well as of the important deadlines:

1.    The employer submits an application to the Ministry of Economy for each newly registered resident individually.
2.    The application is submitted once a year (up to 8 times in total), in the period from 15 September to 30 September.
3.    The application is submitted for the salaries of newly registered residents paid in the period from 1 July 2022 until 31 December 2028, whereby each application is submitted for salaries paid in the period preceding the submission of the application, for a maximum of 12 months.
4.    The Ministry of Economy decides on submitted applications within 120 days from the deadline for submitting the application.
5.    The employer has the right to file a complaint to the decision of the Ministry within 8 days of receiving the decision. The Ministry is obliged to decide on the complaint within 15 days.
6.    The Ministry of Economy compiles and submits list of employers who have the right to the incentive, within 120 days of the deadline for submitting the application.
7.    The Ministry of Economy transfers the funds to the Ministry of Finance - Treasury Administration, to a dedicated account, which then forwards those funds to the employer's dedicated account no later than 45 days. The Treasury Administration informs the Ministry of Economy on the payment realization.

 

What are the effects of the Regulation?
The new Regulation follows the globalist trend that is gaining momentum in the Serbian labor market as well, given the increasing number of newly registered residents who are employed in Serbia. Therefore, it is not difficult to conclude that this Regulation will ease the burden on employers of hiring highly qualified professionals, who possess the necessary knowledge and skills that are beneficial for the Serbian market, which is why this is good news for both employers and foreign workers. In addition, the consequences of this Regulation could be favorable for the demographic picture of Serbia, because the Regulation affirms the employment of domestic returnees who come - for example, from the diaspora, or who have completed their education or professional training abroad and returned to Serbia.


The application submission procedure is quite complex, subject to strict deadlines and voluminous paperwork, however, the tax benefits resulting from this procedure are also worthwhile.

The very first applications for this incentive start on 15 September and last until 30 September.

If you need additional clarification and legal advice, professional help in submitting an orderly and complete application, or if you want to ensure that you are covered when it comes to potential irregularities during the entire procedure, feel free to contact us.

 

Authors

Miloš Vučković, Senior and Managing Partner

Nađa Vuksanović, Junior Associate

 

*The information in this document does not represent legal advice and is provided for general informational purposes only.

**Partner, Senior Associate, Associate and/or Junior Associate refers to Independent Attorney at Law in cooperation with IVVK Lawyers.

30/08/2022

SHARE the NEWS on :

PREVIOUS

PREVIOUS

Corporate Sustainability Due Diligence Directive: Navigating Trough the Turmoil

PREVIOUS

PREVIOUS

Jurisdiction for Issuing Construction Permits

PREVIOUS

PREVIOUS

EU Minimum Corporate Income Tax Directive: What to Know and What to Expect?

PREVIOUS

PREVIOUS

Marking Data Protection Day: A Reminder of How Important it Is to Protect Privacy

PREVIOUS

PREVIOUS

Drag Along and Tag Along in Domestic Legal System

PREVIOUS

PREVIOUS

AI Act - Challenges of Artificial Intelligence To the Global Market

PREVIOUS

PREVIOUS

Understanding NPLs: Scheme, Serbian Context & Notes of Economists

PREVIOUS

PREVIOUS

Insurance – Luxury or Necessity?

PREVIOUS

PREVIOUS

Claims Secured by a Mortgage and the Statute of Limitations

PREVIOUS

PREVIOUS

Alert: New Regulation Concerning Incentives in the Hotel Industry

PREVIOUS

PREVIOUS

Most Profitable Investments In The Republic Of Serbia

PREVIOUS

PREVIOUS

Annex to the Employment Contract for Transfer to Another Suitable Job (Due to the Needs of the Work Process and Organization)

PREVIOUS

PREVIOUS

Delayed justice is denied justice

PREVIOUS

PREVIOUS

Regulation of the Government of the Republic of Serbia on electricity delivery and supply conditions: Outlining the conditions for connection to the grid

PREVIOUS

PREVIOUS

Shareholders agreement – General overview and important clauses

PREVIOUS

PREVIOUS

Serbia drafting new Law on Information Security

PREVIOUS

PREVIOUS

IVVK Lawyers becomes part of the LexQuire family

PREVIOUS

PREVIOUS

Serbia looking for strategic partners for solar power plants

PREVIOUS

PREVIOUS

ARTICLE Benefits of employee stock ownership plan in Serbia

PREVIOUS

PREVIOUS

In 5 years 450 new RES power plants in Serbia

PREVIOUS

PREVIOUS

ARTICLE Co-ownership of share in Serbia

PREVIOUS

PREVIOUS

Serbia hosts Specialised Expo 2027

PREVIOUS

PREVIOUS

ARTICLE Uncovering legal challenges of AI

PREVIOUS

PREVIOUS

Energy related Memorandum of Understanding signed with UK

PREVIOUS

PREVIOUS

Serbia established quota for solar power auctions

PREVIOUS

PREVIOUS

ARTICLE The dark side of ESG

PREVIOUS

PREVIOUS

ARTICLE ESG principles and their impact on corporate world

PREVIOUS

PREVIOUS

Serbia focuses on energy, IT and biotech

PREVIOUS

PREVIOUS

Serbian Orthodox Church becomes solar prosumer

PREVIOUS

PREVIOUS

Notary Chamber of Serbia releases E-Notary app

PREVIOUS

PREVIOUS

ARTICLE CFD brokers hiding behind Terms and Conditions

PREVIOUS

PREVIOUS

Process of company founding in Serbia goes electronic

PREVIOUS

PREVIOUS

Upward trend of renewables confirmed in 2022

PREVIOUS

PREVIOUS

ARTICLE Obtaining hemp cultivation permit in Serbia

PREVIOUS

PREVIOUS

ARTICLE Legal aspects of cultivation, trade and use of cannabis in Serbia

PREVIOUS

PREVIOUS

Serbia's 2023 economic growth depends on IT sector

PREVIOUS

PREVIOUS

ARTICLE Legal considerations of seasonal work engagements in Serbia

PREVIOUS

PREVIOUS

IVVK Lawyers hosted lecture for foreign business people

PREVIOUS

PREVIOUS

ICT sector recorded 2 billion EUR surplus

PREVIOUS

PREVIOUS

Growth of creative industries sector in Serbia

PREVIOUS

PREVIOUS

Serbia large biomass energy potential

PREVIOUS

PREVIOUS

Rich gold deposit found in Serbia

PREVIOUS

PREVIOUS

Serbia among top 3 global raspberry producers

PREVIOUS

PREVIOUS

Serbian Chamber of Commerce present in Dubai

PREVIOUS

PREVIOUS

Establishment of Serbia-Qatar Business Council

PREVIOUS

PREVIOUS

Serbia's Securities Commission approved establishment of a new AIF

PREVIOUS

PREVIOUS

Serbia adopted Air Quality Protection Program 2022-2030

PREVIOUS

PREVIOUS

Danube region transnational cooperation program 2021-2027 approved

PREVIOUS

PREVIOUS

Rakija entered UNESCO-s Intangible Cultural Heritage of Humanity List

PREVIOUS

PREVIOUS

Possible electricity import from Azerbaijan

PREVIOUS

PREVIOUS

Serbia's unique solar energy storage solution

PREVIOUS

PREVIOUS

Serbia abundant in rare minerals

PREVIOUS

PREVIOUS

Luxury Real Estate Market in Montenegro

PREVIOUS

PREVIOUS

LexQuire meets IVVK Lawyers

PREVIOUS

PREVIOUS

ARTICLE Law on Agency Employment aimed at prevention of labor abuse

PREVIOUS

PREVIOUS

11 cities and municipalities signed a Memorandum of Understanding

PREVIOUS

PREVIOUS

Price increase of housing units in Montenegro by 40%

PREVIOUS

PREVIOUS

Foreign trade in goods increased by 35.1%

PREVIOUS

PREVIOUS

ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

PREVIOUS

PREVIOUS

Apartments as the leading segment of the real estate market

PREVIOUS

PREVIOUS

Businessmen optimistic about the third quarter of 2022

PREVIOUS

PREVIOUS

Inflation in Serbia amounted to 12.8% in July

PREVIOUS

PREVIOUS

Bank fees and commissions to remain stable in 2023

PREVIOUS

PREVIOUS

ARTICLE Law on Alternative Investment Funds

PREVIOUS

PREVIOUS

Montenegro introduces auctions for renewable energy sources

PREVIOUS

PREVIOUS

ARTICLE Legal framework for investments in energy facilities in Serbia

PREVIOUS

PREVIOUS

Hydro Power Plants as a possible energy solution for Serbia

PREVIOUS

PREVIOUS

ARTICLE Four-day working week in Serbia

PREVIOUS

PREVIOUS

Crops estimations for 2022 in Serbia

PREVIOUS

PREVIOUS

ARTICLE Innovation clusters as high-potential solution for SMEs

PREVIOUS

PREVIOUS

Customs-free importing quotas for Eurasian Economic Community 2023

PREVIOUS

PREVIOUS

IVVK JOB OPENING We are hiring Junior Associates

PREVIOUS

PREVIOUS

Startups Attract More Than USD 135 Million to Serbia in 2021

PREVIOUS

PREVIOUS

Construction Plan for a Wind Farm in Bor

PREVIOUS

PREVIOUS

IVVK Lawyers participated in Confindustria HR Forum

PREVIOUS

PREVIOUS

IVVK-UpSkill Workshop "Presentation on social and TV media"

PREVIOUS

PREVIOUS

Serbia and Azerbaijan up for cooperation in the energy field

PREVIOUS

PREVIOUS

Energy permits digitized starting November

PREVIOUS

PREVIOUS

Belgrade declared city with greatest economic potential in region

PREVIOUS

PREVIOUS

Digitalization of fiscalization and invoicing in Serbia

PREVIOUS

PREVIOUS

New Register of Investment Locations in Serbia

PREVIOUS

PREVIOUS

Paysend opens new European tech center in Serbia

PREVIOUS

PREVIOUS

Serbia allows free export of flour from 15 May

PREVIOUS

PREVIOUS

Serbia to announce auctions for renewable energy power plants

PREVIOUS

PREVIOUS

Energy most important for economic development

PREVIOUS

PREVIOUS

Action Plan for Implementation of Digitalisation Programme in Health System

PREVIOUS

PREVIOUS

Oracle Corporation opens regional centre in Serbia

NEXT

NEXT

Corporate Sustainability Due Diligence Directive: Navigating Trough the Turmoil

NEXT

NEXT

Jurisdiction for Issuing Construction Permits

NEXT

NEXT

EU Minimum Corporate Income Tax Directive: What to Know and What to Expect?

NEXT

NEXT

Marking Data Protection Day: A Reminder of How Important it Is to Protect Privacy

NEXT

NEXT

Drag Along and Tag Along in Domestic Legal System

NEXT

NEXT

AI Act - Challenges of Artificial Intelligence To the Global Market

NEXT

NEXT

Understanding NPLs: Scheme, Serbian Context & Notes of Economists

NEXT

NEXT

Insurance – Luxury or Necessity?

NEXT

NEXT

Claims Secured by a Mortgage and the Statute of Limitations

NEXT

NEXT

Alert: New Regulation Concerning Incentives in the Hotel Industry

NEXT

NEXT

Most Profitable Investments In The Republic Of Serbia

NEXT

NEXT

Annex to the Employment Contract for Transfer to Another Suitable Job (Due to the Needs of the Work Process and Organization)

NEXT

NEXT

Delayed justice is denied justice

NEXT

NEXT

Regulation of the Government of the Republic of Serbia on electricity delivery and supply conditions: Outlining the conditions for connection to the grid

NEXT

NEXT

Shareholders agreement – General overview and important clauses

NEXT

NEXT

Serbia drafting new Law on Information Security

NEXT

NEXT

IVVK Lawyers becomes part of the LexQuire family

NEXT

NEXT

Serbia looking for strategic partners for solar power plants

NEXT

NEXT

ARTICLE Benefits of employee stock ownership plan in Serbia

NEXT

NEXT

In 5 years 450 new RES power plants in Serbia

NEXT

NEXT

ARTICLE Co-ownership of share in Serbia

NEXT

NEXT

Serbia hosts Specialised Expo 2027

NEXT

NEXT

ARTICLE Uncovering legal challenges of AI

NEXT

NEXT

Energy related Memorandum of Understanding signed with UK

NEXT

NEXT

Serbia established quota for solar power auctions

NEXT

NEXT

ARTICLE The dark side of ESG

NEXT

NEXT

ARTICLE ESG principles and their impact on corporate world

NEXT

NEXT

Serbia focuses on energy, IT and biotech

NEXT

NEXT

Serbian Orthodox Church becomes solar prosumer

NEXT

NEXT

Notary Chamber of Serbia releases E-Notary app

NEXT

NEXT

ARTICLE CFD brokers hiding behind Terms and Conditions

NEXT

NEXT

Process of company founding in Serbia goes electronic

NEXT

NEXT

Upward trend of renewables confirmed in 2022

NEXT

NEXT

ARTICLE Obtaining hemp cultivation permit in Serbia

NEXT

NEXT

ARTICLE Legal aspects of cultivation, trade and use of cannabis in Serbia

NEXT

NEXT

Serbia's 2023 economic growth depends on IT sector

NEXT

NEXT

ARTICLE Legal considerations of seasonal work engagements in Serbia

NEXT

NEXT

IVVK Lawyers hosted lecture for foreign business people

NEXT

NEXT

ICT sector recorded 2 billion EUR surplus

NEXT

NEXT

Growth of creative industries sector in Serbia

NEXT

NEXT

Serbia large biomass energy potential

NEXT

NEXT

Rich gold deposit found in Serbia

NEXT

NEXT

Serbia among top 3 global raspberry producers

NEXT

NEXT

Serbian Chamber of Commerce present in Dubai

NEXT

NEXT

Establishment of Serbia-Qatar Business Council

NEXT

NEXT

Serbia's Securities Commission approved establishment of a new AIF

NEXT

NEXT

Serbia adopted Air Quality Protection Program 2022-2030

NEXT

NEXT

Danube region transnational cooperation program 2021-2027 approved

NEXT

NEXT

Rakija entered UNESCO-s Intangible Cultural Heritage of Humanity List

NEXT

NEXT

Possible electricity import from Azerbaijan

NEXT

NEXT

Serbia's unique solar energy storage solution

NEXT

NEXT

Serbia abundant in rare minerals

NEXT

NEXT

Luxury Real Estate Market in Montenegro

NEXT

NEXT

LexQuire meets IVVK Lawyers

NEXT

NEXT

ARTICLE Law on Agency Employment aimed at prevention of labor abuse

NEXT

NEXT

11 cities and municipalities signed a Memorandum of Understanding

NEXT

NEXT

Price increase of housing units in Montenegro by 40%

NEXT

NEXT

Foreign trade in goods increased by 35.1%

NEXT

NEXT

ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

NEXT

NEXT

Apartments as the leading segment of the real estate market

NEXT

NEXT

Businessmen optimistic about the third quarter of 2022

NEXT

NEXT

Inflation in Serbia amounted to 12.8% in July

NEXT

NEXT

Bank fees and commissions to remain stable in 2023

NEXT

NEXT

ARTICLE Law on Alternative Investment Funds

NEXT

NEXT

Montenegro introduces auctions for renewable energy sources

NEXT

NEXT

ARTICLE Legal framework for investments in energy facilities in Serbia

NEXT

NEXT

Hydro Power Plants as a possible energy solution for Serbia

NEXT

NEXT

ARTICLE Four-day working week in Serbia

NEXT

NEXT

Crops estimations for 2022 in Serbia

NEXT

NEXT

ARTICLE Innovation clusters as high-potential solution for SMEs

NEXT

NEXT

Customs-free importing quotas for Eurasian Economic Community 2023

NEXT

NEXT

IVVK JOB OPENING We are hiring Junior Associates

NEXT

NEXT

Startups Attract More Than USD 135 Million to Serbia in 2021

NEXT

NEXT

Construction Plan for a Wind Farm in Bor

NEXT

NEXT

IVVK Lawyers participated in Confindustria HR Forum

NEXT

NEXT

IVVK-UpSkill Workshop "Presentation on social and TV media"

NEXT

NEXT

Serbia and Azerbaijan up for cooperation in the energy field

NEXT

NEXT

Energy permits digitized starting November

NEXT

NEXT

Belgrade declared city with greatest economic potential in region

NEXT

NEXT

Digitalization of fiscalization and invoicing in Serbia

NEXT

NEXT

New Register of Investment Locations in Serbia

NEXT

NEXT

Paysend opens new European tech center in Serbia

NEXT

NEXT

Serbia allows free export of flour from 15 May

NEXT

NEXT

Serbia to announce auctions for renewable energy power plants

NEXT

NEXT

Energy most important for economic development

NEXT

NEXT

Action Plan for Implementation of Digitalisation Programme in Health System

NEXT

NEXT

Oracle Corporation opens regional centre in Serbia