New Incentives for Employment of Newly Settled Persons – Be One of The First to Use Them!
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In one of the previous articles on our website, 7 reasons why you should invest in your business in Serbia, we mentioned significant tax incentives for foreigners.
In this article, we will focus on the package of incentives for the employment of foreigners and let you know how you can make the most of this opportunity.
Namely, in June of last year, the Government of Serbia adopted the Decree on the Criteria for Granting Incentives to Employers who employ Newly Settled Individuals in the Republic of Serbia (hereinafter: the “Decree”).
What kind of tax incentives are we talking about?
If employers and employees fulfill conditions prescribed in the Decree, incentives are paid in the amount of:
- 70% of calculated and paid payroll tax for one or more newly settled persons, and
- 100% of calculated and paid contributions for mandatory pension and disability insurance, for payments made for newly settled persons.
Tax incentives are paid in a maximum period of 60 months, starting from July 1st, 2022, and ending on December 31st, 2028.
Who is considered a newly settled person?
A newly settled person is a person who fulfills the following criteria:
- They have not resided in the territory of the Republic of Serbia for more than 180 days in the 24 months preceding the day of concluding an employment agreement,
- They concluded an employment agreement with a qualified employer for an indefinite period of time with full working hours, and
- They have a monthly salary of at least RSD 300,000.00 (approx. EUR 2,500).
To receive the tax incentives, a newly settled person must be continuously employed by the employer in the period between the day of application and 31st December of the year in which the application is submitted.
Does the employer have to meet any criteria?
Employers who can exercise the right to these tax incentives are domestic or foreign natural persons and legal entities, entrepreneurs registered to perform business activities in Serbia, as well as branches and representative offices of foreign employers that are registered to perform business activities in Serbia.
The tax incentives are available only to employers whose number of full-time employees on the day of submission of the application for tax incentives is the same or above the number of full-time employees on the day of entry into force of the Decree increased by the number of employed newly settled persons for whom the employer submits an application.
Additionally, an employer will not be entitled to these incentives if it:
- pays dividends, i.e. realized profits, in the period from the submission of the first application, and ending with the end of the calendar year in which it receives the last incentive payment (except for dividends or profits that are paid out of a portion of the profit that is higher than the amount received as an incentive),
- is a beneficiary of state aid in connection with which an employer has an obligation to employ (except for taxpayers who have already fulfilled that obligation by July 1st, 2022), or
- is already using the right to reduce the tax base in accordance with the Law on Income Tax.
In case of an employer breaches the prescribed conditions, it won’t be entitled to the incentives and it will be obliged to return the funds.
To whom and when should the application be submitted?
The deadline for submission is between 15 and 30 September. Each application is submitted for payments in the period preceding the submission of the application, a maximum of 12 months.
The application, alongside a number of additional documents, is submitted to the Ministry of Economy which should decide on it within 120 days.
P.S. Keep in mind that a foreign employee must obtain a temporary residence permit, as well as a work permit in order to be legally employed in Serbia. Check out this article for more information: Want to Relocate to Serbia? Become a Resident in Just 3 steps!