Law on Amendments to the Law on Contributions for Compulsory Social Insurance
The Law on Amendments to the Law on Contributions for Compulsory Social Insurance (“Official Gazette of the RS”, No. 118/2021 – hereinafter: the Law) entered into force on the eighth day from the day of its publication in the “Official Gazette of the RS”, i.e., 17. December 2021, and shall apply from 1 January 2022, except for the provisions of Article 7 of the Law which shall apply from 1 March 2022.
Namely, with this Law, the legislator introduces changes in relation to the rates at which contributions are calculated and paid, i.e., reduces the rate for mandatory pension and disability insurance from 25.5% to 25%.
The Law further removes the provision that conditions the use of the right to exemption from the payment of contributions prescribed by the provisions of Art. 45d of the Law, which refers to the employer by prescribing that the employer must be established in the period ending on December 31, 2021, in order to be entitled to use the said exemption from this article.
In addition, the provisions of the following Article 45d stipulate that an employer who had a maximum of 30 employees on 31 December 2020 and who at any time in the period from 1 January 2020 to 31 December 2021 concluded, that is, from January 1, 2022 to December 31, 2025, concludes an employment contract with a qualified new employee in accordance with the law governing employment and who registers that person for compulsory social insurance in the Central Register of Compulsory Social Insurance, is released from obligations to pay contributions for mandatory pension and disability insurance at the expense of the employee and at the expense of the employer, for the salary of that person paid as of December 31, 2025. Furthermore, in accordance with the legal provisions, the employer in accordance with this article cannot be exempted from paying contributions for mandatory pension and disability insurance on the basis of salary paid in the period from January 1, 2023 to December 31, 2025 for a qualified new employee from paragraph 5 and 6 of this Article, with whom the employer concluded an employment contract after June 30, 2021, and who had been at any time after January 1, 2020 previously employed with employer who according to the regular annual financial report for 2020, had an average of more than 30 employees.
Prior to that, by legal provisions of the same article, it is further expanded the notion of a newly qualified person by introducing that now a qualified new employee considers a person who in the period from January 1, 2019 to December 31, 2021 did not have the status of an insured employee, i.e. an insured person of independent activities, who is founder or member of company, who is in employment relation with company of which he is the founder or member, and who in that period had the status of insured of independent activities as an entrepreneur, if the status of insured employee, or insured of independent activities who is the founder or a member of a company who is in employment relation with company of which he is founder or member, acquires in the period from 1 January 2022 to 30 April 2022 by establishing an employment relationship with the employer referred to in paragraph 3 of this Article or with another employer who had a maximum of 30 employees as of December 31, 2020
The exemption from this article stipulates that an employer who starts performing activities after December 31, 2021, can also exercise it if he has no related legal entities in the period of using the exemption in the sense of the law governing corporate income tax. The law further prescribes cases when the mentioned right to release is lost, as follows:
- In the event that the employer reduces the number of employees in relation to 31 December 2019, the termination of employment of a person who is not considered a qualified new employee in relation to 31 December 2019,
- If the employer at any time would have related persons during the period of using the tax exemption.
In addition, the Law anticipates the exemption from the obligation to pay contributions for mandatory pension and disability insurance on salaries paid in a certain period in accordance with the Law in the rates of 85%, 75%, 65%, 55%.
The law additionally specifies the notion of qualified new employee, therefore the said new employee is not considered a person who in the period from January 1, 2019, to April 30, 2022 had the status of beneficiary of old-age, early old-age or disability pension.
Besides that, the Law introduces a new Article 45ž by which it is provided 100% tax exemption from the obligations to pay contributions for mandatory pension and disability insurance at the expense of the employee and the employer, for the salary of the newly employed person, paid as of December 31, 2024.
With the same article, the legislator defines the term newly employed person and stipulates that a newly employed person from this article of the Law is considered a person who in the period from January 1, 2019 to February 28, 2022 did not have the status of employee insured, self-employed insured as an entrepreneur, i.e. the insured of independent activities who is the founder or member of the company who is in the employment relation with the company whose founder or member he is, and who acquires the status of the insured employee, i.e. the status of the insured of independent activities who is the founder or member of the company who is in employment relationship with a company of which he is founder or member, acquired in the period from March 1, 2022 to December 31, 2022 by establishing an employment relationship with the employer referred to in paragraph 1 of this Article or with another employer and earning a monthly salary of more than 76,500 dinars. Then it further prescribes that the contributions for mandatory pension and disability insurance for a newly employed person, for whom the right to exemption from paying contributions is exercised, are paid from the budget of the Republic, and for the purpose of exercising pension and disability insurance, they are considered paid at the moment of maturity.
In addition to the mentioned, it is introduced that the employer is not entitled to use the exemption for the person in question in case that the employer uses any type of incentive for that particular person which are regulated by relevant provisions of law, including benefits that, within the programs and measures of active employment policy, are paid by the National Employment Service in accordance with the law governing employment and unemployment insurance, except when using the exemption in accordance with the provision of the law governing personal income tax relating to the same type of relief.
Furthermore, the relevant provisions of the Law prescribe a new exemption for employers, namely employers who perform research and development within the scope of their activities in the territory of the Republic, so that they are exempted from paying 70% of calculated and suspended from the salary of persons who are directly engaged in research and development, in proportion to the time that such persons spend on research and development in relation to full-time work. However, the employer is not entitled to the aforementioned tax exemption when he uses any type of incentive for a certain person, which is regulated by the relevant law, except when he uses the exemption in accordance with the provision of the law governing contributions for compulsory social insurance related to the same type of relief. This restriction on the right to use incentives pursuant to the provisions of this Article of the Law does not apply to an employer who exercises the right to double recognition of costs directly related to research and development in accordance with the law governing corporate income tax.
