Law on Amendments to the Law on Personal Income Tax
The Law on Amendments to the Law on Personal Income Tax (“Official Gazette of RS”, No. 118/2021) enters into force on the eighth day from the day of its publication in the “Official Gazette of RS”, i.e. on December 17, 2021, and it shall apply from January 1, 2022, except for the provisions of Article 7 of this Law, which shall apply from March 1, 2022.
The reasons for passing this law are the need to simplify the procedure for determining the tax liability for taxpayers who earn income from work on which tax is paid by self-taxation, as well as reducing the cost of administering the tax on that basis, all in order to combat the gray economy.
Namely, the Law stipulates Art. 9 overlooks the tax exemption from personal income tax and benefits that, in accordance with the law governing dual education, as material and financial security of students, receive students who perform learning through work.
Also, the legislator introduced changes in the provisions of Article 15a of this Law, which increased the amount of non-taxable amount of salary by providing the amount of 19.300,00 RSD per month for each person working full time instead of 18.300,00 RSD as prescribed by the old law.
The law further provides for the right of an employer who hires a new person to claim a refund of paid income tax for a newly hired person, paid as of December 31, 2022 instead of 2021. In addition, if, in accordance with the provisions of Article 21d of the Law, an employment relationship is established with two new persons, the employer will be entitled to 75% of the paid income tax for the newly employed person paid in the previously mentioned period.
In addition, the provisions of Article 5 of the Law provide for the right of employers – newly established companies that perform innovative activities to exercise the right to exemption from payment of calculated and suspended taxes from the salaries of founders employed in the newly established company, whereby the Legislator this time omitted the condition for exercising this right, which refers to the period of establishment of employers. By deleting the mentioned provision, Article 5 states that the right to use the exemption will now be able to be used by employers regardless of the moment of founding the company.
In addition, the legislator introduces an extension of the period of tax exemption based on the salary paid as of December 31, 2025 for newly qualified persons by the end of 2025, if the employer had a maximum of 30 employees on 31 December 2020, and in any period from January 1, 2020 to December 31, 2021, he concluded from January 1, 2022 to December 31, 2025 conclude an employment contract with a qualified newly employed person in accordance with the law governing labor relations and who registers that person for compulsory social insurance in the Central Register of Compulsory Social Insurance. However, the employer referred to in the aforementioned article cannot exercise tax exemption on the basis of wages paid in the period from January 1, 2023 to December 31, 2025 for a qualified new employee with whom he concluded an employment contract after June 30, 2021, and who was previously employed at any time after January 1, 2020 by an employer who, according to the regular annual financial report for 2020, had an average of more than 30 employees. Pursuant to the provisions of the Law, the mentioned tax exemption can also be realized by an employer who starts performing activities after December 31, 2021, if during the period of using the exemption there are no related legal entities in terms of the law regulating corporate income tax.
Tax exemption acquired by the employer in accordance with the provisions of this Law may be lost if at any time in the aforementioned period he has related parties and starting from that moment for the next period, the employer loses the right to tax exemption, as well as if during the use of the tax exemption the employer reduces the number of employees compared to December 31, 2019, by termination of employment of a person who is not considered a qualified new employee, also loses the right to use the tax exemption for the number of qualified new employees by the number of employees reduced compared to 31 December, 2019, where, in the case when the tax exemption is realized for more qualified new employees, he first loses the exemption for the qualified new employee with whom he previously established an employment relationship.
In this regard, the Law stipulates that the employer is released from the obligation to pay calculated and suspended income tax, as follows:
- 60% tax – for salaries paid in the period from January 1, 2022 to December 31, 2022;
- 50% tax – for salaries paid in the period from January 1, 2023 to December 31, 2023;
- 40% tax – for salaries paid in the period from January 1, 2024 to December 31, 2024;
- 30% tax – for salaries paid in the period from January 1, 2025 to December 31, 2025.
The legal provisions of this Law introduce two new articles which regulate new benefits for employment, whereby Article 21z stipulates that the employer who establishes an employment relationship with a newly employed person, releases the obligation to pay 70% of the calculated and suspended tax from the salary of the newly employed person, for the salary paid as of December 31, 2024. Furthermore, the provisions of the following Article 21i introduce benefits for the employer who, within the scope of his activity in the territory of the Republic, conducts research and development, so that 70% of the calculated and suspended tax from the salary of persons who are directly engaged in research and development, is released, in proportion to the time that such persons spend on research and development in relation to full-time work.
In the section that regulates the capital gains tax, an additional specification of the term – second transfer is introduced, which now implies any entry of a non-monetary contribution into a legal entity.
The legislator further introduces that capital gains or losses in the sense of this law are not considered differences arising from the transfer of rights, shares or securities, among other things, and when the status change is a change of shares, that is, the shares that the obligor has in the transferring company, exclusively for shares, i.e. shares in the acquiring company in accordance with the law governing companies.
In the following, in accordance with the provisions of Article 74 of the Law, it is additionally prescribed that the purchase price of shares, i.e. shares acquired in the status change in accordance with legal provisions, is equal to the purchase price of shares, that is, shares in the transferring company, which are exchanged for acquired shares, i.e. shares in the acquiring company. Furthermore, it is stated that the purchase price of shares or stakes acquired on the basis of transfer of property rights to which the tax exemption referred to in Article 79b of this Law is considered is the market value of these rights determined by authorized appraiser for the purposes of their entry as a non-monetary contribution to the capital of a company resident in the Republic.
The newly added Article 79b of the Law envisages a new tax exemption – exemption from capital gains tax – in case of entry of copyright and related rights and industrial property rights into the capital of a company by entering it in full into a non-monetary contribution to the capital of a RS resident company.
In addition, a reduction in annual taxable income is introduced for taxpayers under the age of 40, in such a way that taxpayers who are less than 40 years of age on the last day of the calendar year for which the annual personal income tax is determined, the annual sum of salaries taxable income from self-employment and taxable income from copyright and related rights and industrial property rights is further reduced by the amount of three average annual salaries per employee paid in the Republic of Serbia in the year for which the tax is determined.
Another novelty specified by the Law refers to the filing of a tax return for a taxpayer who transfers digital assets during the year on the basis of which a capital gain or loss may arise in accordance with this Law, and in accordance with the provisions of this Law the taxpayer is obliged to file a tax return application no later than 120 days from the end of the quarter in which the income was generated from the transfer of digital assets.
