Serbia Personal Income Tax

Residents are subject to tax in Serbia on their world­wide income. Nonresidents are subject to tax on Serbian-source income only.

Individuals are considered to be resident for tax purposes if they have a domicile, residence or center of business and life interests in Serbia or if they spend more than 183 days within a 12-month period, which begins or ends in the tax year (that is, the calendar year). In addition, Serbian individuals seconded abroad by a resi­dent employer or an international organization to operate in the name of the employer are also considered resident.

Income subject to tax. Tax is levied on the types of income de­scribed below.

Employment income. Salary tax is payable at a rate of 10% on income from permanent or temporary employment, benefits re ceived in money and in kind, paid leave and other employment remuneration that exceeds a prescribed level.

Self-employment income. Tax is levied on the net earnings of self-employed individuals at a rate of 10%. For this purpose, taxable income is accounting profit adjusted in accordance with the tax regulations. The tax authorities may grant certain self-employed individuals the right to not maintain books; lump sum tax is lev­ied on these individuals.

Investment income. Tax is imposed at a rate of 15% on the follow­ing types of investment income:

  • Interest
  • Dividends and participation in profits
  • Income derived from investment units

Interest derived from government bonds and deposits and savings in local currency is exempt from tax under the personal income tax law.

Income from property leasing and subleasing is taxed at a rate of 20%. A standard deduction of 25% may be claimed with respect to this leasing income. Under an exception, a 50% deduction is allowed for income received from the leasing of apartments, rooms and beds in the tourist industry.

Withholding tax is imposed at a rate of 20% on royalties from copyrights, rights related to copyrights and industrial property rights. Deductions from royalty income may vary between 34%, 43% and 50% of the total royalty income, depending on the source of income. Actual expenses incurred by an author or inter­preter are deductible if they are properly documented.

Directors’ fees. Fees received by members of a board of directors or supervisory board of a legal entity are taxed at a rate of 20%. A standard deduction of 20% may be claimed with respect to such income.

Other income. Income from insurance, reduced by paid premi­ums, is taxed at a rate of 15%.

Other types of income, including winnings from games of chance, are subject to tax at a rate of 20%. Certain standard deductions are allowed with respect to such income.

Capital gains and losses. Capital gains derived from the sale of real estate, industrial property rights and securities are subject to tax at a rate of 15%. Capital losses incurred in a calendar year may offset capital gains derived in that year or in the following five years.

Annual personal deductions. Taxpayers may claim a personal deduction in the amount of 40% of the average annual salary per employee paid in Serbia in the year for which the tax is assessed. In addition, individuals may claim a deduction in the amount of 15% of the average annual salary per employee paid in Serbia in the year for which the tax is assessed for each dependent family member. The total amount of deductions claimed may not exceed 50% of taxable income.

Annual tax rates. Annual tax in Serbia is not a reconciliation of taxes paid during a year, but rather an additional tax for individu­als whose income exceeds a prescribed threshold. Progressive income tax rates of 10% and 15% apply to the income of indi­viduals exceeding the threshold.

For Serbian tax resident and nonresident individuals (both Serbian and foreign nationals), the 10% rate applies to net income from sources specified in the tax law exceeding three times the amount of the average annual salary per employee paid in Serbia in the year for which tax is assessed, but not exceeding nine times such average annual salary in total. A 15% rate applies to income exceeding nine times the average annual salary.

The above thresholds are modified each year in accordance with the annual fluctuation of average salary in Serbia.

Relief for losses. Losses incurred in self-employment activities may be carried forward for up to five years.

Other taxes

Property tax. Residents and nonresidents are subject to property tax at rates that may not exceed the maximum rates set by the Property Law. Each municipality may determine the rates up to these maximum rates. The maximum rates range from 0.4% to 2% on real estate owned in Serbia. The rates depend on the kind of property (land or building), kind of owner (company/entrepre­neur or physical person) and, for physical persons, the value of the property. Shares and stakes in legal entities are not subject to property tax.

Inheritance and gift tax. Inheritance and gift tax is levied on the market value of property at rate of 1.5% for taxpayers who are second relations to the testator or donor and 2.5% for taxpayers who are third relations or are not related to the testator or donor. Shares and stakes inherited, or received free of charge, are not subject to inheritance and gift tax.

Transfer tax. The rate of the transfer tax is 2.5%. The tax base is the higher of the contract price or market price. Sales of shares and stakes in legal entities are exempt from transfer tax.

Social security and other contributions

Contributions. Social security tax is imposed on salaries received by individual employees. Employers and employees each pay contributions at the rates noted to the following.

  Employer Employee
Fund Rate (%) Rate (%)
Pension and Disability Fund 12 14
Health Care Fund 5.15 5.15
Unemployment Fund 0.75 0.75

Contributions to the Pension and Disability Fund at a rate of 26% and contributions to the Health Care Fund at a rate of 10.3% (for individuals without any other insurance) are payable by individu­als on income received under contracts relating to royalties, ser­vices, additional work, agency and sports, as well as under similar contracts involving the payment of remuneration for services performed.

For expatriate employees, social security contributions may also be payable on salaries received outside Serbia. Under certain bilateral conventions, expatriates may pay social security contri­butions in their country of residence only.

Rates of contributions to the chambers of commerce of the Republic of Serbia and municipalities range from 0.19% to 0.35%. These contributions are not compulsory.

Coverage. An employee who pays Serbian social security contri­butions is entitled to benefits, including health insurance for the employee and dependent family members, disability and profes­sional illness insurance, unemployment allowances, retirement and other benefits.

Totalization agreements. To prevent double taxation and to assure benefit coverage, the Republic of Serbia currently applies social security totalization agreements with the following countries.

Austria                            Egypt                          Norway

Belgium                           France                         Panama

Bosnia and                      Germany                     Poland

Herzegovina                    Hungary                     Romania*

Bulgaria                           Italy                            Slovak Republic

Canada                            Libya                          Slovenia

Croatia                             Luxembourg                Sweden

Cyprus                            Macedonia                   Switzerland

Czech Republic               Montenegro                 Turkey

Denmark                         Netherlands                  United Kingdom

* This agreement covers only the avoidance of taxation with respect to health insurance.

These agreements generally provide a 12-month exemption, which may be extended. Certain agreements provide an exemption for the full term of the individual’s assignment.

Tax filing and payment procedures

The tax year is the calendar year. Annual tax returns must be filed by 15 May of the year following the tax year. Withholding tax is levied on most types of income, including salaries. Individuals who are liable for income tax must make advance payments of income tax in monthly or, in certain cases, quarterly installments (subject to a ruling of the tax authorities).

Double tax relief and tax treaties

Although Serbia professes to honor the tax treaties concluded by the former Yugoslavia, the applicability of these treaties is in doubt in several instances. In the event of the inapplicability of a treaty, Serbian tax legislation provides for the unilateral avoid­ance of double taxation through tax credits.

The Republic of Serbia, as the legal successor of the Union of Serbia and Montenegro, applies treaties with countries that were entered into by the former Yugoslavia and the former Union of Serbia and Montenegro. Tax treaties with the following countries are being applied.

Albania                        Germany                   Pakistan*

Austria                         Greece                       Poland

Azerbaijan                    Hungary                    Qatar*

Belarus                         India                          Romania

Belgium                       Iran                           Russian Federation

Bosnia and                   Ireland*                     Slovak Republic

Herzegovina                 Italy                           Slovenia

Bulgaria                       Korea (North)           Spain

Canada                         Kuwait                      Sri Lanka

China                           Latvia                        Sweden

Croatia                         Libya*                       Switzerland

Cyprus                         Lithuania                   Tunisia

Czech Republic            Macedonia                Turkey

Denmark                      Malaysia*                 Ukraine

Egypt*                         Malta*                       United Arab

Estonia*                       Moldova                   Emirates*

Finland                         Montenegro*            United Kingdom*

France*                        Netherlands               Vietnam*

Georgia                        Norway

* These treaties cover the avoidance of double taxation on income only.

Temporary visas

Valid passports and visas are required to enter Serbia for foreign nationals of many countries. Transit visas allow foreign nationals in transit to stay in Serbia for up to five days if they register with the Republic Police Department. Foreign nationals from certain countries (for example, European Union citizens) holding valid documents and who are on vacation or visiting family may remain in the country for 90 days. Foreign nationals wishing to stay longer than three months must request a residence permit from the local Republic Police Department.

Work permits

Before applying for a work permit, a foreign national must have a temporary or permanent residence permit. Work permits are valid until the expiration of the residence permit.

Residence permits

Temporary and permanent residence permits are issued by the Republic Police Department.

To obtain a temporary residence permit, a foreign national applies to the local Republic Police Department by stating the reasons for the temporary stay and, if requested, providing documents justi­fying the reasons. The applicant must also prove that he or she has health insurance and sufficient financial means for his or her support during the stay in Serbia. A temporary residence permit is issued for one year (or until the expiration date of the holder’s passport, if sooner), and may be extended for similar periods if sufficient reasons exist.

For a permanent residence permit, a foreign national applies to the Republic Police Department enclosing evidence of sufficient financial means for his or her support in Serbia. A permanent residence permit is issued to an applicant who meets one of the following conditions:

  • The applicant has lived for at least five years continuously in Serbia, based on a temporary resident permit.
  • The applicant has been married for at least three years to a Serbian citizen or to a foreign national with a permanent resi­dence permit.
  • The applicant is a minor with a temporary residence permit, one of his or her parents is a Serbian citizen or a foreign national with a permanent residence permit, and he or she has the consent of the other parent.
  • The applicant is of Serbian origin.

Family and personal considerations

Work permits for family members. Work permits are not auto­matically granted to the family members of a foreign national who receives a work permit.

Forced heirship. Serbia’s forced heirship rules prevent the disin­heritance of the closest relatives of the decedent. The decedent’s descendants, whether biological or adopted, and spouse comprise forced heirs in the first line, who are entitled to one-half of their intestate share of the decedent’s estate. Other forced heirs are entitled to one-third of their intestate share. Forced heirs have all the rights and duties of other heirs.

Driver’s licenses. Foreign nationals may drive in Serbia with their home country driver’s licenses for six months. After this period, they must apply for Serbian driver’s licenses.