Tax incentive for new residents in Serbia

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Government of the Republic of Serbia adopted the Regulation on Criteria for Granting Incentives to the Employers who Employ Newly Inhabited Persons in the Republic of Serbia (hereinafter referred to as the “Regulation”), published in the Official Gazette of the RS no. 67/22 and entered into force on 18 June 2022.

Pursuant to the provision of the Regulation, employer who employs certain category of employees is entitled to refund of 70% of paid tax as well as to refund of 100% of paid mandatory pension and invalidity security.

To be eligible for this incentive, employer must execute full time employment agreement for indefinite period with a person who, in the last 24 months before execution of the employment agreement, has not resided in the Republic of Serbia more than 180 days. Furthermore, the incentive may be applied only if the employee has salary of RSD 300.000,00 (cca. 2.550,00 EUR) or more. It is worth mentioning that incentives may be granted for both domestic and foreign employees.

The employer is considered to be a domestic or foreign natural person i.e., a legal entity or an entrepreneur registered to perform activities in the Republic of Serbia, as well as a branch and representative office of a foreign employer registered to perform activities in the Republic of Serbia.

At the moment of application for this incentive, employer must have the same (or more) number of employees with employment agreement for indefinite period as on the date of entering into force of the Regulation. Additionally, employer may apply for incentives only for the surplus of incentive eligible employees (positive difference between the number of employees on the date of application for incentive and number of employees on the date of entering into force of the Regulation). In case employer is established after 18 June 2022, it is deemed that he had no employees at the time of entering into force of the Regulation.

The employer applies for incentives with the Ministry of Economy once a year in the period between 15 September and 30 September. Incentive period starts from 01 July 2022 and ends on 31 December 2028. This means that one employer may submit total of 8 applications for incentives. Each employer is entitled for a maximum 60 months of incentive period. When applying for incentive, application may encompass up to 12 months preceding the date of application.

Prohibition to pay dividends from the refunded tax and mandatory pension and invalidity security is introduced. In other words, employer may pay dividends only from the part of the profit that exceeds the refunded amount. Otherwise, employer loses granted incentives and must return all received benefits.

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