Navigating Personal Taxes: A Guide to Understanding Taxation in Serbia

Do you think you could live comfortably in a European country with a nice climate and comparatively low costs of living? If you doubt that it is possible, we invite you to consider Serbia. Serbia is not an EU member state yet but it is planning to join the Union soon. Besides, the quality of life in Serbia already comes up to the European standards.

The Serbian authorities make it easy to relocate to the country and acquire legal residence there. Naturally, if you are thinking of moving to a foreign country, you want to know how heavily you are going to be taxed there. We give brief information about personal taxes in Serbia below. You will see that taxes are quite bearable in the country. At least, they are considerably lower in comparison to the taxes in most neighboring countries.

Acquiring tax residence in Serbia

A foreign national becomes a tax resident of Serbia if any of the conditions below is satisfied:

  • The person has spent at least 183 days in Serbia within a calendar year;
  • The center of the person’s vital interests is located in Serbia.

Any of the following circumstances counts as ‘having the center of vital interests’ in Serbia:

  1. The person has purchased real property in Serbia;
  2. The person’s family lives in Serbia;
  3. The person’s children go to school in Serbia.

In addition, it is also possible to acquire tax residence in Serbia via registering a company there.

Residents of Serbia are taxed on their global income while non-residents are taxed only on the income made in Serbia.

Taxes for salaried personnel in Serbia

Non-residents pay a personal income tax only if they work for a Serbian company. However, taxes may be due in their country of legal residence. (For example, a non-resident freelancer may be working in Serbia while remaining a tax resident of his/ her home country.) If non-residents work for a foreign company, they might have to pay taxes in their home country as well as the country of the company’s registration.

Residents of Serbia have to pay a personal income tax even if they work for a foreign company. If this is the case, they might also have to pay taxes in the country where the company is registered.

The minimum tax rate is 10% and the first 21,712 Serbian dinars of income is tax-free.

A progressive income tax rate is applied in Serbia. You pay 10% if your income does not exceed the amount of three average annual salaries. When it does, you have to pay an additional 10% until your income does not exceed the amount of six average annual salaries. Thus, the total income tax on that amount is going to be 20%. If you make more than six average salaries, the tax rate goes up to 15%.

Please note that it’s the tax payer’s responsibility to pay the extra taxes. They are not deducted automatically from your salary.

Tax rates for residents and non-residents of Serbia

Social security contributions are made up of two parts: 1) the amount withheld by the employer from the employee’s wages, and 2) the amount paid by the employer out of his/ her own funds.

Tax rates for the employee:

  • Pension and disability insurance – 14%;
  • Medical insurance – 5.15%;
  • Unemployment insurance – 0.75%.

Tax rates for the employer:

  • Pension and disability insurance­ – 11%;
  • Medical insurance ­– 5.15%.

In total, the social security contributions amount to 36.05% in Serbia.

Minimum tax base for social security contributions is 35% and maximum tax base is five times the amount of the average monthly wage. This means that you have to pay nothing in social taxes on the outstanding amount if you make more than that.

Taxes for freelancers in Serbia

Freelancers pay taxes at the same rates in Serbia and salaried workers do.

Non-resident freelancers pay a personal income tax only if they work for a Serbian employer. However, they may be taxed in their home countries. If a non-resident freelancer works for a foreign employer, he/ she may have to pay additional taxes in the country of the employer’s tax residence.

Resident freelancers pay an income tax in Serbia regardless of who they work for – a Serbian or a foreign employer. If they work for a foreign employer, they may have to pay additional taxes in the country of the employer’s tax residence.

Freelancers pay the social security taxes at the following rates in Serbia:

  • Pension and disability insurance­ – ­­25.5%;
  • Medical insurance – 10.3%;
  • Unemployment insurance – 0.75%.

Taxes for foreign company owners in Serbia

If you own a company in Serbia, your annual income is from three to six average wages, and you are below 40 years of age, you may qualify for a 10% tax deduction. That is to say, you won’t have to pay an additional 10% on that amount and thus the overall tax rate is going to be 10% for you instead of 20%.

If you launch an innovative startup and work for the company yourself, part of your annual income (around 15,000 euros) can become tax exempt for 3 years. You will have to pay neither the personal income tax nor the social security taxes.

Similar opportunities are available to highly-qualified specialists who have started working in Serbia: they can pay taxes at reduced rates for five years. In particular, if their wages exceed three times the amount of the average wage, 70% of their income can be tax-free during the period. Employers benefit directly from the tax reduction and employees benefit indirectly as the employer can pay them a bit more.

Property taxes in Serbia

Both resident and non-resident owners of Serbian property pay the property tax at the rate of 0.4% of its cadastral value.

If you rent your property out, you have to pay a tax of 20% of your rental income. You can deduct 25% of your income from the tax base writing it down as property maintenance costs.

If you sell your property (including real estate, company ownership shares, and intellectual property), you are taxed at 15% in Serbia. If you sell real estate that has been in your possession for 10 years or more, the sale is tax-exempt.

Other personal taxes in Serbia

Gift tax is not charged if the gift has been made by the spouse, a parent, or a child. If the gift is made by a sibling or a grandparent, the tax rate is 1.5%. In all other cases, the gift tax rate is 2.5%.

Finally, dividends, interests, and royalties are taxed in Serbia at 15% to 20%. Reducing the tax rates is legally possible in certain cases.

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