New Tax Incentives in Serbia

A few major changes concerning salary tax and mandatory social security contributions will come into effect in the following two months.

From 1 August 2014 the new rate for mandatory pension and disability insurance contributions will be increased from 24% to 26%, while the mandatory health insurance contributions will be reduced from 12.3% to 10.3%.

For certain new employees, in the period from 1 July 2014 until 30 June 2016, employers will be able to either reclaim a part of the salary tax and mandatory social security contributions payments (within 15 days from the reclaim request) or use it as tax credit.

The incentives will apply only to new employees that have been registered with the National Employment Service for a minimum of six months (three months for trainees) and have not been previously employed either by the employer or by another party considered to be or have been the employer’s related party as defined by the Serbian transfer pricing rules.

The exact amount of the refund depends on the number of new employees compared to the number of the existing employees on 31 March 2014: 65% refund for one to nine new employees, 70% refund for ten to ninety-nine new employees and 75% refund for one hundred or more new employees.

Companies entitled to any previously applicable employment related incentive that has been abolished by the recent changes will still be able to use them in accordance with the old law.