Tax exemption for new businesses

Law on Personal Income Tax (Serbian)

Law on Mandatory Social Insurance Contributions (Serbian)

Analysis of tax and non-tax burden for new businesses

The amendments to the Law on Personal Income Tax and Law on Contributions for Mandatory Social Insurance, adopted in December last year, launched the exemption from labor taxes and contributions for new businesses starting from 1 October 2018, and these businesses will be exempted from paying these liabilities during their first year of work. The right to this exemption is provided during a period of 12 months from the date of registration of a company or entrepreneur.

The tax exemption measure can be used by businesses or entrepreneur operating in the personal salary regime, with a maximum of 9 employees, if they fulfill one of the following criteria:

  • They completed education (high school, college or faculty) during a period of 12 months prior to establishing a business.
  • They have been registered in the National Employment Service for at least six months

The additional condition is that the total earnings of each employee in the tax exemption regime must not exceed the amount of triple average annual salary in Serbia.

The tax exemption measure can only be used once, which means that, if a person had previously used this right as an entrepreneur, they cannot use it again as a founder of a new business, or as an employee.

The beneficiaries are entitled to healthcare insurance and other labor-related rights, except the pension and disability insurance which can be paid on a voluntary basis in line with the valid regulations.

The tax exemption measure for new businesses was adopted by the Government and Parliament based on a proposal made by NALED, in line with the Analysis of tax and non-tax burden to new businesses, conducted by NALED in 2017 in cooperation with the Faculty of Political Sciences and with the support of German Development Cooperation through GIZ Public Finance Reform project. The analysis showed that the savings for entrepreneurs operating in personal salary regime will reach up to 250,000 RSD a year.

By introducing incentives for new businesses the Government adopted one of the most important measures of the National Program for Countering Shadow Economy.