The Government of Serbia has adopted a new regulation on incentives for employers related to new subsidies for the employment of foreigners in Serbia, which are also valid in 2024.
An employer who wants to hire foreign workers has not used or does not use other facilities for the employment of newly settled persons (foreigners and returnees from the diaspora). These tax benefits for employment represent a completely new subsidy for hiring foreign workers.
Domestic as well as foreign employers who have a company in Serbia are entitled to these benefits for foreigners. One of the conditions for a newly employed foreign worker is the amount of their salary. His basic monthly salary must be more than 300,000 dinars. Employers can exercise the right to grant incentives to those workers with whom the employment relationship was concluded as of December 31, 2024.
The incentives are in accordance with the new Regulation on the criteria for granting incentives to employers who hire newly settled persons in the Republic of Serbia. The regulation entered into force on June 18, 2022, and it defines all the conditions both for newly settled persons and for employers who want to use these benefits for hiring new workers.
1. Incentives for the employment of foreigners and newly settled persons
Incentives that employers can achieve relate to a reduction in payroll taxes, as well as contributions to PIO. They cover (pay for):
- 70% of the calculated and paid salary tax for one or more newly hired, newly settled persons,
- 100% of calculated and paid contributions for mandatory pension and disability insurance (PIO).
Incentives are paid for the payments made to the newly settled employee within a maximum period of 60 months, starting on July 1, 2022, and ending on December 31, 2029.
2. Which employers can claim the right to new subsidies for hiring foreigners?
Employers who can exercise the right to new benefits and subsidies for the employment of foreigners, i.e., newly settled persons, are:
- domestic natural persons,
- foreign natural persons,
- legal entities,
- entrepreneurs registered to carry out activities in Serbia,
- branches of foreign companies,
- representative offices of foreign employers that are registered to perform activities in Serbia.
3. A newly settled persons who can use new incentives
Newly settled person is a profile of a worker, i.e., a natural person for whom there is a need that cannot be easily met on the domestic labor market. This criterion must be met.
Additional conditions for foreign workers for which employers can exercise the right to new subsidies:
- that they did not stay in Serbia for more than 180 days in the period of 24 months before the day of concluding the employment contract with the employer;
- that the employee is a natural person with whom the employer has concluded a full-time permanent employment contract;
- that the employed person earns a monthly salary of at least 300,000 dinars in the gross amount.
In addition to foreigners, newly settled persons also include returnees from abroad, as well as persons who received education or professional training outside the borders of the Republic of Serbia. Also, they can be employed persons who meet the stated conditions and who have been continuously employed by the employer in the period between the date of submission of the application and December 31 of the year in which the application was submitted.
4. Who is not entitled to new subsidies for the employment of foreigners?
Not all employers have the right to use it, as do not all employees who are considered newly settled taxpayers. More details follow below.
Employers are not entitled to incentives:
- if they pay dividends or realized profits in the period from the submission of the first application for the award of incentives and ending with the end of the calendar year in which they receive the last payment for those incentives;
- if they are beneficiaries of state aid and have an obligation to hire new workers (except for taxpayers who have fulfilled this obligation as of July 1, 2022);
- if they use benefits for the reduction of the tax base and contribution to wages by 70% for an employed, newly settled person, or if they use them (benefits for returnees from the diaspora).
Employed newly settled persons who are not entitled to new incentives, i.e., subsidies:
- workers with whom the employer concluded a labor contract for a fixed period of time;
- workers who have established a part-time employment relationship with the employer.
5.1. Requirement for employers – the number of employees as an incentive criterion for foreigners
An employer who is entitled to incentives must meet an important criterion. It is about the number of employed workers for an indefinite period of time, and that number must be the same or higher on the day of application in relation to the number of employees on the date when the regulation entered into force.
That is, the new incentives for foreigners are realized by an employer whose number of permanent full-time employees on the date of application submission is the same or greater than the number of permanent full-time employees on June 18, 2022, only increased by the number of persons for whom an application is submitted. That is the date of entry into force of the Regulation.
The clarified criterion refers to already registered entrepreneurs (registered before June 18, 2022).
On the other hand, there are also employers who were registered after this date. In that case, for employers registered after June 18, 2022, it is considered that they did not employ full-time permanent workers on the date of entry into force of the Regulation.
5.2. The number of workers for whom the new subsidy for foreign workers can be obtained
As for the number of workers for whom the subsidy for foreign workers can be obtained, the right to the award is exercised at most for the number of employed newly settled persons (together with the number of employed persons for an indefinite period with full-time work who are not newly settled taxpayers on the date of submission of the application), which is greater than the number of permanent full-time employees on June 18, 2022.
5.3. Additional conditions for granting incentives
- An employed, newly settled person can exercise the right to an incentive if he is continuously employed by the employer in the period between the date of submission of the application and 31.12. year in which the application was submitted.
- The employer can obtain new subsidies for the employment of foreigners only for newly settled persons employed by December 31, 2024 (employment for an indefinite period and with a full pool of working hours).
- For applications whose submission starts in 2024, the right to subsidies for foreign workers can be exercised by the employer if the following condition is met – if in the period after 12.31.2023, and finishing with the end of the year in which incentives were last paid to that employee, the total number of permanent full-time employees was not reduced.
6.1. Submitting an application for the award of new incentives for foreign workers
The application for the award of incentives contains prescribed information, whether the employer is a natural or legal person. Other details for submitting an application:
- Applications for payment of individual salaries can be submitted only once;
- It is submitted on the prescribed form and must contain all business data;
- The employer submits the application for newly employed, newly settled persons once a year (a total of nine times for the period July 1, 2022-December 31, 2029);
- The application is submitted between September 15 and September 30;
- Each application is submitted for wages paid in the period preceding the submission of the application, a maximum of 12 months;
- The application is submitted for each employed, newly settled person.
An employer who submits an application for each newly hired employee additionally attaches:
- name, surname, JMBG, or registration number for foreigners;
- calculation showing 70% of the calculated and paid salary tax and 100% of the calculated and paid contributions for PIO (for wages paid in the period to which the application relates);
- the report of the authorized auditor confirming the accuracy of the calculation;
- a written statement by which the employed foreign worker confirms that in the period of 24 months prior to the conclusion of the employment contract with the employer he did not stay in Serbia for more than 180 days (statement in the Serbian language or in the language of the employee with a translation into Serbian; submitted only when applying for the first assignment incentives).
6.2. Method of payment of incentives for foreign workers
The method of payment of funds to employers is carried out as follows:
- The Ministry of Economy creates and submits lists of employers who have exercised the right to incentives, within 120 days of the deadline for submitting applications;
- the funds are transferred to the Treasury Administration to a special dedicated account within 30 days of the deadline for submitting the application (not before the end of the year in which applications are submitted);
- The Treasury Administration transfers funds to employers to special dedicated accounts, which are opened for these purposes, within 45 days at the latest;
- After the payment, the Treasury Administration submits a notification to the Ministry of Economy confirming the payment.
6.3. Loss of right to subsidies for foreign workers
Employers who receive new incentives for foreign workers may lose the right to use them. These are the following cases:
- if a dividend or realized profit is paid (in the period from the submission of the first application and ending with the end of the calendar year in which he received the last incentive payment);
- if for employed newly settled persons for whom he receives incentives, he uses the right to relief for the reduction of the base for newly settled persons (70% wage tax and 70% PIO contributions);
- if, in the period after December 31, 2024, the number of full-time employees is reduced.
An employer who loses the right to use incentives has the obligation to return the funds received, that is, the full amount of incentives received based on applications for employed workers. Default interest is also included, which is calculated starting from the day the incentive was paid. Funds are returned together with default interest to a dedicated account with the Treasury Administration within 5 days from the date of loss of rights.
The accounting agency HLB T&M Consulting provides all information related to the employment of foreigners in Serbia, professional help with payroll salary calculations, as well as support with submitting applications when applying for tax incentives. Contact us.
