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Profit tax in Serbia – all you need to know about it

Jun 04, 2018

HBL > Tax > Profit tax in Serbia – all you need to know about it

Profit or income tax is an additional tax on earnings or some profitable income. It is delivered no later than May 15 of the current year, for the realized earnings from the previous year. This tax is not mandatory for all persons who receive income. It is mandatory only for persons whose earnings exceed a certain non-taxable amount and is paid over that amount.


Non-taxable amount


For the year 2018, the non-taxable amount is 2,375,136 dinars and is equal to triple the amount of the average annual salary per employee, which was paid in the Republic of Serbia in 2017. For amounts exceeding the limit, income is then taxed.

By definition, non-taxable income is triple the amount of average annual earnings per employee, paid in the Republic of Serbia. According to the data of the Republic Institute for Statistics, the average annual salary per employee in the Republic of Serbia, paid in 2017, is 791,712 dinars. Based on this, the non-taxable amount for 2017 is 2,375,136 dinars.

Taxpayers qualify for the personal income tax only when they earn income threefold higher than the average monthly salary of an employee in the current year. It takes into account the citizen’s salary, paid in the Republic of Serbia in the year for which the tax is determined. The main condition is that in the course of a calendar year, the income is greater than the triple amount of average annual earnings.


Who pays the income tax for citizens?


Annual tax on the income of citizens is paid by the following qualified taxpayers:

  • Citizens who have earned income greater than the non-taxable amount,
  • Residents, for income, realized in the Republic of Serbia and abroad,
  • Non-residents, for income, realized in the Republic of Serbia.

Residents are persons who reside in Serbia, as well as persons who perform their business activities within the territory of the Republic of Serbia. Residents are also persons who reside in our country for 183 days or more, for a period of 12 months.

Individuals who are going to work abroad become residents, but only if they fulfill certain conditions, in accordance with the Law. Otherwise, they do not become residents. Individuals who go abroad to work in a diplomatic or consular mission are residents.
A non-resident is an individual who earns income in the Republic of Serbia but does not fulfill the conditions for becoming a resident. He is obliged to file a tax return and pay a personal income tax.


Revenues that needs to be taxable


Income that is taxable and whose total annual sum represents the total annual income are:

  • wages,
  • taxable income from independent activity (profit of entrepreneur),
  • the base for lump-sum taxation (only according to the Tax Administration’s decision),
  • taxable income from the copyright and related rights, as well as industrial property rights,
  • taxable income from the issue of movables,
  • taxable income from issuing real estate,
  • taxable income of athletes and sports professionals,
  • all other income, from Article 85 of the Law.

Consult your authorized bookkeeper about all the details and concerns about taxable income and tax.


Taxable income


Taxable income is the difference between the total annual collection of taxable income, deducted for taxes and contributions on the account of the income recipient, and the non-taxable amount. This means that total earnings are reduced by paid taxes and contributions, from which the non-taxable amount is deducted.


Taxation base


The tax base for the personal income tax can be reduced through individual deductions. That is, in fact, the difference between taxable income and deductions. Deductions to which a taxpayer is entitled may also be personal and deductions for dependent family members. Those are:

  • for the taxpayer, the deduction is 40%, from the average annual salary per employee,
  • for a dependent family member, the deduction is 15% of the average annual earnings per employee.

It is important to note that with deductions of family members there are some restrictions:

  • the total deduction may not exceed 50% of the taxable income,
  • if two or more family members are subject to annual income tax, the right to deduct can be realized only for one taxpayer.

If two or more family members are taxpayers of annual income tax, only one taxpayer, or a member of the family who is supported, can deduct a deduction on this basis. Supported family members are persons who are supported by the taxpayer and they make the family community. Those are:

  • underage children or adopted children,
  • children or adopted children in full-time education or during unemployment (if they live with a taxpayer living in a household)
  • grandchildren (if their parents do not support them and if they live with a taxpayer in the household),
  • a spouse,
  • parents or adoptive parents.


Taxation rate


There are two rates of annual income tax, which are 10% and 15%. Up to the amount of 4,750,272 dinars tax is paid 10%, and over that amount, 15% is paid. This means the following:

  • if the taxpayer realizes a taxable income of up to six average annual salaries, he will pay the tax at a rate of 10% – up to 4,750,272 dinars,
  • If the taxpayer has income exceeding six average annual salaries, the rate of 15% will apply. In this case, the tax is paid in such a way that up to the amount of 4,750,272 dinars (six average annual salaries), a tax rate of 10% is applied, and 15% is paid for the amount greater than this.


Responsibilities and penalties


If the Tax Administration fails to file a tax return for income tax, penalties may be monetary or result in imprisonment. The taxpayers can be punished if they fail to submit the application and pay taxes within the legal deadline, but also if they commit other offenses:

  • do not submit an application,
  • do not submit an application at all,
  • if you submit an unsigned application,
  • if the tax return is filled in with incorrect data, and the document is not corrected before the deadline,
  • if they submit an application without the necessary supporting documentation and evidence, which are relevant to the determination of the tax.


Deadline for submitting tax application


Annual tax on citizens’ income shall be reported to the competent Tax Administration, at the place of business and performance of the activity, no later than May 15 of the current year. The tax return is applied and submitted electronically or in paper form, on the prescribed tax return PPDG-2R. If submitted electronically, the taxpayer must have an electronic signature. If the tax return is completed in paper form, it must be signed. The tax return must be submitted to the Tax Administration personally, but the taxpayer may also authorize a tax proxy.