Incentives for employment in Serbia – ultimate guide

During year of 2024, employers have the opportunity to use employment benefits, and/or benefits when paying salaries to employees.

The following is the ultimate guide to employment benefits in after registering your company in the Republic of Serbia. We have summarized all the current employee benefits in 2024 and outlined the details for each one – which legal entities can use, what conditions must be met, in which period of time they can be exercised, in what way, in what amount and more.

1. Benefits for salaries of newly settled taxpayers

Salary benefits for newly settled taxpayers are tax reliefs related to the reduction of the tax base and contributions to salaries by 70%. They consist in reducing the base for paying tax on salaries and contributions for mandatory social insurance by 70%, after determining these bases.

1.1. Who has the right to use the tax relief for the salaries of newly settled employees?

• qualified employer;
• newly settled taxpayer

1.2. What are the conditions for using the tax relief for the salaries of newly settled employees?

• an employment agreement for an indefinite period between must be concluded between a qualified employer and a newly settled employee;
• the employment relationship is based on a job for which there is a need for a person to have a special professional education and for which there is a need that cannot be easily satisfied on the domestic labour market;
• the monthly salary for an employed newly settled taxpayer must exceed 344.082 dinars (for returnee/foreigner), i.e. greater than 229.388 dinars (young returnee);
• a foreign citizen employed by an employer is obligated to reside in the territory of the Republic of Serbia, in order to be considered a tax resident.

1.3. In what period can tax reliefs for newly settled employees be exercised?

• within a period of five years from the date of conclusion of the employment agreement, regardless of the change of employers;
• the right to a reduction of the tax base for newly settled employees is exercised starting from the first salary that was paid for the month in which evidence of the fulfilment of the conditions was obtained from the competent authority.

1.4. Who is a qualified employer?

• a resident of the Republic of Serbia,
• legal entity that, in accordance with the Law on Personal Income Tax, which governs corporate income tax, cannot be considered a related entity to the employer where the newly settled employee was previously employed;
• an employer who is a resident of the Republic of Serbia, who establishes an employment relationship with a newly settled taxpayer who, for at least three years since 1990, has fulfilled the requirements referred to in Article 7, Paragraph 2, Item 1 of the Law on Personal Income Tax (that he has a residence or a centre of business and life interests in the territory of the Republic of Serbia as a resident).

1.5. Who is a newly settled taxpayer?

• an employee who, in the period of 24 months prior to the day of establishing an employment relationship with a qualified employer, did not mainly reside in the territory of the Republic of Serbia (the condition is that he/she earns a monthly salary exceeding 344.082,00 gross 1);
• an employee who is less than 40 years old at the time of entering into an employment agreement with a qualified employer, and who, in the period of 12 months prior to establishing an employment relationship with a qualified employer, has mostly resided outside the territory of the Republic for further education or professional development (the condition for his monthly salary more than 229.388,00)
• an employee who, at the same time as establishing an employment relationship or within a reasonable time after establishing an employment relationship, settles in the territory of the Republic of Serbia (who thus fulfils the requirement to be considered a tax resident based on the centre of business and life interests in the territory of the Republic of Serbia, as well as a tax resident for the purposes of applying the agreement on the avoidance of double taxation).

We wrote about these incentives – Tax relief for returnees from abroad and foreigners.

2. Relief for employing persons with disabilities

Benefits for employing persons with disabilities are tax reliefs that refer to the exemption of the employer from the obligation to pay 100% of the tax from the salary of persons with disabilities, as well as 100% of the contribution for mandatory social insurance (at the employer’s expense, not at the employee’s expense).

In that case, contributions for newly employed persons with disabilities for whom the employer has been granted a tax relief are payable by the National Employment Service (NES).

2.1. Who is entitled to use employment benefits for persons with disabilities?

• private sector – an employer who engages and enters into an employment agreement for an indefinite period of time with a disabled person.

2.2. Who is not entitled to employment benefit for persons with disabilities?

• state bodies and organizations,
• public companies,
• public services,
• other direct or indirect budget beneficiaries

2.3. What are the requirements for using a tax relief?

• the employer must conclude an employment agreement with an employee with a disability for an indefinite period of time;
• the employment agreement must be in accordance with the law governing the prevention of discrimination against persons with disabilities;
• the disability of a person with a disability must be proven by appropriate legally and medically valid documentation.

2.4. In what period can the employment benefits for persons with disabilities be exercised?

• 3 years from the date of establishment of the employment relationship with that person.

2.5. When is not the employer entitled to the relief?

• the relief cannot be exercised for persons other than persons with disabilities;
• tax reliefs cannot be exercised for a person who, before entering into an employment relationship, was employed by the employer who is the founder or a person connected with the company where he/she starts to work, regardless of whether there was a termination of the employment relationship;
• when the employer uses a relief for a specific person;
• when the employer has exercised the relief for the same person when paying tax on salaries and contributions for mandatory social insurance on another legal basis in accordance with the relevant regulation.

3. Benefits for the employing newly employed persons

The tax relief refers to the refund of part of the paid salary tax and contributions for mandatory social insurance for the salaries of newly employed persons (both at the expense of the employee and at the expense of the employer). This benefits refer to for the employing persons who were previously registered with the NES (National Employment Service).

The refund of the portion of the paid taxes and contributions is realized by the employer according to the percentage depending on the number of newly employed employees:

• 65% (from 1 to 9 employees) – if employment is established with at least one and at most with nine newly employed persons;
• 70% (from 10 to 99 employees) – if employment is established with at least 10 and at most 99 newly employed persons;
• 75% (out of 100 employees) – if an employment relationship is established with at least 100 newly employed persons.

3.1. Who is entitled to use the employment benefit for engaging employees who were previously registered with the NES?

Private sector employer:

• legal entity,
• entrepreneur, lump sum entrepreneur or farmer entrepreneur;
• and employers from the private sector who started their activities after March 31, 2014.

3.2. Who cannot exercise the right to benefit?

Public sector employers:

• State bodies and organizations,
• Protector of citizens of the Republic of Serbia,
• Commissioner for the Protection of Equality,
• State Auditing Institution,
• Commissioner for Information of Public Importance and Personal Data Protection,
• Agency for Anti-Corruption,
• Republic Commission for the Protection of Rights in Public Procurement Procedures,
• Commission for the Protection of Competition,
• Securities Commission,
• Fiscal Council,
• National Broadcasting Agency,
• Energy Agency of the Republic of Serbia and other public agencies,
• public enterprises,
• public services,
• other direct or indirect budget beneficiaries, and/or public funds beneficiaries.

3.3. Conditions for using the employment benefit for persons who were previously on the records of the NES?

• that the employer has concluded an employment agreement with the newly employed person;
• if the establishment of an employment relationship with a newly employed person increased the number of employees compared to the number of employees the employer had on March 31, 2014;
• a newly employed person who, before starting an employment relationship with the employer, was registered as an unemployed person with the National Employment Service for a certain period of time (at least six months, and a person who is considered to be a trainee for at least three months);
• that the employee who establishes an employment relationship with the employer was not employed by an employer that is a related party to the employer with whom he establishes an employment relationship, and/or by an employer that, if it had not ceased to exist, would have been a related party to his/her future employer, regardless of whether there was a termination of the employment relationship.

3.4. When is not the employer entitled to use the tax relief for employing persons from the NES records?

• it is not entitled to use this benefit for a specific person from the NES records for whom he already uses any type of incentives, which are regulated by the relevant law.

3.5. For what period can the relief be exercised?

• for the salary of a newly employed person, which will be paid by December 31, 2024.

4. Employment benefits for at least two persons who were previously registered with the NES

And these benefits were extended in 2024. Benefits for engaging new employees that were previously on the NES records are tax benefits that refer to the refund of part of the tax paid on the salaries of newly employed persons, as well as contributions for mandatory social security (both at the expense of the employee and at the expense of the employer) for those newly employed persons.

When engaging new employees, the employer can be refunded 75% of the paid salary tax and social contributions.

4.1. Who is entitled to use the employment benefit for employing at least two persons from the NES records?

• legal entities – micro and small legal entities,
• entrepreneur, lump sum entrepreneur or farmer entrepreneur,
• and employers who started their activities after October 31, 2015.

4.2. Which employers are not entitled to use the benefit?

• public sector employers

4.3. Conditions for using the benefit for two newly employed persons from the NES records

• the employer must employ at least two newly employed persons from the NES records;
• if the employment of those newly employed persons increases the number of employees by at least two employees compared to the number of employees the employer had on 31.10.2015;
• the newly employed persons were registered as unemployed with the NES for at least six months before entering into an employment relationship with the employer (and for persons who are considered trainees at least three months);
• that the employees who establish an employment relationship and for whom the benefit will be exercised were not employed in a company that is considered a related party to the employer with whom they establish an employment relationship, and/or with an employer that, if it had not ceased to exist, would have been a related party to their future employer, regardless of whether there was a termination of the employment relationship;
• the employer company, which as of 1.1.2016 establishes an employment relationship with one newly employed person, and in the following period establishes an employment relationship with another employee can use the benefit for the first newly employed person, but only after employing another employee who meets the conditions (the right to refund of taxes and contributions paid for the first newly employed person is only exercised when the employer pays his/her salary for the month in which it has met the condition for using the benefit).

4.4. For which period can the benefit be exercised?

• for the salaries of newly employed persons, which will be paid by December 31, 2024.

4.5. When is not the employer entitled to use this tax relief for the employment of certain persons?

• It shall not be entitled to use benefits for employees from the NES records for establishing an employment relationship, if it already uses any type of incentives for that person, which are defined by the relevant law.

We wrote everything detail about benefits for hiring workers from the bureau.

5. Benefits for the employer – a newly established company that performs innovative activities (benefits for start-ups, IT companies)

Benefits for the founders of innovative companies are tax reliefs that refer to the exemption to pay 100% of taxes from the founder’s income, as well as 100% of the founder’s mandatory social insurance contribution (both at the expense of the employee and at the expense of the employer).

It can be exercised for one or more founders. The persons for whom the relief is exercised are paid contributions, and they are paid from the budget of the Republic of Serbia.

5.1. Employers entitled to use benefits

• newly established companies that perform innovative activities (start-ups, innovative companies);
• innovative companies that are not related to any legal entity;
• innovative companies that do not generate more than 30% of their total income from other legal entities, which are considered to be related to any of the founders of companies that perform innovative activities.

5.2. Conditions for using benefits for innovative companies

• it can be exercised only for the paid salary of the founder who is employed in that innovative company (for one or for each of the founders, if there are more of them);
• if the founder holds at least 5% of the shares or stakes in the newly founded innovative company in the period when the benefit starts to be exercised;
• benefit can be exercised for the founder’s income, the amount of which is not higher than 150,000 dinars per month,
• if the income is higher, the benefit is exercised for a portion of the income, up to 150,000 per month at most.

5.3. For which period can the benefit be exercised?

• For the founder’s income, which are paid in a period of 36 months, from the day when the start-up, and/or the innovative company, was founded.

5.4. When can’t innovation companies exercise benefits?

• if a newly founded innovative company has exercised the benefit for the founder, another innovative employer cannot use the benefit for that same person;
• an employer who exercised this benefit to establish an employment relationship with the founder cannot claim the right to other benefits for the same person, as well as a subsidy for employment and self-employment.

Read more about this topic in the text we wrote – Tax incentives for innovative companies.

6. Benefit for employing new persons since 01.03.2022.

Benefits for newly employed persons last until the end of 2024. Benefits for the employment of new persons are tax reliefs related to exemptions from the obligation to pay salary tax and pension contributions for new employees (applied from 01.03.2022):

• the employer is exempt from paying 70% of income tax;
• the employer is exempt from paying 100% of contributions for pension and disability insurance (both at the expense of the employee and at the expense of the employer).

6.1. Who is entitled to benefits for employing new persons?

• legal entity
• entrepreneur, lump sum entrepreneur or farmer entrepreneur,
• representative office,
• subsidiary of a foreign company.

6.2. Conditions for exercising benefits for engaging new employees

• concluded employment agreement between the employer and the newly employed person;
• the newly employed person earns a monthly salary of more than 76,500 dinars (gross amount);
• a newly employed person who was not employed in the period from 01.01.2019 until 28.02.2022 (he/she did not have the status of insured employee, entrepreneur, nor the status of the insured founder of a company);
• a newly employed person who acquired the status of insured employee or the status of the insured founder in the period from 01.03.2022 until 31.12.2022 (provided that on 1.1.2019 he/she was not a beneficiary of an old-age, early old-age or disability pension).

6.3. For which period can the benefits be exercised?

• For paid salaries to newly employed person, payable during the period 01.03.2022 – 31.12.2024.

6.4. When cannot employers exercise their right to benefits on salaries?

• If the employer already uses any type of incentive for a person who meets the conditions for establishing an employment relationship and using benefits, including benefits within the program and measures of the active employment policy.

7. Benefit for the employer engaged in research and development activities

Benefits for employers who perform research and development activities refer to tax reliefs for the salaries of employees engaged in these activities, where the employer is not obliged to pay part of the salary tax and contributions for pension and disability insurance:

• Relief from payment of 70% of tax on salaries;
• Relief from payment of 100% of contributions for pension and disability insurance (at the expense of the employee and at the expense of the employer).

7.1. Who is entitled to exercise benefits for research and development activities?

• Only legal entities (other than entrepreneurs),
• a company that performs research and development activities on the territory of the Republic of Serbia for its own account;
• a legal entity that retains ownership of intangible assets

7.2. A condition for exercising benefits on account of research and development activities

• for the payment of the salary of an employee who is directly engaged in research and development activities;
• for engaging an employee who is directly involved in identifying and solving relevant problems, as well as tasks related to the project;
• it is exercised in proportion to the time that employees spend on research or development, in relation to full-time work;
• It can be exercised for engaging new employees, as well as for existing employees (if they meet the requirements).

7.3. When cannot the benefit for research and development be exercised?

• for salaries paid for research activities aimed at finding and developing oil, gas or mineral resources in the extractive industry;
• if the employer uses any of the incentives for a certain person, in accordance with the law;
• for engaging in activities related to direct or indirect supervision of project implementation, as well as support activities

7.4. For which period can the benefit be used?

• Start of application since 01.03.2022

8. Benefit for employing qualified new personnel

Benefits for the employment of qualified unemployed persons (for 2024. to 2025.) are tax reliefs that exempt the employer from paying portion of the salary tax, as well as portion of the contributions for pension and disability insurance, in this year paid from 01.01.2024. – 31.12.2024:

• 60% tax on salary;
• 85% contributions for pension and disability insurance (both at the expense of the employee and at the expense of the employer).

8.1. Who is entitled to exercise benefits for qualified non-employed persons?

• legal entity
• entrepreneur, lump sum entrepreneur or farmer entrepreneur,
• representative office,
• subsidiary of a foreign company,
• natural person.

8.2. Who is not entitled to benefits?

• Public sector employers.

8.3. Conditions for using benefits for a qualified new employee

• the employer is obliged to enter into employment relationship with a qualified newly employed person;
• the employment increases the number of employees, compared to the number of employees on 31.12.2019.
• the employer is exempt from payment of salary tax and contributions for pension and disability insurance in the stated percentage;
• if the employer engages a person who acquired the status of a qualified newly employed person in 2022, the percentage of taxes and contributions for pension and disability insurance is reduced by 3% (57% tax and 82% pension and disability insurance contributions).
• benefits can be exercised and achieved by employers who started their activities after 31.12.2019.

8.4. For which period can benefits be exercised?

• for the paid salaries of qualified persons as of December 31, 2022;
• in an extended period ending on December 31, 2025 (special conditions must be prescribed).

For all additional questions related to tax benefits for employment or the conditions for their exercise, please contact us.

Bookkeeping company HLB T&M Consulting provides advice on tax benefits of interest to you. We can help you exercise them and make the most of them.