Tax reliefs for the employment of returnees from the diaspora and foreigners (newly settled taxpayers) are also valid for the year 2024, and they began to be implemented in March 2020. The provided incentives can be used to employ returnees from the diaspora, including young people as well as foreigners. They are realized in the form of the payment of reduced taxes and contributions to the wages of returnees from abroad.
An employer who establishes an employment relationship with a newly settled taxpayer can use benefits in the form of a 70% reduction in the tax base and salary contributions. These tax benefits for the employment of returnees and foreigners can be used by companies, i.e. employers, innovative businessmen, who employ our people from the diaspora, but also if they employ foreigners. Businessmen who employ them will be able to pay 70% lower taxes and contributions on their earnings for five years.
Available incentives became valid on March 1, 2020 and represent measures for the development of the innaovative economy. They are prescribed in accordance with Article 15v ZPDG and Article 15a ZDOSO. After the creation of the conditions for their application, the Rulebook was adopted, which prescribes in more detail the way to exercise the right to a reduction of the salary tax base for newly settled taxpayers. The Rulebook entered into force on 14.11.2020.
Like other current tax incentives for employment, the incentives for foreigners and returnees are intended to encourage local employers to hire new workers. In a specific case, on the employment of foreigners and returnees from the diaspora, including immigrants and young returnees.
1. What are the tax reliefs for the employment of returnees and foreigners?
Incentives refer to tax exemption when hiring returnees from abroad, as well as foreigners. Domestic employers who use them can exercise the right to:
- reduction of the salary tax base by 70%;
- reduction of the contribution base by 70%.
In order to achieve them, returnees and foreigners (newly settled persons) and a qualified employer must establish an employment relationship for an indefinite period of time. When concluding an employment contract, additional conditions must be met, namely:
- that the employment relationship is based on a workplace for which there is a need for a person to have a special professional education,
- that he is a person for whom there is a need that cannot be easily satisfied on the domestic labor market,
- a foreign citizen employed by an employer has the obligation to reside in the territory of the Republic of Serbia, in order to be considered a tax resident.
The mentioned incentives are only one of the measures for the development of the innovative economy. They can be realized for returnees from abroad, as well as for foreigners who meet the general conditions for the application of benefits.
2. For what period are the benefits granted for newly settled taxpayers
Qualified employers can exercise the right to tax relief for newly settled tax payers for a period of five years, starting from the date of conclusion of the employment contract. The right is exercised independently of the change of employers. Fulfillment of the conditions related to the use of incentives, with the workplace, as well as the conditions for the newly settled taxpayer during that period is assumed.
The newly settled taxpayer has the right to use the relief from the first salary, which was paid for the month in which evidence of the fulfillment of the conditions was obtained from the competent authorities.
3. Who is considered a qualified employer?
Employers who are entitled to tax relief for newly settled taxpayers (returnees, immigrants, foreigners) are qualified employers. In order to be able to use them, they must meet certain conditions:
- the qualified employer must be a resident of the Republic of Serbia (if he is a domestic employer);
- that he is not considered a related person to the employer where the newly settled taxpayer was previously employed;
- any employer resident in the Republic of Serbia, who establishes an employment relationship with a newly settled person who has had a residence or a center of business and life interests in the territory of the Republic for at least three years since 1990, is considered a qualified employer.
Written statement for the newly settled taxpayer
A qualified employer who enters into an employment relationship with a newly settled taxpayer has the obligation to draw up a written statement, which confirms that before establishing the employment relationship, that person was not employed by any employer who, at the time of acquiring the status of a newly settled taxpayer, would be considered a related person to that qualified employer.
In the case of a change of qualified employer, that is, if an employee who is considered a newly settled taxpayer concludes an employment contract with another qualified employer, the statement is drawn up again. Every subsequent qualified employer also has this obligation if there is a change in the company in which a person with the status of a newly settled taxpayer is employed.
The written statement confirms that the person was not employed before establishing an employment relationship with a qualified employer. On the other hand, if you were employed by one or more employers, the full name, headquarters of each, as well as the country where the company is located, are stated in the written statement.
4. Who can be considered a newly settled taxpayer?
Diaspora returnees, i.e. newly settled persons, are considered to be:
- taxpayers who did not predominantly reside in the territory of the Republic of Serbia in the period of 24 months prior to the date of conclusion of the employment contract with a qualified employer (at least two years) – this includes foreigners and returnees from the diaspora, regardless of age;
- taxpayers who are less than 40 years old at the time of concluding an employment contract with a qualified employer, and that in the period of 12 months prior to concluding an employment contract with that employer, they mostly stayed outside the Republic of Serbia for further education or professional development – young returnees.
Therefore, there are two categories of newly settled taxpayers. Each of them separately has prescribed conditions that must be met in order for a person to be considered a newly settled taxpayer, whether they are foreigners, returnees from the diaspora or young returnees. It is sufficient that the employee for whom the incentive will be used meets one category, as well as the conditions regarding the workplace and special professional education (specifically – for the amount of his minimum monthly gross salary).
The right is exercised regardless of the change of employer, if the specified conditions are met in terms of workplace and professional education. And the new employer, by employing a newly settled taxpayer, acquires the right to use the tax relief, within 5 years starting from the date of establishment of the employment relationship.
5.1. Relief 70% lower base for paying taxes and contributions for the employment of foreigners
The first category of newly settled taxpayers refers to foreigners (and certain returnees). In order for the employer to obtain a tax incentive in the form of a 70% reduced basis for paying taxes and contributions when establishing an employment relationship, certain conditions must be met:
- that the person to be employed did not predominantly reside in the territory of the Republic of Serbia in the period of 24 months prior to the date of conclusion of the employment contract with a qualified employer (that he was abroad for at least two years – 24 months);
- that the employment relationship is based with a domestic employer at a workplace, which requires a specific professional education and a need for a worker that is not satisfied by the domestic labor market,
- that the contracted monthly gross salary is greater than 344.082 dinars,
- an additional condition for newly settled taxpayers for the reduction of the base is that upon establishing an employment relationship, he resides in Serbia and is considered a tax resident.
For the period of stay of the employee, which proves that he did not mainly stay in Serbia in the period of 24 months before the conclusion of the employment contract with a qualified employer, additional documents are submitted:
- certificate of change of residence, i.e. residence in Serbia, issued by the competent authority of the Republic of Serbia;
- certificate of residence or residence in another country, issued by the competent authority of another country;
- foreign employer’s;
- confirmation of employment in another country and work on the territory of another country;
- proof from the competent social security authority of another country that the employee was insured according to the regulations of that country;
- a written statement that in the period of 24 months prior to the establishment of the employment relationship, the person mainly resided in the territory of one or more other countries (a statement containing information about the country or countries in which he/she resided, as well as that the person did not reside continuously or intermittently in Serbia of 366 days in the period of two years before the date of conclusion of the employment contract).
5.2. Reduction of 70% of the tax base and contributions for the employment of young returnees
The second category of newly settled taxpayers refers to young returnees. In order for the base for calculating salary tax and contributions to be reduced by 70%, the following conditions must also be met:
- at the moment of concluding an employment relationship with a qualified employer, the employed person must be under 40 years of age;
- that for a minimum of 12 months in the period prior to the conclusion of the employment contract, the majority of the time was spent outside the Republic of Serbia for further education or professional training;
- to be employed in a workplace that requires special professional education and for which the needs for personnel on the domestic labor market are not met;
- that during employment he/she earns a monthly salary of more than 229.388 dinars.
For the period of stay in another country for the purpose of education and professional development, which proves that in the period of 12 months before the conclusion of the employment contract with a qualified employer, the person did not mainly stay in Serbia, additional documents must be submitted:
- certificate of change of residence or residence in Serbia;
- proof of residence or stay in another country;
- a written statement confirming that in the 12 months prior to employment, the person mainly resided in the territory of another country (the statement contains information about one or more countries in which he/she resided, and that he/she did not stay in Serbia continuously or with interruptions for more than 183 days in a period of 12 months before the conclusion of the employment contract);
- certificate, diploma or certificate of completed education or professional training in another country.
6.1. Obligation to reside in the territory of the Republic of Serbia
A newly settled taxpayer is entitled to a 70% reduction in taxes and salary contributions when:
- settles in the territory of the Republic of Serbia when establishing an employment relationship or within a reasonable time after employment;
- meets the requirements to be considered a tax resident based on the center of business and life interests in Serbia, as well as for the application of the Double Taxation Avoidance Agreement.
The following documents are attached to prove residence:
- proof of one’s own right of ownership or the right of ownership of family members to immovable property;
- a written statement confirming that the person resides in the territory of the Republic together with his spouse and common minor children;
- certificate of residence or residency in the Republic;
- proof of approved temporary residence or approved permanent residence;
- such proof for the spouse and joint minor children.
6.2. Deadline for obtaining documentation
A qualified employer has the obligation to collect documentation on a newly employed payer no later than the day when the first salary is paid, based on which he is entitled to tax relief and reduction.
If there is a change of qualified employer (when a returnee from the diaspora concludes an employment contract with another), he also has the obligation to collect documentation. Thus, he proves the fulfillment of the conditions in order to realize the right to use the tax relief. If there is a change of several employers, then each subsequent qualified employer with whom the employment contract is based has this obligation.
7. Employment of foreigners in the Republic of Serbia
When it comes to the employment of foreigners in the Republic of Serbia, the basic condition for foreign nationals to reside and work in our country is that they have an approved temporary residence and work permit. For a residence and work permit for foreigners in Serbia, a request and prescribed documentation are submitted, and which work permit will be issued depends on the grounds for approval of a temporary residence or work permit.
We have written a detailed guide for issuing work permits for foreigners in the Republic of Serbia.
The agency for business consulting and accounting services HLB TM DOO specializes in performing all types of work and related activities related to the legal employment of returnees from abroad, as well as the employment of foreigners in Serbia. We provide professional help for payroll services Belgrade, as well as support in applying for incentives and exercising the right to tax exemption. Contact us.
