Tax benefits of IT businesses in Serbia
The founders of companies that perform IT activities are exempt from paying taxes and contributions on each salary up to 150000 RSD for 3 years from the date of establishment. This law entered into force on March 1st, 2020 in Serbia. It is a new relief that should stimulate the opening and development of companies that deal with IT, but in order for the founder of such a company to exercise this right, he must have at least five percent of shares or stakes in the company and must not be associated with any legal entity.
This tax benefit is a continuation of the relief initiated by NALED with the Government of Serbia in 2018, which enabled exemption from paying taxes and contributions on salaries for newly established companies, entrepreneurs and farmers. The intention of the authorities at the time was to stimulate young people to start their own business and to make their first year of business easier. This principle reduces the financial burden for beginners when they enter the world of business after graduating from school or college. In fact, they can save at least 10000 RSD a month in taxes and contributions, which they can invest in equipment or business development. This way it is possible that they will save around 1000 euros annually.
New incentives to start a business
The new incentive measure, which also came into force on March 1 this year, is a 70% reduction in the tax base and contributions for the salaries of newly settled citizens. The reduction is realized for a period of five years, for jobs for which special vocational education is required, if the monthly salary is higher than 145,104 RSD, i.e. 217,656 RSD for newly settled citizens who mostly lived outside Serbia for 12 years before starting employment for an indefinite period. The second measure of exemption from paying part of the tax on the basis of salaries of newly employed skilled workers refers to persons who were previously unemployed. The measure is applied for a period of three years: in 2020 the employer is released from the obligation to pay 70% tax and 100% contribution for the Republic Pension and Disability Insurance Fund, in 2021 65% tax and 95% contribution for the Republic Pension and Disability Insurance Fund and in 2022 60% tax and 85% contribution to the Republic Pension and Disability Insurance Fund.
If you are from the IT industry, you must know that the most important thing is that this is the only period for exercising the right to benefit with companies or entrepreneurs who enter the entire framework of these measures. According to the currently valid legal provisions, there is no procedure that is prescribed to prove that the employee was not employed for a single day during 2019.
How are the rights to these benefits transferred?
These benefits have another advantage related to the employment climate: the benefit is a property of the employee, not the employer, which means that this regulation means that all qualified employees carry the benefit with them in case they are employed by a new employer during this period. Therefore, the relief will not be a privilege only for the employer who first hires a qualified person, but the qualified person will be able to transfer the right to the relief until 31.12.2022. year to each subsequent employer.
Who can be considered using these tax benefits?
A person who was employed under the stated conditions, and who did not have an established employment relationship in the period from January 1st to December 31st, 2019. Qualified new employees are considered based on the following criteria that imply to the year 2019. They need to be either:
- Unemployed or
- Students who have completed their studies
- Founders who have not established an employment relationship with the company
- Persons who have been engaged under any contract outside the employment relationship
- Agreement on the rights and obligations of the director
- Contract on temporary and occasional jobs
- Additional work contract
- Copyright agreement
- Contract on professional training or advanced training
Are these benefits cost effective for IT companies?
First of all, these benefits do not only apply to IT companies. Namely, these benefits apply to any type of companies, which have the ability to hire people who meet the criteria listed in the text.
Therefore, if we look at these benefits comprehensively, they can be – both in the short and medium term – quite profitable, both for IT companies and for any other type of company.
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