Tax residents of the Republic of Serbia and foreign individuals (tax non-residents) who perform business activities as freelancers in Serbia or from Serbia, during the period of earning income, may potentially have an obligation to pay tax, contributions for pension and disability, and health insurance in Serbia. Concerning the tax obligation, it is essential to consider the relevant double taxation conventions, while the obligation to pay contributions is assessed and determined on an individual, case-by-case basis.
Tax resident and foreign freelancers in Serbia
Freelancers pay taxes and contributions on income earned on a quarterly basis by submitting an online tax return. Tax residents of Serbia have the option to claim a tax credit for taxes paid in another country, provided they possess the relevant certificate from the competent state authority of the foreign country indicating the paid tax amount. This is applicable irrespective of whether a double taxation avoidance agreement has been concluded.
Non-residents have the option to register as freelancers in Serbia and report their taxes, provided they possess either a foreigner registration number or a tax identification number. It is crucial for non-residents to hold an approved stay in Serbia or to register themselves with the Tax Administration as taxpayers through a tax attorney. Notably, non-residents are not required to obtain a work permit. They can legally reside in Serbia with an approved temporary stay and engage in freelance work without establishing an employment relationship.
From 2023: option to chose between two taxation models
Since 1 January 2023, freelancers in Serbia have the option to choose between two taxation models, enabling them to optimise their tax liability. The first model is more favourable for novice freelancers or for those for whom freelancing represents merely an additional income source. The second model is a more advantageous choice for individuals for whom freelancing constitutes their primary source of income.
Both models are built upon the recognition of specific standardised costs that reduce the tax base, with the amount and method of determining these costs varying significantly depending on the chosen model.
According to the first taxation model, which can be chosen by freelancers in Serbia, the tax base is the gross income reduced by a fixed amount of standardised costs, approximately EUR 800, on a quarterly basis, on which a tax rate of 20% is applied. The base for contributions for mandatory pension and disability insurance is the taxable income of the freelancer, which is subject to a rate of 24%. The base for health insurance contributions is the same as the tax base, but it cannot be lower than approximately EUR 390, to which a rate of 10.3% is applied.
According to the second taxation model, which can be chosen by freelancers in Serbia, the tax base is the gross income reduced by an absolute amount of standardised costs, approximately EUR 490, on a quarterly basis, and a relative amount of standardised costs of 34% of the gross income. Tax rate in this model is 10%. The base for contributions for mandatory pension and disability insurance is the same as the tax base, but it cannot be lower than approximately EUR 890 on a quarterly basis (this condition does not exist in the first model). The base for health insurance contributions is the same as in the first model.
Exemptions from contributions
When it comes to contributions for the pension and disability insurance fund, there is no obligation for freelancers in Serbia to pay them if the work is performed abroad and the income is earned from a foreign payer (primarily important for tax residents of Serbia).
There is no obligation to pay health insurance contributions for freelancers in Serbia if the person is health-insured in Serbia on another basis or is health-insured in another country with which Serbia has concluded an international agreement regulating health insurance.
The consulting team of WTS Serbia has extensive experience providing tax advisory services to companies and individuals, including expat workers. Please do not hesitate to contact their experts if you have questions related to the taxation of freelancers in Serbia.