Tax Alert, April 2018

On March 28, 2018, the Ministry of Finance published on their website 2017 Annual Income Tax Instructions (hereinafter: Instructions).

Taxpayers for the annual income tax are tax residents for their worldwide income and tax non-residents for their income sourced in Serbia.

Non-taxable threshold

Non-taxable threshold for 2017 according to the relevant Republic Statistics Authority amounts to RSD 2,375,136.

The average annual salary per employee in the Republic of Serbia for 2017 amounts to RSD 791,712 according to Statistical Office of the Republic of Serbia authority official data published in the “Official Gazette RS” no. 7/18.

Personal tax deductions

Taxpayers, when calculating the taxable income, have the right to apply deductions which are deducted from the income for taxation. Personal tax deductions in 2017 are as follows:

-  For taxpayer – 40% of average annual salary per employee, in the amount of RSD 316,685;

-  For dependent family member - 15% of average annual salary per employee, in the amount of RSD 118,757.

Tax rates

The annual income tax is levied and paid depending on the earned taxable income in the amount of:

-  Up to the RSD 4,750,272 – applicable tax rate of 10%;

-  Exceeding the amount of RSD 4,750,272 – tax rate of 15%.

Taxable income

Following types of income, received between 01.01.2017 and 31.12.2017 are subject to taxation:

-  Employment income from Article 13 to 15b;

-  Entrepreneurship taxable income from Article 33 paragraph 2 and Article 40;

-  Taxable income from royalties and similar rights and industrial property rights from Article 55 and 60;

-  Taxable income from immovable property Article 65v;

-  Taxable income from leasing movable property from Article 82 paragraph 3 and 4;

-  Athletes and sport experts income from Article 84a;

-  Other taxable income from Article 85;

-  Income from abovementioned points earned and taxed in foreign states – for tax residents.

Additionally, it is stated that the maximum annual social security cap for 2017 was RSD 3,793,175. Provided that social security contributions were paid over the maximum annual social security cap in 2017, for the amount paid over the maximum annual cap, the payer has the right to request a refund of that amount in accordance with the Law on Mandatory Social Security Contributions.

Annual income tax return for 2017 is submitted on the PPDG 2R form („Official Gazette RS“ no. 90/17) until May 15, 2018 at the latest.

Tax return may be submitted either electronically or in paper– directly or by mail post.

Taxpayer – resident may submit the tax return in paper to the organizational unit of the Tax Authorities competent in accordance with taxpayer’s place of permanent residence or place of temporary residence.

Non-resident taxpayer, through a tax proxy, may submit the tax return in paper to the organizational unit of the Tax Authorities in accordance with place where the taxpayer earned income or place of temporary residence or place of permanent residence or seat of the tax proxy.