Tax Alert, December 2019
Law on changes and amendments of the Law on Mandatory Social Security Contributions has been adopted
We hereby wish to inform you that the Law on changes and amendments to the Law on Mandatory Social Security Contributions (the Law) has been adopted in National Assembly of the Republic of Serbia on 6 December 2019, and it will enter into force 8 days from publishing in the Official Gazette RS, i.e. on 14 December 2019.
Changes and amendments will be discussed in more detail in the text below. For any questions regarding the implementation of the changes and amendments to the Law, you may contact Tatjana Milenkovic, Director in the tax department on the following email address email@example.com.
Key proposals refer to:
· Defining SSC base for qualified new employees;
· Defining SSC base for the repatriates and new immigrants;
· Reduction of the contribution rate for pension and disability insurance borne by the employer;
· Defining the SSC base for founders of newly founded companies that carry out innovative business activity;
Changes and Amendments to the Law
1. SSC base for qualified new employees
New Article 45dj prescribes the exemption from paying pension and disability insurance contributions due by employee and employer in case of employing a qualified new employee for the salaries paid out until 31 December 2022.
Qualified new employee is a person who did not have the status of an insured employee or insured as independent entrepreneur as the founder/member of a company which is employed in such a company in 2019 (meaning that exemption applies to persons that have been insured as entrepreneurs in 2019) and who acquires this status from January 1 to April 30, 2020.
Persons which had a status of beneficiary of old-age, temporary old-age or invalidity pension, in the period 1 January 2019 until 30 April 2020, will not be deemed as qualified new employee.
The same Article sets out additional conditions that must be fulfilled for this tax exemption to apply.
The employer is exempted from the obligation to pay contributions for pension and disability insurance due by employee and employer in the following manner:
· 100% contribution - for salary paid from January 1 to December 31, 2020;
· 95% contribution - for salary paid between January 1 and December 31, 2021;
· 85% contribution - for salary paid from January 1 to December 31, 2022.
Pension and disability insurance contributions covered by the incentive will be paid from the funds of the Republic of Serbia.
This incentives corresponds to the incentive prescribed by the Personal Income Tax Law.
2. SSC base for the repatriates and new immigrants
New Article 15a foresees that both employee and employer SSC base will be reduced by 70%, for the repatriates and new immigrants, in accordance with the PIT Law.
3. SSC rate for pension and disability
In accordance with the amendments to Article 44 the rate of pension and disability insurance contributions paid by employers or other payers is reduced from 12% to 11.5%.
4. SSC base for founders of newly founded companies that carry out innovative business activity
Article 45d prescribes that the newly founded company i.e. employer will be able to apply the exemption for social security in total on the founder’s salary.
The exemption is applied to salary paid out to the founder, who is employed with the company, for the period of 36 months and up to RSD 150,000.
Upon adoption, amendments to the Law will apply from 1 January 2020, except for the provisions relating to repatriates and new immigrants and provisions relating to the exemption applied to the salary of founders of entities who perform innovation activity, which will apply from 1 March 2020.