Tax Alert, December 2018

On 7 December 2018, National Assembly of the Republic of Serbia adopted Law on amendments to the Law on Mandatory Social Security Contributions (hereinafter: SSC Law or the Law) which comes into force on 16 December 2018.

The main reason for the amendments was a need for additional reduction of fiscal burden on salaries through lower social security rates, as well as the need for the alignment of deadlines for publishing salary data and determination of the minimum and maximum social security base.

The most important changes concern:

• Cancelling the social security contribution for unemployment insurance, borne by the employer;
• Method of calculating social security contributions on maximum monthly base;
• Social security relief for newly established companies and entrepreneurs;

Most of the amendments to the SSC Law will be applicable from 1 January 2019, except for the provision related to the situation where competent authority determines the status of the insured person and liability for the payment of social security contributions which will be applicable as of 1 January 2020.

Below is an overview of the most significant changes that are prescribed by this law.

Unemployment social security contributions

The changes prescribe that the liability for the payment of unemployment social security contributions lies with the insured person only. In such way, employers are not liable to calculate, withhold and pay unemployment insurance paid on top of the salary at the rate of 0.75%.

Method for calculating social security contributions on maximum monthly base

Article 41 introduces a new paragraph which explains the method of calculating social security contributions, i.e. specifies that, when the conditions are met, maximum monthly social security base is applied even in the case where an individual has worked part time, i.e. when the period for which social security contributions are calculated is shorter than one month, and the individual receives salary equal or higher than maximum monthly cap.

Social security reliefs

Article 45g, which regulated the social security relief for newly established legal entities, has been amended so that the relief after the changes is applied exclusively to the founders of the company who are at the same time employees of the Company, that is, on entrepreneurs/entrepreneurs farmers.

The founder of the newly established legal entity, a newly registered entrepreneur and entrepreneur farmer, has a right to a relief from social security contributions for a period of 12 months from the moment of establishment or registration, and for an amount of monthly net salary up to 37,000 dinars provided:

• The founder has established a working relationship with a newly established legal entity and has been registered with CROSO, i.e. the entrepreneur/entrepreneur farmer is registered at CROSO
• Prior to establishment / registration, individual has been registered with the National Employment Agency continuously for 6 months or that they have graduated from high school or college 12 months prior to the establishment / registration

The relief is applicable for the employers established by 31 December 2020.

Social security contributions will be paid from the budget of Serbia on the minimum monthly base for the individuals under this relief.

Employer which acquires the right to the social security relief defined in the Article 45g of the previous SSC Law, by the date of coming into force of the new SSC Law, will continue to apply the relief in line with the previously valid provision.

Minimum and maximum social security contribution base

Period for the determination of the minimum and maximum social security base is changed, and as of 1 January 2019 it will be determined based on the previous 12-month period starting from October (instead of November as it was defined in the previous version of the law). In addition, the amount of the maximum and minimum base would apply from the first day of the month following the publication of the said amount.