Summary

 

If you start a company in the period from 2019 till the end of 2020 and qualify for tax relief prescribed by the Individual Income Tax Law, you shall be exempt from paying taxes and contributions for yourself. The state shall regularly pay taxes and contributions for you, and years of service shall be calculated for such period. 
If you have employees, there is no more option to utilize tax relief for 9 employees. 
 

Beginning of the new year brings changes related to tax relief, referring to companies and entrepreneurs that are of recent date. 

If you started a company in the period from 01 October 2018 to 31 December 2018 (so, only in these three months) in line with the Individual Income Tax Law (hereinafter referred to as: Law), you qualify for certain tax relief. Namely, you will be exempt from paying taxes and contributions for you and your 9 new employees. This relief refers to the following year, which means that your only obligation shall be to pay net salary to your workers, and you do not need to worry about the taxes and contributions. 

New changes - no exemption for taxes and contributions for 9 new employees

However... surprise! Latest amendments of the Law came into effect stating that as of 01 January 2019, if you start a company or entrepreneurial business after this date, you can use the tax relief but only for yourself as the owner of the company, or the entrepreneur. So, in case you started a company in the period from 01 October until 31 December 2018, you qualify for relief for a maximum of 9 workers, and if you start a company after 01 January 2019 you will no longer qualify for exemption for taxes and contributions for these 9 workers. In this manner the entrepreneurs that took their time are in disadvantage, since initially it was announced in the Law that the benefits will apply to all entrepreneurs that dare to become one until 31 December 2020. 

Who is entitled to tax relief - mandatory conditions:

In order to qualify for tax relief in line with the Law, there are certain conditions that must be met. All conditions are stated in the Individual Income Tax Law in Article 21đ, and we will mention only the most important ones:

• You need a valid employment contract with your company (if you start a company and do not register as an entrepreneur). The contract must include the amount of net salary that must not exceed RSD 37,000, in order to qualify for tax and contributions exemption. If the amount is over RSD 37,000 you will not qualify.
• One of the conditions is that you acquired a high school or higher learning diploma 12 months ago at the latest or if this is not the case, then you must meet the condition that before starting the company, the founder or an entrepreneur are registered in the national employment service for a period of at least 6 months.
• If you meet all the conditions and qualify for tax relief, you will not be able to use any other relief, such as different subsidies from the national employment service.
• Tax relief shall not apply to lump sum taxpayers, only for entrepreneurs that pay salaries or agricultural entrepreneurs.

Difference between the new and the old law - who benefits more from the new one?

People who wanted to start a business, and not employ any other persons, if they were not in a hurry, surely waited for this new law, and here is why.

Old law - no registration of years of service

The idea of the old law was that if you start a company before 31 December 2018 you get an option to be exempt from paying taxes and contributions for you and 9 new employees. This was an excellent principle stimulating entrepreneurs to implement their ideas. However, the pain point of this law if that if you do not pay taxes or contributions for pension insurance your years of service are not registered. This business model is fully in line with illegal work only, it would not be illegal now. These gaps resulted in law amendments that came into effect on 01 January 2019. Naturally, the old law provides an option to pay taxes and contributions for yourself and your employees, but it is much more expensive that way and the whole point is lost. 

New law - no tax relief for 9 employees but the state registers years of service

At the beginning of 2019 some changes were made regarding the income tax law. On one hand, there is no more option for tax relief for 9 employees, and on the other hand years of service are registered. This is very significant if you do not employ workers, since the state pays for contributions for health, pension and disability insurance. As we have stated, the salary may not exceed RSD 37,000 in order to qualify for tax relief. This means that unlike the old law your years of service will be registered for the annual period in question.

If you wish to start a company and use all the benefits you can do so by the end of 2020.