The Government of the Republic of Serbia enacted the Decree on criteria for awarding incentives to employers employing newly settled persons in the Republic of Serbia (“Official Gazette of RS”, no. 67/2022) (the “Decree”), for which there is a need that cannot be easily met in the domestic labour market (“a newly settled person”).

If employers and employees fulfil specified conditions, incentives are paid in the amount of:

• 70% of calculated and paid payroll tax for one or more newly settled persons, and
• 100% of calculated and paid contributions for mandatory pension and disability insurance, for payments made for newly settled persons,

in a period of maximum 60 months, starting from 1 July 2022 and ending on 31 December 2028.

Who is considered a newly settled person?

A newly settled person is an individual:

• who has not resided in the territory of the Republic of Serbia for more than 180 days in the 24 months preceding the day of concluding an employment agreement,
• who has concluded an employment agreement for an indefinite period of time with full working hours (for the practical issues, please see below), and
• with a monthly basic salary of at least RSD 300,000.00 (approx. EUR 2,500).

To receive listed incentives, a newly settled person must be continuously employed by the employer in the period between the day of application and December 31 of the year in which the application is submitted.

Are there any restrictions for employers?

An employer needs to sign an employment agreement with newly settled persons by 31 December 2023.

The incentives are available only to employers whose number of full-time employees on the day of submission of the application for incentives is the same or above the number of full-time employees on the day of entry into force of the Decree increased by the number of employed newly settled persons for whom the employer submits an application.

Additionally, an employer would not be entitled to these incentives if:

• pays dividends during a specific period after filing an application, or
• is a beneficiary of state aid in connection with which an employer has an obligation to employ (except for taxpayers who have already fulfilled that obligation by 1 July 2022), or
• is already using the right to reduce the base in accordance with the Law on Income Tax.

In case of an employer breaches the listed conditions, it is deprived of the incentives and is obliged to return those funds.

Potential issues in practice

Although the Decree should apply to both foreign and domestic citizens who have not spent a certain time in the Republic of Serbia, implementing the Decree to foreigners who can be considered as a newly settled person can represent a challenge.

Namely, in order to be employed in the Republic of Serbia, a foreigner needs to obtain a temporary residence permit as well as a work permit. For a newly settled person, both permits may be usually issued for up to 1 (one) year, with the possibility for extension upon expiration of each year. This means that an employer who intends to engage a newly settled person may conclude only a fixed-term employment agreement with such person. Therefore, the actual scope and application of this Decree would be questionable in practice, since one of the main criteria for getting incentives is the indefinite term employment of a newly settled person.

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Anđa Nikolić, Senior Associate
andja.nikolic@sog.rs

Kristina Pavlović, Senior Associate
kristina.pavlovic@sog.rs