At the end of 2022, following the State’s decision to regulate the taxation of freelancers, accompanied by strong resistance from freelancers, amendments to the laws on personal income tax and compulsory social security contributions came into force. These amendments concerned the tax treatment of freelancers. The new rules came into force on 1 January 2023, and the portal for reporting and taxing freelancers’ income was launched a few months later. However, this positive outcome did not come without challenges. Protests, protracted negotiations with government authorities and dissatisfaction among freelancers pointed to the need for urgent and comprehensive reform of the status of freelancers in Serbia.
The law recognizes as freelancers individuals who are not registered as entrepreneurs but who provide services and generate income. Therefore, individuals who provide services as registered entrepreneurs are not considered freelancers. The new tax rules apply to freelancers who receive income from foreign individuals or legal entities, as well as to those who receive income from domestic individuals. Individuals who provide services to domestic legal entities or entrepreneurs are not considered to be freelancers and the income generated in this way is not taxed under the new rules.
Freelancers can choose between two taxation models. Both are self-assessment, which means that freelancers are responsible for calculating, reporting and paying tax.
Model A
Under the first model, the tax base and the base for contributions for mandatory social insurance are calculated by reducing the income earned by the freelancer in the quarter by 96,000 RSD (recognized-normative costs). On this calculated base, the freelancer is required to calculate, report, and pay:
- Tax at a rate of 20%;
- Contributions for health insurance at a rate of 10.3%;
- Contributions for pension and disability insurance (PIO) at a rate of 24%.
If the freelancer’s profit is less than the recognized-normative costs, there is no obligation to pay taxes. This model is particularly favorable for freelancers with lower quarterly income.
It is important to note that registration on the freelancer portal does not automatically include registration for insurance. A separate application must be submitted to commence contributions.
Model B
The second model involves calculating the tax base by reducing the total income earned by the freelancer in the quarter by a fixed amount of 57,900 RSD, as well as by 34% of the total earned income. On this calculated base, the freelancer calculates, reports, and pays:
- Tax at a rate of 10%;
- Contributions for health insurance at a rate of 10.3%;
- Contributions for pension and disability insurance (PIO) at a rate of 24%.
This model is suitable for freelancers with higher incomes. We recommend using a tax calculator to independently determine which model best suits your needs.
It is essential to emphasize that the choice between the two self-taxation options is free, meaning a freelancer can change the selected model. This flexibility allows individuals to opt for a different model in the next quarter, positively influencing their tax obligations.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.