Preparation of the Draft on taxes reduction for citizens and companies

The ministry of Finance and Economy of the Republic of Serbia is preparing a Draft of tax law regulations modification, which will be examined by the Government by the end of september, and if adopted, all the propsed fiscal changes will be forwarded for a debate in the Pariliament of the Republic of Serbia.

In this second phase of fiscal reforms, we are planning a series of tax reductions both for citizens and the companies. Along with these reforms, the Taxes Administration work will also be modified with the introduction of a new set of features

Modifications of the existing legal framework are related to the suspension of the sales tax on sugar and cooking oil. We are considering the suspension of this tax duty (which is presently at a rate of 20%) on which will result by a price reduction of these two vital products, declared Mr. Bozidar Djelic, the Serbian Finance minister ? the „consumer?s basket“ will thus be much more tax exempted, because we already suspended this tax on meat, eggs and fruit.

This type of tax duty, as announced by the Draft, should be suspended as well for real-estate renting for physical persons and the companies. Landlords, mainly, did not pay this tax duty by the past, therefore, the tax suspension, would probably mean the same as a legalization of the failing to comply with this duty. After a financial analysis, it will be decided upon the suspension this tax duty for companies, said Mr. Dusko Stojkov, special consultant for fiscal policy within the Finance Ministry.

The yearly income tax for citizens reduction (from 20% to 10%) is also considered by this Draft. This tax duty suspension would be a rational solution, because it is calculated on income and dividends, which would be a third taxation in a row, at the end of the year ? well, only for the income exceeding 500.000 dinars yearly.

The budget of the citizens will be exempted of tax duties on some kinds of trophy weapons, especially if those are gifts from the Military or the Ministry of Interior. It is considerd as a logical move, because a gift is hardly given away, as well as it would be unjust for those who inherited these weapons ? and can’t give them away ? to pay additional taxes. Aftre the trophy weapons, this tax exemption should be applied on some kinds of boats.

The first tax reduction project related to companies and considered by the Draft, is the reduction of the tax on corporate profit, from the actual 20% to 14%. A reduction of the independent activity income tax for citizens (from 20% to 14%) is considered as well. A special tax benefit is planned for investors, because a raise of the investment credit is planned, form 10 to 20 percent for big companies, and from 30 to 40 percent for small and mid-sized companies. This practically means that the tax on corporate profit would be reduced by 20% and 40% respectively, according to the total funds invested in equipment or machines, and will assure the transfer of unused credits, for each new eployed worker, said Stojkov.

On of the principal fiscal reform measures consists in granting credit to companies for every newly employed worker. The employer would be exempted from tax duty on the employee gross salary, for a period of two years, for every new worker employed.

The main goal of this measure is to provide the citizens with appropriate conditions to enjoy their rights from their work. The employers will be discouraged from employing people from cooperatives or illegally. Therefore, if an employee is earning 100 Euros monthly, in the end of the year, a total of 1.200 Euros would be tax exempted, per each newly employed.

Tax benefits for investors

This fiscal reform also provides for two additional modifications aimed to stimulate important investment and, globally the investment in this region, meeting special Serbian interests. Big companies world be tax exempted for a ten years period, if they invest ten million Euros in production capacities and employ at least 100 new workers. Similar tax benefits are planned for a number of communes, such as Majdanpek and Bor, but with a much lower limits for invested funds ? approximately 100.000 euros and a much lesser number of newly employed.

Number of taxpayers

Considering the introduction of a unique ID number for every taxpayer, the Tax Administration of the Republic of Serbia will, in the current of the following week, initiate a campaign, aimed to inform employers. This year, only the companies will be provided with this unique ID number ? meaning business units and employers ? and the citizens only in the current of the following year.