Tax rates reduction and fiscal stimulations extension

The second phase of fiscal reforms transformed into the modification of six legal regulations, provides for the reduction, by a third, of taxes for farmers, taxi drivers, lawyers, medical practice offices, and owners of private companies (Autonomous Trading)…

Besides the reduction of the income tax, it is also provided for the extension of the fiscal stimulations on the basis of the openings of new positions and investment in development. Therefore, for every new worker employed, the company will be totally exempted from paying the tax on the workers salary for a period of two years. Concerning the entrepreneurs investment, the fiscal credit is raised by 20 percent, more exactly 40 percent for small-sized companies.

By the present date, only salaries were taxed at a 14 percent rate. However, the 20 percent tax rate is still applicable on copyright royalties, real-estate renting, income from capital, and, according to the newest legal provisions, income realized through youth and student labor cooperatives. Benefits these cooperatives enjoyed in the past, are now suspended, and the realized income brought to the level of any other kind of income. According to the explanation of the Government of the Republic of Serbia, the proposer of these changes, precisely this kind of professional engagement was the generator of illegal employment.

A special Article of the Law provides for an inventory of all professional athletes kinds of income: payment of transfer indemnities (according to the concluded contracts), indemnities for the use of their image (TV and advertising commercials), financial stimulations for athletes with special merit, subventions to top-athletes’ advanced training, national recognition and prizes for the sports development and affirmation, indemnities and prizes for sports experts (coaches, referees, delegates…). The tax rate is 20 percent, and it is applicable on 50 percent of the total amount.

According to the principle – reduction of the whole fiscal burden but also the reduction of tax evasion possibilities – it is suggested to suspend the payment of the tax on capital profit on the basis of the trading with the bonds on old foreign currency savings deposits, as well as with the bonds on the Loan for the economic rebirth. Also, the tax won’t be applicable on indemnities for pensions, only if the concerned amount does not exceed two average salaries (at present, it is at 1.5 salaries rate). The extension of the fiscal exemptions is also valid for the severance pays for workers having lost their jobs as a technological manpower surplus. If the concerned workers are above 50 years of age, there will be no tax paying, disregarding the amount of the severance pay; regarding the others, tax exemption goes up to the level defined by the collective contract in effect in their companies.

Changes are planned as well for the summary annual income taxing: considering the total amount of realized income for the current year (including the salary and all other kind of income), the income tax to be paid next spring is applicable only to the income exceeding 600.000 dinars, at a single 10 percent rate. By the present date, a scale of 10, 15 and 20 percent rates were applied for the annual income tax calculation depending on the difference with the limit defined by the Law.

Starting from January 1st, 2003, office space as well as apartment renting, will be exempted from sales tax payment, only if the owner is a regular citizen (not a company). The 20 percent tax rate on realized income, as well as the communal taxes still remain in effect. Considering these changes, the total fiscal burden, depending on the communal taxes, will amount 22-24 percent.