The Government of Serbia adopted the Decree on the Criteria for Granting Incentives to Employers Hiring Foreign Experts Relocating to Serbia[1] (“Decree”), effective as of 18 June 2022.
The Decree introduces state subsidies to companies and entrepreneurs registered in Serbia, as well as Serbian branches and representative offices of foreign companies (“Serbian Employer”), for hiring under a full-time indefinite-term employment contract non-resident experts relocating to Serbia („Eligible Experts“). Subsidy consist of a partial refund of payroll tax and full refund of social security contributions.
Eligible Serbian Employers
Serbian Employer qualifies for the subsidy if the total number of its full-time, indefinite-term employees as of the date of the application (which can be made in September, see below) is equal to or higher than the total number of its full-time, indefinite-term employees as of 18 June 2022, increased for the total number of Eligible Experts hired since 18 June 2022.
Serbian Employer which reduces after 31 December 2023 (the final deadline for hiring Eligible Employees) the total number of its full-time, indefinite-term employees compared to 31 December 2023, forfeits the right to subsidy for the future and must repay, with statutory default interest, any subsidy received for the year in which its relevant reduction of its workforce occurred.
Serbian Employer who has received the subsidy cannot distribute dividends at any time between the first application for the subsidy and the end of the calendar year in which it has received the subsidy, except from the portion of a distributable profit exceeding the amount received as the subsidy. A breach of this ban will result in the obligation to repay the subsidy with default interest.
Serbian Employers who have received other forms of state aid and have an outstanding corresponding obligation to hire personnel as of 1 July 2022 are not eligible for the subsidy discussed here. The same is true for employers which have used another available tax incentives under the Personal Income Tax Act and the Social Security Contributions Act for the same Eligible Expert.
Eligible Experts
Although the Decree defines Eligible Experts as people with “expertise that is scarce on the local labour market”, there is no requirement on the employer to actually demonstrate, when applying for the subsidy, that the Eligible Employee’s expertise is indeed scarce on the Serbian labour market. The following conditions must be met:
(i) Eligible Expert has not spent in Serbia more than 180 days in the period of 24 months prior to commencing work in Serbia; and
(ii) Eligible Expert’s gross I[2] monthly salary is no less than RSD 300,000 or approx. EUR 2,542.
Form and amount of the subsidy
The subsidy is in the form of a refund of 70% of the payroll tax and 100% of the social security contributions paid by the Serbian employer on Eligible Experts’ salaries. Refund will be available for salaries paid in the period starting from 1 July 2022 until 31 December 2028, for Eligible Experts hired no later than by 31 December 2023.
There is a cap on the number of Eligible Experts for whom the subsidy can be claimed, and it is calculated as follows:
[total number of Eligible Experts as of the date of the application] + [total number of other full- time, indefinite-term employees on the date of application] – [total number of full-time, indefinite-term employees as of 18 June 2022]. An Eligible Expert for whom subsidy is claimed must remain continuously employed with the claimant employer from the application date until the end of that year.
Procedure
Subsidies are available upon application. Applications must be submitted to the Ministry of Economy, between 15 and 30 September, for a maximum period of 12 months prior to the application date. The application must be accompanied by a report prepared by a licensed auditor confirming the accurateness of the amount of the subsidy claimed.
The Ministry of Economy has 120 days, starting from 30 September, to decide on the application. If it approves the application, it has additional 30 days to transfer the funds to the Ministry of Finance, Treasury Department, which then makes the payments to the applicant employer on its accounts opened with the Treasury within 45 days from the expiry of the 120-days’ deadline mentioned above. The total amount of subsidies is subject to limits set out in the law on annual budget.
[1] Uredba o kriterijumima za dodelu podsticaja poslodavcima koji zapošljavaju novonastanjena lica u Republici Srbiji (Sl. Glasnik RS br. 67/2022).
[2] Net salary with payroll tax and social contributions withheld from the employee.
