Under Article 15v of the Law on Personal Income Tax,[1] Serbian employers who hire qualifying foreign employees or returning nationals benefit from a 70% reduction of the salary tax base, applied at source during payroll calculation, for five years. This guide covers who qualifies, the 2026 salary thresholds, documentation requirements, and how to apply the incentive.
Our employment law team regularly advises companies on eligibility, affiliated employer issues, and annual threshold compliance. The analysis below reflects the rules in force from 1 January 2026, with salary thresholds from Official Gazette No. 115/2025.
Contents
What the Benefit Is and How It Works
A qualified employer who enters into an employment relationship with a "newly-settled taxpayer" (novonastanjeni obveznik) applies a 70% reduction to the salary tax base of that employee. This means that payroll income tax and social security contributions are calculated and paid not on the full taxable salary but on 30% of it. The reduction is applied during the payroll calculation itself, before any payment is made to the Tax Administration. There is no separate approval process, no post-payment refund, and no application to submit before the benefit can be used.
The benefit covers payroll income tax (10% rate) and mandatory social security contributions on both sides. It runs for five years from the employment start date. If the employee changes to a different Serbian employer, the new employer continues the reduction for the remaining term, provided all conditions are still met.
The annual personal income tax of the employee, filed separately at year-end, is calculated on the full salary amount, without the Article 15v reduction. The benefit affects only the monthly payroll calculation, not the annual tax reconciliation.
| Element | Standard payroll | With Article 15v reduction |
|---|---|---|
| Taxable salary base | Gross salary minus non-taxable threshold (RSD 34,221 in 2026) | Standard base reduced by 70%; tax paid on 30% only |
| Social security contributions | Calculated on full gross salary | Calculated on reduced base |
| Duration | N/A | 5 years from employment start date |
| Portability | N/A | Follows the employee to a new Serbian employer |
| Annual income tax reconciliation | On full salary | On full salary; reduction does not apply |
Conditions Applicable to the Employer
To qualify as a "qualified employer" (kvalifikovani poslodavac) for the purposes of Article 15v, the employer must meet two conditions.
First, the employer must be a Serbian-resident legal entity, entrepreneur, flat-rate entrepreneur, or agricultural entrepreneur registered in Serbia for tax purposes. Foreign companies without a registered presence in Serbia do not qualify.
Second, the employer must not be affiliated with the employee's previous employer. The affiliation test is defined broadly. A person or entity is affiliated with the employer where any of the following applies:
- Direct or indirect ownership or control of at least 25% of shares or votes in the employer, held by the previous employer or by the same natural or legal persons who had that position in the previous employer.
- A family relationship between persons with control or significant influence at both entities (spouse, partner, children, parents, siblings, grandparents, and their spouses or partners).
- The previous employer is a legal entity from a tax haven jurisdiction under Serbian law.
Exception: even where affiliation exists, the benefit is available if the employee has resided in Serbia for at least three years at any point in the previous 25 years. Companies forming a new Serbian entity for relocated talent should complete the affiliation analysis before the employment start date; a disqualification discovered after payments have been made results in reclassification as underpaid tax.
Who Qualifies as a Newly-Settled Taxpayer
The Law defines a newly-settled taxpayer as an individual who, on the date the employment contract is concluded, falls into one of two sub-categories set out in Article 15v paragraph 4.
Category 1: General Returnees and Foreigners
The employee has not predominantly resided in Serbia during the 24-month period immediately before the employment contract is concluded. "Predominantly resided" means having one's centre of business and personal interests in Serbia. This category covers both foreign nationals who have never lived in Serbia and Serbian citizens who have been living and working abroad.
The minimum gross monthly salary for this category is RSD 439,692 for 2026[2] (three average monthly salaries, updated annually). A contract salary that falls below the current threshold loses the benefit from that month forward.
Category 2: Young Returnees
The employee is under 40 years of age on the contract date, and has predominantly resided outside Serbia during the 12-month period immediately before the contract date for the purpose of further education or professional training.
The minimum gross monthly salary is RSD 293,128 for 2026 (two average monthly salaries, updated annually), reflecting that young returnees are often at the start of their careers.
For both categories, the employee must establish Serbian tax residency by settling in Serbia and forming their centre of personal and business interests here, spending at least 183 days per 12-month period with their immediate family throughout the benefit period. Obtaining a work permit and temporary residence permit is a parallel step; because foreigners cannot hold an open-ended contract independently of a valid permit, the standard practice is an indefinite employment contract conditioned on work permit renewal.
Job Position and Employment Contract Requirements
Two further conditions apply at job and contract level.
The employment contract must be for an indefinite period. In practice this is an indefinite contract conditioned on work permit renewal, which the Tax Administration accepts; fixed-term contracts do not qualify.
The job position must require specific professional education and must be of a kind that cannot easily be filled from the domestic labour market. This condition is intended to ensure the incentive is used for scarce expertise rather than for any hire from abroad. IT professionals, engineers, and senior specialists in finance, life sciences, and other technical fields typically meet this condition. Each position should nonetheless be assessed individually, since the Tax Administration may scrutinise the basis for the employer's conclusion if an audit is conducted.
The minimum salary thresholds described in the previous section serve as the proxy for this job position condition: if the salary exceeds the threshold, the Law treats the job position and education requirements as satisfied. The salary must remain above the applicable threshold throughout the five-year period; if the statutory threshold is updated annually and the employee's salary is not adjusted accordingly, the benefit lapses.
How to Apply the Incentive in Payroll
Once documentation is in order, the employer's bookkeeping agency applies the 70% reduction to the salary tax base in the monthly payroll calculation and records the Article 15v code in the PPP-PD form. No separate form, advance ruling, or Tax Administration communication is required.
The five-year clock runs from each employee's individual employment start date. Continuing to apply the reduction after expiry is treated as underpaid tax, subject to reclassification and statutory interest.
Because the Article 15v thresholds update annually, employers must verify at the start of each year that each qualifying employee's gross salary still exceeds the current figure. If it does not, the contract must be amended or the benefit lapses. Our employment law team assists with annual threshold reviews and contract amendments. To discuss a full relocation package, schedule a consultation.
Frequently Asked Questions
Does the employee need to do anything to activate the benefit?
No. The employer applies the reduction at the payroll calculation stage; the employee submits no personal application. The employee's obligations are to provide the required documentation before the first salary is paid and to maintain Serbian tax residency throughout the benefit period. Note that the 70% base reduction does not apply to the annual personal income tax reconciliation, which uses the full salary.
What happens if the employee changes employers in Serbia?
The benefit is portable. If the employee moves to a new Serbian employer during the five-year period, the new employer can continue applying the Article 15v reduction for the remainder of the term, provided the new employer is not affiliated with a previous employer of the employee and all other conditions are met at the new employment. The five-year clock does not restart with the new employer; it continues from the original employment start date.
Does the affiliated company restriction only apply to the direct previous employer?
No. It applies to any previous employer that is affiliated with the new qualified employer. The employee must provide a written list of all prior employers, and the employer must confirm none are affiliated parties. One exception: if the employee has resided in Serbia for at least three years at any point in the previous 25 years, the restriction does not apply.
Do the salary thresholds change every year, and what happens to existing contracts?
Yes. The Government updates them annually based on the prior 12-month average salary. For 2026: RSD 439,692 for Category 1 and RSD 293,128 for Category 2. If a threshold increase takes an employee's contract salary below the new figure, the employer must amend the contract or lose the benefit for that year. An annual contract-salary review against the published threshold should be a standard payroll compliance step.
Can the benefit be used for an employee working in Serbia for a foreign company with no Serbian entity?
No. The employer must be a Serbian-resident legal entity or entrepreneur. The correct approach is to establish a Serbian entity or use a locally registered employer of record.
- Law on Personal Income Tax (Zakon o porezu na dohodak gradjana), Official Gazette of the Republic of Serbia, No. 24/2001 and subsequent amendments; Article 15v governing the salary tax base reduction for newly-settled taxpayers (novonastanjeni obveznici).
- Dinarski iznosi mesecnih zarada iz clana 15v st. 5. i 6. Zakona o porezu na dohodak gradjana za 2026. godinu, Official Gazette of the Republic of Serbia, No. 115/2025: Category 1 threshold RSD 439,692; Category 2 threshold RSD 293,128.
- Rulebook on the Manner of Exercising the Right to Salary Tax Base Reduction for Newly Settled Taxpayers (Pravilnik o nacinu ostvarivanja prava na umanjenje osnovice poreza na zaradu za novonastanjenog obveznika), Official Gazette of the Republic of Serbia, No. 134/2020.
