What is the result? Entering into employment relationship with entrepreneurs becomes more attractive and is more simplified for the employer. Namely, the employer who establishes the employment relationship with an entrepreneur will be exempt from the following:
- 70% of the income tax paid in 2020;
- 65% of the income tax paid in 2021;
- 60% of the income tax paid in 2022;
- 100% of the contributions for the mandatory pension and disability insurance for the salaries paid in 2020;
- 95% of the contributions for the mandatory pension and disability insurance for the salaries paid in 2021;
- 85% of the contributions for the mandatory pension and disability insurance for the salaries paid in 2022.
Therefore, if the lump-sum taxed entrepreneur concludes the employment agreement with their client, the client will obtain the right to significant tax relief in the following three years.
Furthermore, the importance of this benefit reflects in creating a counterbalance to possible difficulties in the business activities of business entities that fail to comply with the Independent contractor test.
However, declaration of the state of emergency in the Republic of Serbia caused the need to modify a number of regulations to the new circumstances. One of the most recent amendments is the one from the Decree on postponing the deadline for acquiring the status of a qualified newly employed person (hereinafter referred to as Decree), which entered into force on April 24, 2020. According to its title, Decree extends the deadline for the acquisition of the state of a qualified newly employed person, hence it is postponed from April 30th to a period of 60 days from the date of termination of the state of emergency.
By extending the above-mentioned deadline, lump-sum taxed entrepreneurs earned the additional time to legally establish the regular employment relationship and therefore prevent the tax inspection penalties, which may be a threat in case the entrepreneur fails to fulfill the requirements set in the Independent contractor test. In this case, the additional time may represent a second chance for all those who missed their opportunity to enter into the employment agreement by April 30, and a motive to reconsider their decision.