Let’s, just for a second, take a look at a few years back; it can be easily noted that, when it comes to the tax treatment of freelancers in Serbia, the year 2020 was the most significant turning point. For those of you who weren’t actively following the course of the event, let’s recap: around the mid-October of that year, the Tax Administration issued a statement – warning directed at all natural persons – taxpayers in the Republic of Serbia who receive a salary or other income from abroad to file their taxes and therefore fulfill their legal obligation of self-initiatively taxation of the income that does not originate from Serbia.
This unexpected “invitation” has been a surprise for many of those to whom it was directed, and it was followed by a backlash from the public. With this gesture, not only did the Tax Administration openly draw the taxpayers’ attention to their obligations but has also explicitly indicated that certain individuals who do not adhere to these rules have already been identified.
According to the initial allegations of the Tax Administration, such a result arose from the conducted comparison of the transactions made from abroad to the foreign exchange accounts of natural persons in Serbia and the reports on the submitted tax returns of the taxes calculated and paid by the self-assessment, as well as of the contributions based on salary and other income. The conclusion that the described analysis led to is that the legal obligation of a self-taxation has been subject to a large number of violations by freelancers and other natural persons engaged by foreign employers and clients, which was the main trigger of the Tax Administration’s intervention.
Although at a first glance, it appears that the obligation to pay the taxes and contributions for the salary or other income from abroad has always been a generally known fact, everything previously described creates the impression that a certain number of taxpayers were not aware of this obligation of theirs, whereas the ones who were aware weren’t sure how to calculate the exact amount that needs to be paid. Consequently, we have had the opportunity to encounter the practical realization of the famous legal principle stating that the “ignorance of the law excuses not”, given that the majority of freelancers have been confronted with the obligation to retroactively pay significant amounts of taxes to the government.
The previously described events led to numerous protests by freelancers, as well as negotiations with state authorities; moreover, the Association of Internet Workers was established to negotiate with the Government, as well as for the general protection of the rights of the so-called digital workers. Despite multiple amendments to the Law on Personal Income Tax following October 2020, the tax status of freelancers in Serbia from the aspect of labor law and tax law is still not definitively regulated, and it is projected that the adoption of a special law regulating their status would be the only adequate and complete solution. Such a solution would include defining the forms of work via the internet and the formal regulation of the freelancers’ business activities, setting the criteria for the calculation of the taxes and contributions, as well as the issues such as sick leave and other absences.
Therefore, the period ahead of us shall bring some significant novelties. Until that happens, we will focus on the current regulations and probably the most important question for the majority of freelancers – what does the current taxation regime look like?