At the end of 2019 and at the beginning of this year, the world of IT entrepreneurs saw changes with the adoption of amendments to the Personal Income Tax Act and the introduction of the independence test in order to determine who is actually a lump sum entrepreneur and who is avoiding income tax payments (Independence test). Namely, the amendments to the Personal Income Tax Act and the Compulsory Social Security Contributions Act set a significantly higher rate for taxes and contributions for entrepreneurs who would be found to have failed the Independence test, and special reliefs were given for companies that employ former entrepreneurs, who were in fact employed until then.
This year should have seen the start of the Independence test and also the recruitment of persons having de-facto employee status. However, the coronavirus pandemic has changed the focus in all segments of society, a plethora of decrees have been issued to help businesses overcome the potential financial crisis, tax administration included.
Shifting the hiring deadline – the latest in a series of economic package measures
On April 24, 2020, the Government of Serbia enacted a Decree postponing the deadline for determining who qualifies as a qualified new employee (“Decree“). This Decree postpones the deadline for determining who qualifies as a qualified new employee as defined in Article 21ž(3) of the Personal Income Tax Act and Article 45đ(3) of the Compulsory Social Security Contributions Act.
Namely, the deadline for determining who qualifies as a qualified new employee, for a person who in the period from January 1, 2019 to December 31, 2019 did not have the status of an insured employee, i.e. a self-insured person who is a founder or shareholder of a company, which is in an employment relationship in a company of which he is a founder or a shareholder, is postponed for a period of 60 days from the date the state of emergency is lifted. It also covers all persons who fall into this category, together with entrepreneurs who have not been employed in the previous year.
Finally, the state has met the needs of the business community and extended the deadline for former entrepreneurs and other persons, giving them access to obtain employment benefits and allowing them to qualify for new qualified employee status within the extended deadline. However, while the Decree is good news for all companies planning to hire, there is not too much cause for celebration. The deadline for implementation of the Independence Test has not been postponed, so the new rules of business introduced under the amendments of the Personal Income Tax Act should become the norm, in order to avoid being slapped with a higher tax bill than you budgeted for.
For more information, please contact us via covid19@geciclaw.com.
