Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Mellow by themselves.
To carry on tax accounting in Serbia for your Mellow income, you need to:
• be a tax resident.
• obtain a tax ID number.
Tax residence in Serbia
Serbia taxes its residents on their worldwide income, while non-residents are taxed on Serbian-source earnings only.
A resident of the Republic of Serbia shall be understood to mean any individual:
whose residence or center of business and vital interests (real estate, family, or underage children's place of study) are in the territory of the Republic;
who resides in the territory of the Republic for 183 or more days, continuously or with breaks, over a period of 12 months beginning or ending in the respective taxation year;
who is sent abroad for the purpose of working for the diplomatic or consular representative office of the Republic.
Tax ID
The tax identification number (Poreski Identifikacioni Broj, PIB) in Serbia is a unique number that you need to obtain to pay the country's taxes (including property tax) and to set up as a sole proprietor. PIB consists of 9 digits for sole proprietors and 13 digits for individuals. The Tax Administration assigns PIB based on a registration application:
PR-2 — Form to register as a sole proprietor.
PR-3 — Form to register as a non-resident individual.
Freelancer taxes
Tax liabilities in Serbia depend on the freelancer's status and/or fulfillment of certain conditions. See a detailed breakdown below.
Self-employed individual
On January 1, 2023, a new tax regime became available to freelancers in Serbia. It introduced an online platform where each quarter Serbia-based freelancers can choose one of two taxation models:
Model A (1): A 20% tax rate, fixed statutory deductible costs on a quarterly basis in the amount of RSD 96,000. Social security contributions at the following rates: healthcare insurance – 10.3%; pension and disability insurance – 24%. The basis for calculating the contributions is taxable income, but the minimum contribution amount is RSD 1,402 per month (RSD 4,206 per quarter).
Sample calculation of tax on quarterly income of RSD 150,000: (RSD 150,000 - RSD 96,000) * 20% = RSD 10,800.
Model B (2): A 10% tax rate, statutory deductible costs on a quarterly basis in the amount of RSD 57,900 increased by 34% of quarterly gross income. Social security contributions at the following rates: healthcare insurance – 10.3%; pension and disability insurance – 24%. The basis for calculating the contributions is taxable income, but the minimum monthly contribution amount is RSD 23,160 for pension and disability insurance and RSD 4,206 for healthcare insurance.
Sample calculation of tax on quarterly income of 150,000 RSD: (RSD 150,000 - RSD 57,900 - (RSD 150,000 * 34%)) * 10% = RSD 4,110).
Reporting and payment. Regardless of the chosen model, taxpayers must file quarterly tax returns under the PP OPO form and pay the tax within the same period of no later than 30 days after the end of the quarter. For example, from April 1 to April 30, 2023, the taxpayer pays tax and reports income for the period from January 1 to March 31, 2023. The tax return contains information about the taxpayer and the amount, type, receipt method, basis, and date of income. To file a PP OPO tax return, follow these steps:
Go to the E-Porezi (E-taxes) portal.
Log in using the PIN code provided by the Tax Administration.
Select where you're going to file the tax return by pressing the button "Izaberi" (if you're not yet registered with the Tax Administration, you'll be given the option to register).
Check, correct, or supplement the declaration online, or upload an XML file and sign the document before sending it to the Tax Administration.
To streamline data entry and tax calculation, the Tax Administration prepares the tax return in advance and sends it to the taxpayer. The taxpayer is expected to update the data (change or supplement it). Should the taxpayer fail to file the return within the statutory period, the Tax Administration does it for them based on the data available to the fiscal authority (which may be incomplete).
To sum up, Model A is the better option for smaller incomes, while Model B becomes more profitable as your income grows.
Sole proprietorship
Entrepreneurs who set up as sole proprietors (preduzetnik) must be Serbia's citizens, or have Serbian residence and work permits which they renew regularly. After registering as a sole proprietor, you can apply to the Department for Foreigners for a residence permit, and then for a work permit to the National Employment Service. Foreign nationals arriving to Serbia are required to register their residence ("potvrda o prijavi boravišta") with the local police station or online within 24 hours of their arrival.
Setting up as a sole proprietor:
determine the type of activity (šifra delatnosti);
submit an application to the Serbian Business Register Agency (Agencije za privredne registre, APR) and pay an RSD 1,500 fee;
obtain a tax ID (PIB);
open a bank account.
Registering as a sole proprietor in Serbia takes an average of 5 business days.
IMPORTANT! Entrepreneurs need to pass an independence test that assesses them based on 9 criteria (clause 17 of article 85 of the Personal Income Tax Law) to ensure there is no employee misclassification and the entrepreneur is in fact independent from the client. If a sole proprietor doesn't pass at least 5 of the 9 criteria, they may be reclassified into the client's employee.
Entrepreneurs in Serbia have two taxation methods to choose from: lump-sum or self-taxation (bookkeeping).
You pick lump-sum taxation when registering as a sole proprietor, and the APR passes on this information to the Tax Administration. Within 48 hours from the registration, the tax authority sends the respective calculation to the entrepreneur's E-Porezi account. Changing the taxation method is only possible in the next taxable period (year) and is done by submitting an application before October 31 of the current year through the E-Porezi portal. Upon terminating a sole proprietorship, the entrepreneur must notify the tax authority and file a tax return within 30 days.
Requirements and limitations. Lump-sum entrepreneurs have an annual income limit of RSD 6 million. They also can't be in the VAT system; should the entrepreneur register for VAT, they must start the respective accounting no later than the day their VAT obligations arise.
Accounting and reporting. The only obligation such flat-rate taxpayers have is recording issued invoices in a special book called KPO (knjiga o ostvarenom prometu paušalno oporezovanih obveznika). There's no need to file a tax return: the tax authority sends in the tax and contributions to be paid via E-Porezi.
Calculation and payment. The amount of tax and contributions is not income-dependent. Instead, the tax authority calculates it based on the business activity, place of registration, gender, and age of the entrepreneur. Taxes and contributions must be paid by the 15th of each month.
Entrepreneurs who keep books have two options: pay a personal salary or don't pay a personal salary.
Bookkeeping without salary payment
In this scenario, taxes and contributions are payable on the difference between income and expenses:
tax rate — 10,0%;
pension and disability insurance contribution — 24,0%;
healthcare insurance contribution — 10,3%;
unemployment insurance contribution — 1,5%.
Accounting and reporting. Sole proprietors who choose this taxation method are obliged to keep books and file tax returns (PPDG-1S) and tax-basis balance sheets (PB2) to the tax authority via the E-Porezi portal. We recommend that you double-check the full list of accounting requirements directly with the Serbian Tax Administration. Within 15 days from the date of registration, the bookkeeping entrepreneur must file the first PPDG-1S tax return online. The return includes estimated income and expenses for the period from the incorporation date to the end of the financial year, with the difference between the two constituting the estimated profit (income) that serves as the basis for advance tax and contribution calculation. At the end of the year, that basis for the calculation of taxes and contributions is updated in the PPDG-1S return to factor in the actual income and expenses. To file a PPDG-1S tax return online (the process is the same as that for self-employed individuals), you need to specify the following data:
place of registration and the sole proprietor's bank details;
grounds for filing the return: incorporation, current activities, or termination (see the guide's "Основ за пријаву" section for more details);
the sole proprietor's activities;
tax liabilities data: the amount of income, expenses, contributions, advance payments, receipt dates, and the payment basis.
Payment of tax. Taxes and contributions (advance payments) for the previous reporting month are to be paid before the 15th day of the current month. If the income for the month is less than the minimum base of RSD 22,000, then it is this minimum that serves as the calculation basis for social contributions.
Bookkeeping with salary payment
Entrepreneurs who opt for salary payment must apply online before December 15 of the current year to be eligible in the next taxable period (year).
Under this taxation method, the entrepreneur's income is divided into:
income received as part of entrepreneurial activities, which is to be reported using self-taxation (note: in addition to expenses, taxable income is decreased by the entrepreneur's personal salary and the accompanying insurance contributions).
income that is paid as salary directly to the sole proprietor is subject to income tax like that of an employee (an individual). The tax rate on personal income in Serbia is progressive and depends on the ratio of income received to average annual salaries and wages of the population:
Taxable income, RSD | Tax rate, % |
up to 21,712 | 0 |
up to 3.523 million | 10 |
3.523 million to 7.046 million | 20 |
from 7.046 million | 25 |
The following deductions are available (deductions cannot exceed 50% of taxable income):
40% of average annual income;
15% of the average annual salary for a dependent family member;
taxpayers who are 40 years or older as of the last day of the taxable period (December 31) are eligible for an additional deduction in the amount of three average annual salaries.
The tax return (PP OPO form) is provided by the tax authority annually before April 1 of the year following the reporting one. The return is filled out the same way as that of a self-employed individual. Next, the taxpayer must verify the information online or make changes to it before May 15, and pay the tax within the same period.
Social security contributions are 19.9% (employee's rate) and 17.9% (employer's rate), deductible.
The standard VAT rate is 20% (10% or 0% for certain types of goods and services).
The deadline for filing an application to register for VAT is until the end of the first VAT reporting period. Once registered, terminating VAT is only possible after a 2-year period.
Requirements and limitations. No tax regime affords exemption from VAT, but if the entrepreneur pays VAT, they cannot apply lump-sum taxation.
Self-employed individuals and sole proprietors must pay VAT if their total turnover of goods and services for the last 12 months exceeds RSD 8 million (voluntary registration without exceeding the turnover limit is also possible).
Reporting and payment. The tax return is filed within 15 days after the expiration of the tax period, and then the taxpayer is given another 15 days to pay the tax. There are two taxable periods for VAT purposes: month and quarter. For taxpayers whose annual turnover for the previous 12 months exceeds RSD 50 million, the taxable period is a month, while for all the rest the taxable period is a quarter (as per Article 48 of Serbia's Law on Value-Added Tax). For more information on filling out a VAT return, see here.
IMPORTANT! Mellow does not have the option to choose a tax status for freelancers based in Serbia, but you can fill in your tax ID in your account.
Additional info
Income received via Mellow is declared based on certificates and invoices, and as per the offer agreement;
Reporting templates for individuals and sole proprietors;
Serbia has double taxation agreements with a number of countries;
If you have any questions, get in touch via the chat in your Mellow account, or email [email protected].