Personal income taxation in Serbia is based on the principles of tabular income taxation, which many advanced tax jurisdictions have abandoned because it is unclear and unfair. This is one of the conclusions of the Foreign Investors Council (FIC), which was published in the 2023 White Book.
FIC analysts point out that it is necessary to repeal or amend the controversial decree of the Ministry of Finance regarding the tax treatment and documentation of compensation for commuting costs (to and from work) and to amend the law so that the documentation requirement is abolished or aligned with the earlier judgment of the Supreme Court of Cassation on to this issue.
“The schedular system of taxation of the citizens’ income is still in use and is a problem of the Serbian system of taxation of natural persons. Therefore, the Serbian government should consider implementing a synthetic taxation system, which is used in many developed tax systems,” the FIC report states.
It is also recommended that, through amendments to the law, clearly define and specify the position regarding the tax treatment of interest-free loans (that is, loans with interest rates lower than the current market ones), which the employer grants to employees.
The FIC also underlines the importance of aligning certain regulations that would enable foreign persons sent to work in Serbia and domestic citizens employed by foreign companies to be registered for mandatory social insurance.
Furthermore, the FIC notes that the Serbian government should expand the network of international agreements that regulate the issue of social insurance, all with the aim of avoiding double payment of social contributions.
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