This is how freelancers will pay taxes from January 1, 2023.

No one counted them exactly. Estimates are that slightly more than 100,000 citizens of Serbia work through internet platforms, and freelancers are more than that. They are not recognized by any regulation as a special work "category", and apparently we will not get a law on flexible forms of work anytime soon.

Designers, programmers, professors of foreign languages, translators, writers and all those who earn their living on the basis of copyright or "related rights", from 2023 will pay tax according to a precisely established procedure - through so-called self-taxation, choosing between two models. The regulation that regulates this is currently being adopted in the Serbian Parliament.

Two tax models

After almost a year of work by the Working Group, a new (more precisely, amended and supplemented old) Law on personal income taxes was finally written, which will regulate the taxation of freelancers in the future. And freelancers will submit their first income report to the tax authorities - 30 days after the end of the first quarter of the next 2023, so - by the end of April.

Namely, freelancers will pay their obligations to the state quarterly, while having the opportunity to choose one of two possible methods of income tax calculation every three months - the first carries a tax rate of 20 percent, and the second of 10 percent.

But a lower rate does not necessarily mean a lower burden. Everything, in fact - depends on the amount that the freelancer earns during three months. In short, the new regulation foresees two "formulas" for calculating taxes for freelancers.

The first one, according to the freelancers themselves who participated in the work of the working group, is suitable for those who earn up to 50,000 dinars per month in this way. Namely, the first model envisages that 96,000 dinars of so-called standardized costs are deducted from the quarterly income (as a type of tax exemption), so the difference thus obtained is taxed at a rate of 20%.

According to the second model, standardized costs of 57,900 dinars are deducted from the quarterly income, but 34 percent of the realized income is also deducted. Tax is paid on the difference at the rate of 10 percent. This model is, again according to freelancers, more profitable for those who earn more than 50,000 dinars per month.

- Natural persons under equal conditions can decide on the method of determining the tax base and with it the amount of the tax liability, whether they decide to recognize standardized costs in the amount of RSD 96,000 per quarter and pay tax at a rate of 20%, or to decide to recognize standardized costs in the amount of RSD 57,900 quarterly increased by 34% of the gross income realized in the quarter and payment of tax at the rate of 10% - the Ministry of Finance states in the explanation of the law.

If they won't do it themselves - the tax collectors will do it for them

The introduction of self-taxation means that freelancers will report their incomes and calculate and pay taxes and related contributions themselves. However, in that calculation, they will have the help of the Tax Administration.

- In order to facilitate the entry of data in the tax application and the calculation of the tax liability, the Tax Administration will fill out the tax application in advance and deliver it to the taxpayer in electronic form via the Tax Administration portal, with the data on realized income, and the natural person would have the obligation to amend or supplement tax application related to data that the tax authority does not have, such as the number of dependent members of the household and others - explained in the Ministry of Finance.

The freelancer also submits the amended or supplemented tax application in electronic form, through the portal of the Tax Administration.

- And, if the taxpayer does not submit a tax application within the legal deadline, the Tax Administration submits a tax application for that person - specifies the new law.

What about contributions

We have already mentioned that the first model, with a tax rate of 20 percent, is more suitable for those with lower incomes. More precisely, for those who earn additional income through freelance jobs or who have just entered the "freelance waters". Of course, those who are already employed and earn additional income in this way will not pay health contributions​.

The second model, with a tax rate of 10 percent, is more suitable for those with higher incomes for whom it is still unprofitable to register as an entrepreneur due to, for example, a high flat tax, or because they would not pass the so-called independence test. They also pay pension and health contributions.

Some freelancers still point out that the new regulation brings them more obligations than rights, considering that they will not have the right to sick leave, nor to paid maternity leave, for example, so some associations say that they are not giving up on the proposal that, in proportion to the rights received, reduce the rate of mandatory contributions that are paid. The minimum monthly pension contributions are currently 7,720 dinars - the quarterly cost would be 23,160, while the minimum monthly contributions for health insurance - 1,402 dinars, and the quarterly cost would be 4,206 dinars. These amounts will be different - it is expected to be higher next year, since the minimum bases for both types of contributions are calculated and prescribed in relation to the average earnings published by official statistics.

The amounts of 7,720 and 1,402 dinars represent minimum monthly contributions, and the law states that "if the contribution base is lower than the taxable income - the contribution base is the taxable income".

One of the associations (Association of Freelancers and Entrepreneurs of Serbia), which participated in the work of the working group for drafting the law, published on its website detailed tax calculations based on the new law.

Source: poslovi.infostud.com