Two Self-Taxation Options: Which One to Choose?
If you also generate income as a freelancer, the logical question is which option suits you better in terms of income. Find a more detailed explanation of the two self-taxation options in the text.
Amendments to the Law on Personal Income Tax and the Law on Contributions for Mandatory Social Insurance from December 2022 regulate the issue of tax treatment of income and exercising the rights of freelancers based on the work performed. However, it is important to emphasize that these legal solutions do not define "freelancer" as a legal term, and you will not find a definition of "freelancer" in any valid regulation.
We will use the term "freelancer" in an informal manner, for natural persons who receive income from persons who, when paying income, does not calculate and does not pay tax and contribution obligations in the Republic of Serbia.
What does this mean for freelancers?
According to this legal solution, from January 1, 2023, freelancers in Serbia have the option to pay income tax according to one of two options, which they will be able to choose themselves.
Freelancers report and pay their obligations quarterly, with the possibility to choose one of the two methods of self-taxation within each accounting period, i.e. quarter, which are shown in more detail in the table below.
If you also generate income as a freelancer, the logical question is - how much is the tax burden. In the rest of this text, we offer a more detailed explanation of these two options.
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Option 1 |
Option 2 |
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Standardized expense deduction: 96,000 RSD in a quarter. Tax: 20% - The tax base is made up of the gross income realized in the quarter minus the standardized expenses. This means that if you earn up to RSD 96,000 in a quarter, you will not have to pay taxes. Contributions for pension and disability insurance (PIO) 24% - The basis for the payment of PIO contributions is the gross income realized in the quarter minus the standardized expenses. This means that if you earn up to RSD 96,000 per quarter, you will not have to pay contributions for pension insurance. Health insurance contributions 10.3% - If you are not a primary holder of health insurance on some other basis (e.g. as an employee or according to an international agreement), you are obliged to pay health insurance. The rate of 10.3% is applied to three times the base amount of 15% of the average monthly salary in the RS, which means that the minimum amount to be paid is RSD 4,789 for the quarter. If this base is lower than the taxable income, the taxable income will be calculated as the basis for payment of contributions. ___________________________________ Example 1: quarterly income RSD 60,000 Basis for payment of taxes and contributions = 60,000 – 96,000 =RSD 0 TAX = RSD 0 PIO = RSD 0 Health = RSD 0 if you have health insurance or RSD 4,789 if you don’t have health insurance. Total: RSD 0 or 4,789 ______________________________ Example 2: quarterly income RSD 100,000 Basis for payment of taxes and contributions = 100,000 – 96,000 = RSD 4,000 Tax = 4,000 x 20% = RSD 800 PIO = 4,000 x 24% = RSD 960 Health = RSD 0 if you have health insurance or RSD 4,789 if you don’t have health insurance. Total: RSD 1,760 or 6,549 _______________________________ Example 3: quarterly income RSD 180,000 Basis for payment of taxes and contributions = 180,000 – 96,000 = RSD 84,000 Tax = 84,000 x 20% = RSD 16,800 PIO = 84,000 x 24% = RSD 20,160 Health = RSD 0 if you have health insurance or RSD 8,652 if you don’t have health insurance. Total: RSD 36,960 or 45,612 _______________________________ Example 4: quarterly income RSD 300,000 Basis for payment of taxes and contributions = 300,000 – 96,000 = RSD 204,000 Tax = 204,000 x 20% = RSD 40,800 PIO = 204,000 x 24% = RSD 48,960 Health = RSD 0 if you have health insurance or RSD 21,012 if you don’t have health insurance. Total: RSD 89,760 or 110,772 |
Standardized expense deduction: 57,900 RSD in a quarter, increased by 34% of gross income generated in the quarter. Tax 10% - Taxable income is equal to gross income minus standardized expenses. This means that if you generate less income in a quarter than the amount of taxable income, you will not have the obligation to pay tax. Contributions for pension and disability insurance (PIO) 24%: If you opt for this option, the PIO contribution is mandatory. The basis for paying contributions for PIO is at least three times the amount of the lowest monthly contribution basis. This means that you will have to pay at least RSD 25,218 for the PIO contribution on a quarterly basis. If the basis is lower than the taxable income, the taxable income will be calculated as the basis for payment of contributions. Health insurance contributions 10.3% - If you are not a primary holder of health insurance on some other basis (e.g. as an employee or according to an international agreement), you are obliged to pay health insurance. The rate of 10.3% is applied to three times the base amount of 15% of the average monthly salary in the RS, which means that the minimum amount to be paid is RSD 4,789 for the quarter. If this base is lower than the taxable income, the taxable income will be calculated as the basis for payment of contributions. ___________________________________ Example 1: quarterly income RSD 60.000 Basis for payment of taxes and contributions = RSD (60,000-(57,900+60,000*34%) Tax = RSD 0 PIO = RSD 25,218 Health = RSD 0 if you have health insurance or RSD 4,789 if you don’t have health insurance. Total: RSD 25,218 or 30,007 _____________________________ Example 2: quarterly income RSD 100,000 Basis for payment of taxes and contributions =(100,000-(57,900+100,000*34%)=RSD 8,100 Tax = 8,100 x 10% = RSD 810 PIO = RSD 25,218 Health = RSD 0 if you have health insurance or RSD 4,789 if you don’t have health insurance. Total: RSD 26,028 or 30,817 _______________________________ Example 3: quarterly income RSD 180,000 Basis for payment of taxes and contributions = (180,000-(57,900+180,000*34%) = RSD 60,900 Tax = 60,900 x 10% = RSD 6,090 PIO = RSD 25,218 Health = RSD 0 if you have health insurance or RSD 6,273 if you don’t have health insurance. Total: RSD 31,308 or 37.581 _______________________________ Example 4: quarterly income RSD 300,000 Basis for payment of taxes and contributions = (300,000-(57,900+300,000*34%) = RSD 140,100 Tax = 140,100 x 10% = RSD 14,010 PIO = 140,100 x 24% = RSD 33,624 Health = RSD 0 if you have health insurance or RSD 14,430 if you don’t have health insurance. Total: RSD 47,634 or 62,064 |
More information can be found in the Guide and the FAQ section.