A new way of taxing the income of natural persons who are sent from abroad to work for a domestic business entity
The Government of the Republic of Serbia submitted to the RS Assembly the Draft Law on Amendments to the Law on Personal Income Tax (hereinafter the Law). It is expected that the adoption of the proposed amendments will take place during the month of December, and the proposed amendments will be applied from January 1, 2021. One of the changes refers to the new way of taxing the income of natural persons who have been sent from abroad to work for a domestic business entity.
The current way of taxation
Under the previous Law, Article 100a, paragraph 5, the obligation to calculate and pay withholding tax on the income of a natural person who was sent from abroad to work for a domestic business entity referred to a person who is the recipient of income (referred natural person) and self-taxation, if it was provided for in the Double Taxation Treaty.
A new way of taxation
The proposed amendment to Article 99, paragraph 3 determines the obligation to calculate and pay taxes after deduction of a domestic legal entity on the basis of the income of a natural person who has been sent from abroad to work for a domestic business entity. This obligation arises when the domestic legal entity pays the amount for reimbursement of labor costs to the employer from another state only in the case when the tax is not previously paid by self-taxation in accordance with Article 100a paragraph 5 of the Law, regardless of whether the deadline from Article 95 has expired. paragraph 5 and Article 114 paragraph 1 of the Law.
The draft law adds a new paragraph 6 in Article 100a, which stipulates that a natural person who is sent to work for a domestic economic entity does not have the obligation to calculate and pay taxes if that obligation has already been performed by the domestic economic entity.
The amendment to Article 100a, paragraph 5 only clarifies more clearly that a natural person sent from abroad to work for a domestic business entity is liable to calculate and pay taxes on the basis of earnings and other income from an employer from another country, who sent him to work for a domestic business entity.
The proposed amendment to Article 15a of the Law, to which paragraph 6 has been added, determines that the basis for calculation and payment of taxes is the amount paid by the domestic economic entity to the foreign employer. The amount paid is considered gross income and is subject to 10% tax without the right to tax relief.
The transitional and final provisions of Article 24 provide for the retroactivity of the application of the aforementioned provisions of the Law in cases when the procedures for determining, collecting and controlling withholding taxes have begun and have not been completed by the day these amendments enter into force.
The conclusion regarding all the above is that the obligation to calculate and pay taxes on a domestic economic entity, for natural persons sent from abroad to work for a domestic economic entity, at the time of payment of pre-invoiced salary costs. This obligation exists only in the event that the referred natural person has not already paid the tax on the basis of self-taxation.