Navigating Tax Regulations: Essential Guide for Serbian Freelancers
Today, freelancers in Serbia have several solutions when it comes to legalizing their businesses, and self-employed remote workers finally have the status they deserve.
Highlights
Respect: Freelancing in Serbia is now a respected career with clear tax rules.
Tax Options: Choose Model A (taxes income over a limit) or Model B (lower rates with deductions).
Manage Finances: Track earnings, set goals, and consult experts regularly.
Starting out as a freelancer almost a decade ago meant dealing with looks of disapproval, a plethora of questions, and a veil of mystery surrounding the content writing industry. Today, being a self-employed remote worker is a highly coveted, respected career choice— and even the biggest skeptics are showing great interest in this opportunity.
With the recognition and expansion of freelancing in Serbia came the long-awaited tax regulations. Today, freelancers in Serbia have several solutions when it comes to legalizing their businesses, and self-employed remote workers finally have the status they deserve. Let’s explore the tax considerations for Serbian freelancers and important aspects of finance management.
Initial Challenges and Unfavorable Freelancer Status
Years ago, when I kickstarted my freelancing journey, content writing seemed more like a convenient side hustle opportunity rather than a career path. There were little to no legal regulations concerning this niche, and truth be told, the income wasn’t nearly as high to consider starting a private business.
Since my initial income wasn’t exceeding the tax-free amount, I wasn’t too concerned with legal matters at the very beginning of my career. As my situation changed for the better, I began my investigation regarding income tax, and the regulations at the moment were far from favorable.
Before the Serbian Association of Freelancers began its negotiations with the government, the proposed solution was for freelancers to pay arrears for the last five years WITH interest—in addition to their current tax obligations. This abrupt decision, high interest rates, and the lack of law regulations regarding freelancer tax status resulted in complaints and protests.
An agreement was finally reached in April of 2021, according to which freelancers pay 13% of their annual income if their average earnings surpass 1,000 euros (~$1118) or 20% if the average earnings are more than 2000 euros (~$2235). In addition, the quarterly tax-free threshold was set to ~$524.
The freelancer “witch hunt” ended with an agreement that was deemed a good enough compromise by both parties—although not a perfect solution. Today, Serbian tax legislation recognizes freelancing and offers a dedicated website for freelancing tax declaration.
Taxation Models for Freelancers in Serbia
The amendments to the Law on Personal Income Tax Serbia that were implemented at the very start of 2023 led to a defined, clearly set tax status for freelancers. The government launched a freelancer taxation and income reporting portal, offering two different taxation models.
The first model, known as Model A, was designed for freelancers with lower quarterly incomes. In this scenario, freelancers aren’t required to pay taxes if their quarterly income doesn’t surpass RSD 96,000 (~$916). In case the quarterly income is higher than this amount, only the part that exceeds the limit is taxed. In simpler terms, you will get the tax base when you deduct $916 from your quarterly earnings—and the tax rate applied to that amount is 20%.
Freelancers who earn more usually find Model B far more appealing. This tax model recognizes two categories of standardized costs: the fixed amount (RSD 57,900=around $553) and 34% of total income. In this case, the tax base is immediately reduced by $553, and the remaining amount is then decreased by an additional 34% of total income. The tax rate in this model has been cut in half, meaning it amounts to 10%.
Let’s use a $2,500 quarterly income as an example. A freelancer who selected Model B would, in this case, have a tax base of ~$1,097 after the standardized costs have been deducted. This means that the tax total would be ~$109,7.
Neglecting your tax declarations and payments can lead to severe penalties, as fines can be as high as $1430. Depending on the success of your business, you can switch between models each quarter. The flexibility of this taxation system is quite relieving for freelancers—especially those lacking the security of a fixed income.
The Importance of Regular Review and Adjustment
Juggling all financial obligations and expenses as a freelancer is challenging, to say the least. This is precisely why it is crucial to regularly review your finances, including expenses, savings, and investments, and adjust your plans accordingly.
From one self-employed remote worker to another, here are a few tips to have in mind:
Track monthly earnings and expenses—Don’t rely on short-term memory; you’ve got enough on your mind. Whatever your preferred method may be (journals, spreadsheets, apps), aim for a clear, straightforward record of your earnings and expenses. This will allow you to adjust your lifestyle accordingly and perhaps eliminate unnecessary elements
Set financial goals—Clearly set goals can be a game-changer, as they’ll motivate you to stay on top of your game and prevent mindless spending
Consult with financial professionals—Are you having doubts about the chosen tax model? A single consultation with an expert can completely change your business plan, so don’t hesitate to seek professional advice
Final Thoughts
Gone are the days when freelancing wasn’t worthy of a career status in the business world. Today, freelancers in Serbia are renowned writers, graphic designers, videographers, landscape architects, and IT experts working for successful companies worldwide—or building a business of their own. Don’t hesitate to dip your toes in freelancing waters, whether it be a career choice or a source of extra income.
