Tax Exemptions Update

by Marija

On July 12th, 2019 Ministry of Finance on the basis of Article 18a Paragraph 5 of Personal Income Tax Law enacted Rulebook on the exercise of the right to tax exemption based onorganizing recreation, sport events and activities for employees (”Official Gazette of the Republic of Serbia”, no. 50/19) and on the basis of Article 18 Paragraph 6 related to Article 18 Paragraph 1 point 11) and Pragraph 2 of Personal Income tax law enacted Rulebook on the exercise of the right to tax exemption for the employee earnings based on own shares acquired free of charge or at preferential price (”Official Gazette of the Republic of Serbia”, no. 50/19).

Rulebook on the Exercise of the Right to Tax Exemption based on Organizing Recreation, Sport Events and Activities for Employees prescribes the conditions for exercising the right to tax exemptionrelated to employer expense forcreating and maintaining conditions for recreation of employees in the workplace, reimbursement of employees’ collective recreation costs, organizing sports events and activities for employees (popular: team-building).

Tax exemption can be achieved with the fulfillment of the following conditions: expenses must be documented, payments must be made directly to the supplier’s account, this benefit must be defined by the general act of the employer, all the employees, without discrimination, must have the right to recreation of the same type and quality in the workplace.

The right to participate at team-building (organized sports events and activities for employees) must have at least 70% of employees, and 70% of employees must use the right to participate.

Main goal for organizing sport events and activities is improving the health of employees and building better relationships between employees, i.e. between employer and employees.

Rulebook on the exercise of the right to tax exemption for the employee earnings based on own shares that employee acquired free of charge or at preferential price prescribes the conditions for exercising the right to tax exemption for employee’s incomebased on own shares, options for own shares or shares in capital of the employer, i.e. shares, options for shares or shares in capital of employer’s affiliated entities (hereinafter:“own shares”) which employee acquires without compensation or at preferential price from employer or from employer’s affiliated entities.

Employees can achieve tax exemption under the following conditions: basis, method, and condition of acquisition of shares must be determined by the general act, employment agreement or other act of employer or employer’s affiliated entities, date of acquisition and type and number of shares must be defined, an employee cannot alienate shares within two years of acquisition of the right of disposal, an employer or affiliated entities cannot redeem own share from the employee, employee cannot terminate his employment with the employer before the expiration of two years from the acquisition of the own shares.

Both above mentioned by-laws related to the tax exemptions came into force on July 20, 2019 and will have significant impact to the improvement of tax regulations in these areas. If you have any questions regarding the above, please contact Ana Popović, Živković Samardžić Employment Partner and Nataša Sarić, Associate at Živković Samardžić  or any of your regular contacts at Živković Samardžić.

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