Technological prosperity and development of the Internet have arisen new methods of work and wider possibilities for remote work.
Bearing in mind the above mentioned, many have found sources of income in jobs like professors of English language, web development, QA, content writers and others.
From the year of 2020, the state has recognized a huge amount of incomes that are not reported to the state, so the tax administration came forward with tax controls of the unreported incomes of citizens.
Since then, it appears that freelancers are in constant “public eye“.
Many protests were gathered, many organizations were formed, commissions for drafting the law, negotiations. It has been written and talked about the most optimal solution that would be acceptable both for the state and for freelancers.
Now, three years later, we receive one legal solution within changes and additions to the Law on Personal Income Tax that arose as a result of many years of negotiations and considerations.
What exactly has the state predicted for freelancers?
MODEL A
According to the first model (in further text „Model A“) standardized costs have been established in a quarter period in the amount of 96.000,00 RSD.
Let’s remember, standardized costs are costs that are recognized as the costs of performing business.
Basically, monthly the “non taxable“ part will amount to 32.000,00 RSD.
It is important to emphasize that by the Model A, the only mandatory compensation are the contributions for health care that will be paid on the minimum base.
In the case that a person is already engaged in employment status and as an extra job working as a freelancer, contributions for health care will not be mandatory.
For example, if you are employed and as an extra job you are working as a freelancer and monthly income from freelance is up to 32.000,00 RSD, you will not have to pay for taxes and contributions for the income you earn from freelance.
If you are earning more than above mentioned amount, on the calculated basis you will be required to pay:
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- Contributions for the Pension and Disability Insurance Fond – 24%;
- Contributions for health insurance – 10,3%;
- Personal Income Tax – 20%.
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The basis for taxes, socials and contributions in the case of Model A would be:
Gross income – 96.000,00 RSD = BASIS.
For example, if you have earned within one quarter 300.000,00 RSD, the basis on which you would calculate taxes, socials and contributions would amount to 204.000,00 RSD.
Model A is more payable for people that are earning less and occasionally.
Don’t worry, the law has foreseen a model also for people that from freelance are earning higher incomes.
MODEL B
Model B acknowledges standardized costs in the amount of 57.900,00 RSD within one quarter increased by 34% of the gross income.
In the period of one quarter (the period of three months) to whatever income you earn, the standardized costs amount to 57.900,00 RSD.
As you may notice, it is a smaller amount than the Model A that prescribes the amount of 96.000,00 as standardized costs. However, Model B predicts that standardized costs will increase by 34% of gross income.
So, to reach to the basis on which you will calculate taxes, socials and contributions you must use the following formula:
Gross income-57.900,00 RSD – 34% gross income = BASIS
On a practical example, if you earn an amount of 200.000,00 RSD monthly, that is 600.000,00 RSD quarterly, the basis will be calculated as follows:
600.000,00 RSD (gross income) – 57.900,00 RSD(standardized costs) – 204.000,00 (34% of gross income)
= BASIS in the amount of 338.100,00 RSD.
When you have the basis, on the same one you will calculate taxes, socials and contributions in the following amount:
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- Contributions for the Pension and Disability Insurance Fond- 24%;
- Contributions for health insurance : 10,3%
- Personal Income Tax – 10%.
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It is important to emphasize that in the case of Model B, personal income tax is predicted in the smaller amount then Model A, and it amounts to 10%.
Tax returns
Freelancers will be obligated to submit tax returns on their own behalf for the previous quarter in the next 30 days from the end of the quarter.
Quarter is a time frame of three months, and all obligations for taxes, socials and contributions will be calculated on the basis of income earned within one quarter.
For example, for the period January-March, tax returns will be submitted until April 30 in the current year.
Freelancers themselves can choose Model A or Model B. That is, you will be able to calculate which model is more profitable for you.
The tax returns will be submitted online, and yet is to come to see how in practice the system of submission of tax returns function.
What do you think, have freelancers and the state finally reached a fair agreement?
