The challenges faced by freelancers in Serbia were a primary topic in 2021, yet four years later, they continue to encounter numerous difficulties, ranging from high taxes to complications in receiving payments from abroad. Although new models of self-assessment have been introduced, many still believe that the system is not adequately tailored to their needs.
Freelancers are individuals who are neither employed nor registered as entrepreneurs, but who receive monetary compensation for projects they are hired to complete. They primarily work in programming, graphic design, digital marketing, or teaching foreign languages.
“Being a freelancer has its advantages, but also some downsides. The first and most significant advantage is that there is no boss and I independently carry out my work, even though I regularly do so for clients who can be considered employers,” explains freelancer Tamara Adamović to NIN.
The lack of legal regulations in this area caused significant problems at the end of 2020 when the government decided to introduce a series of regulations to establish order in this market. In December of that year, the tax authorities demanded retroactive payment of taxes on foreign income for the previous five years. Such a change was deemed necessary as freelancing had become a prevalent work practice globally, and in Serbia as well. Therefore, there was a need to integrate these individuals into legitimate tax payment flows. However, freelancers had been operating in a “grey zone” for years without clear regulations on the taxation of income from foreign clients, as internet work was not recognized at that time. The only option was to pay full taxes and contributions without any reliefs, which amounted to approximately 40 percent of total income.
The demand for retroactive tax payments triggered protests from freelancers who sought the withdrawal or amendment of the proposal that could plunge many into debt.
Subsequently, the Government of Serbia, facing significant dissatisfaction, decided to initiate negotiations and present amendments to the proposal in agreement with the Internet Workers Association (Udruženje radnika na internetu – URI). The key change concerned the cancellation of interest, and the government exempted about 80 percent of freelancers who had not settled their tax and contribution obligations in prior years from debt. Those whose outstanding taxes were not forgiven were given the opportunity to refinance their debt and make payments on arrears in installments over a ten-year period. Legal amendments were then introduced to allow this refinancing, which had previously been available only to businesses, to also apply to individuals.
The government offered the cancellation of both interest and debt. Any earnings during the year for which tax was calculated had 50 percent forgiven as standard costs. Furthermore, a non-taxable minimum was also deducted, which stood at 384,000 dinars annually. Thus, those who earned up to 768,000 dinars were not required to pay anything.
In some instances, the Tax Administration issued final decisions on debt repayment without consultation, as was the case with freelancer Aleksandra Čugalj.
“I received such a decision without being asked whether I wanted to be part of the refinancing program or pay the debt in full without entering the program for certain years. What this means in practice is that as long as a person is in the program, they must repay debts and cannot take out a loan, as loans will not be approved,” Aleksandra explains to NIN, adding that this had not been initially communicated to them.
A working group was formed to draft new laws on flexible forms of employment. However, they failed to introduce any amendments over the course of a year. The law with initial amendments remains in effect without any significant changes.
Nevertheless, an increase in the non-taxable amount per quarter was proposed, so from February 1, 2025, the non-taxable amount for the first model of self-assessment will increase to 107,738 dinars, as opposed to 103,296. For the second model, which applies to lower amounts of taxation, the threshold will be 64,979 dinars, which is 2,679 dinars more than the previous year. This adjustment enables freelancers to retain a larger portion of their income without tax.
The government also provided freelancers in Serbia with two options. The first option is more suitable for those with lower incomes who wish to maintain minimal obligations and earn up to 103,296 dinars per quarter, while the second option offers greater flexibility for freelancers with higher earnings, as it allows for larger tax exemptions. The second option is more complex and includes standard costs of 62,300 dinars per quarter, which increase by 34 percent of the gross income earned in that period.
The introduction of new self-assessment options and the digitalization of tax procedures have contributed to an increase in the number of tax returns filed by freelancers. Since the beginning of 2024, nearly 11,000 tax returns have been submitted, representing a 20 percent increase compared to the same period last year, with 3,450 returns submitted in just the third quarter. According to estimates, freelancers paid nearly 890 million dinars in taxes in 2024, 260 million more than in 2023. This increase is attributed to electronic tax filing systems via the ePorezi portal and the Freelancers portal, developed with the support of the Ministry of Finance.
However, despite these changes, dissatisfaction persists among freelancers.
“New platforms have enabled online tax payments, but in practice, they function poorly, as there are no reliefs. Everything must be done manually; the only thing it provides is an insight into how much the tax could amount to based on the earnings a person achieved in the quarter,” Aleksandra explains.
Furthermore, since March 2024, the Health Insurance Fund (RFZO) has enabled automatic verification of health records for freelancers.
Nonetheless, the greatest problem for freelancers remains the high taxes imposed on small earnings. If income exceeds a certain threshold, taxes can increase dramatically, making this work model unprofitable for them.
Freelancers’ incomes fluctuate from period to period, making this payment model unsuitable for everyone. Another issue involves certain banks, which lack adequate administration for handling incoming foreign payments. In some instances, freelancers may wait up to a month for their clients’ payments to be processed. Consequently, they risk having an increased tax burden if a payment is recorded in a subsequent quarter, potentially pushing them over the threshold where tax rates rise.
In addition to tax challenges, freelancers faced a new obstacle in 2023 and 2024 due to difficulties in receiving payments from abroad. Global financial transaction platforms, such as Wise, have eliminated the option for users from Serbia to open accounts, further complicating the situation. PayPal, which already has limited options for users in Serbia, is also not an ideal solution, while other financial platforms have either imposed high commissions or entirely disabled access to their services.
Freelancers with more stable incomes often opt to establish a company and pay a flat tax, allowing them to earn up to six million dinars annually. This model requires monthly tax payments from the first to the fifteenth of the month and is influenced by various factors, including the city or municipality where the company is registered and how many years the company has been active. While a suitable solution for freelancers, it is not financially viable for those whose earnings vary from month to month.
“I was prompted to establish my own company because I have more stable and regular earnings, which allows for a greater variety of financial operations, such as obtaining business or housing loans, purchasing on installments… Another advantage is the possibility of handling multiple jobs simultaneously, or hiring employees for them, which enables me to work in several different thematic areas at the same time, reflecting positively on my earnings,” says Srđan Simonović to NIN.
However, a flat tax payer must undergo an independence test, which the Tax Administration uses to determine whether someone genuinely operates as an independent entrepreneur or is in a concealed employment relationship. If the entrepreneur fails the independence test, their activity may be taxed as an employment relationship, which entails higher taxes and contributions. In cases where someone works exclusively for one company for a certain amount of time (four, six, or eight hours a day), freelancing is the only option to avoid excessively high tax obligations.
Source: Where are freelancers now: Self-taxation, digitalization, and dissatisfaction
