Payroll tax relief for foreign hires in Serbia: the 70% base reduction and its conditions

An employer in Serbia that hires a qualified newly settled taxpayer reduces the salary tax base by 70% under Article 15v of the Personal Income Tax Act. The same 70% reduction applies to the base for mandatory social insurance contributions under the Contributions Act. The relief runs for five years from the start of the employment relationship.

Who counts as a qualified newly settled taxpayer

This is not a general relief for foreign nationals. The Personal Income Tax Act ties it to the status of qualified newly settled taxpayer, which belongs to a person moving to Serbia in order to take up employment and meeting a prior residence test. The test is a time test: the person must not have been predominantly resident in Serbia during the 24 months before the employment contract was signed. Citizenship is not the measure. A Serbian national who spent six years working in Germany can qualify, while a foreign national who spent the previous two years in Belgrade on another basis cannot.

The Act sets out two categories and both carry a salary threshold. The first rests on the 24 month test: the conditions on the position and on special professional education count as met where the monthly salary is higher than three average salaries in Serbia, which from 1 January 2026 means more than 439,692 dinars (Article 15v paragraph 5 of the Personal Income Tax Act, amount as adjusted for 2026). That category covers engineers, project managers and specialists brought in for highly paid positions. The second category replaces that test with another: a person under 40 who spent the 12 months before the contract predominantly outside Serbia for further education or professional training, on a lower threshold of two average salaries, more than 293,128 dinars from 1 January 2026 (Article 15v paragraph 6). Both amounts are restated once a year, so the threshold is read for the year the contract is signed. Each category carries its own evidence list, and the employer has to decide which basis it is filing under before the first payroll run, because the basis cannot be swapped later.

The third condition is the link to a Serbian employer. The employment must be for an indefinite term with a resident employer that is not a related party to the employer the person worked for before, and the person must hold resident status in Serbia for tax purposes. The relief follows the salary from that employment, not income under other contracts.

What the relief is worth and how long it lasts

The reduction applies to the base rather than to the tax amount, and it applies twice. The salary tax base is reduced by 70% under Article 15v of the Personal Income Tax Act, and the base for mandatory social insurance contributions is reduced by 70% under the Contributions Act. For the employer this means both tax and contributions are computed on 30% of the contracted gross salary, within the statutory minimum and maximum contribution bases.

The duration is five years from the day the employment relationship begins. The clock starts on that day, not on the day the employer first applied the relief, so a late start shortens the usable period instead of shifting it.

A separate set of reliefs exists for newly employed persons generally, unconnected to relocation. The window for using those existing reliefs for newly employed persons was extended to 31 December 2026 by the 2026 amendments to the Personal Income Tax Act. The two regimes are not combined on the same salary, so the employer picks one basis per employee.

Procedure, supervision and the mistake that costs most

Supervision sits with the Tax Administration of the Republic of Serbia, inside the system run by the Ministry of Finance. The relief is not granted by a separate decision in advance: the employer applies it through the withholding return for tax and contributions and keeps the evidence in the employee file for inspection. The practical order runs like this. Before the employment contract is signed, gather proof of where the person lived for the previous 24 months, confirmations of foreign employment, and qualification evidence if the second category is used. At signing, set a contract salary consistent with the chosen basis. From the first payroll run, compute on the reduced base and keep the full file for five years.

The most expensive mistake is the 24 month test. An employer claims the relief for a worker who, eighteen months before the contract, was already registered on temporary residence in Serbia on another basis. The audit reads that from the residence record, the relief fails, and the employer pays the difference in tax and contributions for every month it was applied, with interest. If the worker arrived in Serbia on a work permit and this is not their first stay, check the residence history before the payroll is even prepared. How that stay is documented is covered in our note on the D visa and employment procedure in Serbia, and registration duties in the guide to social insurance registration for foreign workers.

The Article 15v relief lowers the base for both tax and contributions, so on the same contracted gross salary the employer's cost falls and the net reaching the worker rises. It depends on facts that exist before the contract is signed and cannot be repaired afterwards. The full employment cost with and without the relief is set out in our cost breakdown for hiring a foreign worker in Serbia and in the material for employers.