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N O T I F I C A T I O N
regarding the proposed new Law on Personal Income Tax which is to take effect on 01 January 2019, and the existing Law on Personal Income Tax and other amendments to the legal provisions in the Law on the Public Revenue Office, the Law on Prevention of Money Laundering and Terrorist Financing and the Law on Fiscalisation shall cease to apply
The proposed Law on Personal Income Tax regulates the taxation of personal income of natural persons, taxpayers for tax payment, tax basis for tax calculation, tax rates, deadlines for tax payment and other issues important for personal income tax assessment and payment.
The new draft law categorizes income into two basic types of income categories, as follows:
- Income earned by the taxpayer through their (physical or intellectual) work (income from labor) as follows: income from work; income from self-employment; income from copyright and related rights; income from the sale of own agricultural products. This type of income is taxed at a progressive rate as follows: 10% for tax basis of up to 90,000.00 denars and 18% tax rate for the part of income over 90,000.00 denars.
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Annual tax base (gross) up to 1,080,000.00 – 10% applicable rate
Annual tax base (gross) from 1,080,001.00 – 18% applicable rate
For individual gross payments of up to 90,000 – 10% applicable rate
From 90,001.00 – applicable rate of 18%
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Annual tax base (net) up to 972,000.00 – 11.1111% progressive rate
Annual tax base (net) from 972,001.00 – 21.9512% progressive rate
In individual net payments of up to 81,000.00 – 11.1111% progressive rate
From 81,001.00 – progressive rate of 21.9512%
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- Income earned by the taxpayer from capital, property or other assets in their possession (income from capital and other income), as follows: income from industrial property rights; income from lease and sublease;
2.1. capital income as follows:
– Dividends
– Interests on loans
– Interests on deposits
– Interests on securities;
2.2. capital gains, as follows:
– Real estate sold within 5 years after acquisition (100% * 15%)
-Real estate sold within a period of 3 years after acquisition if they lived there for 1 year before the sale (90% * 15%
– Real estate sold 5 years after acquisition (not taxed)
– From securities (90% * 15%)
– Share in capital (90% * 15%)
– Other movable property (90% * 15%)
– Intangible Property (100% * 15)
winnings from games of chance, insurance income and other income.
These types of income are taxed at a single applicable rate of 15%.
Flat tax of 15% irrespective of the amount of gross income i.e. flat tax of 17.6471% irrespective of the amount of net income.
- Change in social contribution rates:
– Mandatory pension and disability insurance contribution from 18% to 18.40%
– Mandatory health insurance contribution from 7.30% to 7.40%
Other contributions remain unchanged
Conclusion: salary contributions increase by 0.50%
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Gross salary of 25,000 in December 2018 NET = 17,178.00
Gross salary of 25,000 in January 2019 NET = 17,113.00
DIFFERENCE = 65.00 monthly
- Novelties in taxation of leases (tax on income from lease and sublease)
– Exemptions for furnished premises were reduced from 30% to 15% and in May for unfurnished premises from 25% to 10%.
– Income tax rate applied to the net tax base for unfurnished premises is 15.6069% and for furnished premises 14.6132%
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Unfurnished premises:
Gross income = 60,000.00
Recognized costs = 6,000.00
Tax base = 54,000.00
Income tax = 8,100.00
Net amount payment = 51.900.00
FURNISHED premises
Gross income = 60,000.00
Recognized costs = 9,000.00
Tax base = 51,000.00
Income tax = 7,650.00
Net amount for payment = 52,350.00
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- DRAFT AMENDMENTS TO THE LAW ON FISCALIZATION (cash payments)
– In catering facilities, a fiscal receipt must be issued with the order;
– The receipt can be canceled within 15 minutes from the moment it is issued at the catering facility;
– Each fiscal receipt must show the payment method (cash, card, invoice, etc.);
– Payment in cash is banned for goods and services of up to 2,000 euro or more in denar currency in the form of one or several clearly related transactions, which has not been effected through a bank, savings house or account with another payment services institution. This ban applies until 31.12.2018. From 01.01.2019 until 30.06.2019 the ban on payment in cash shall be 1,000 euros in denar currency; and after 30.06.2019 it shall be 500.00 euros in denar currency.
The fines for inobservance of these provisions of the Law on Prevention of Money Laundering and Terrorist Financing amount to 30,000 euro for the legal entity and 30% of the legal entity’s fine for the responsible person (9,000 euro).
- AMENDMENT TO THE LAW ON THE PUBLIC REVENUE OFFICE – IMPORTANT PROVISION!!!
The Public Revenue Office is obliged to collect data on all individual payments of natural persons through transaction accounts kept at the authorized banks.
Authorized banks shall be obliged to submit information to PRO on the institution authorized to perform payment operations (the bank); information on the natural person – recipient (name, surname and EMBG); information on the ordering party; information on the inflow amount and other inflow data (code and basis for payment, country code and currency if the payment is from abroad) by 28.02.2019.
As of January 2019, the banks shall submit this information to PRO within 15 days of the month for the previous month.
With this novelty, PRO will at all times have information on payments to individuals on all grounds (taxable and non-taxable).
Regarding persons who have income – tax on income from abroad, they are obliged to pay personal income tax within 10 days of the month for the previous month.
- FOR UNREPORTED PERSONAL INCOME TAX PRO is entitled to calculate TAX at the rate of 70%
- The calculation and payment of INCOME TAX ON PERSONAL INCOME for SELF-EMPLOYED PERSONS and SOLE PROPRIETORS (LAWYERS, NOTARIES, ACCOUNTANTS, ENFORCEMENT OFFICERS, EXPERTS, CONSULTANTS, SOLE PROPRIETORS in RETAIL, SERVICE ACTIVITIES, ARTISANS, etc.) falls under taxpayer income from LABOR INCOME and shall be taxed at a progressive rate of 10% and 18%.