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Even though a compromise has been reached, for the time being, the question arises whether this is just the lull before a new storm or just one of the battles in the “war” between the Tax Administration and workers on the internet.
On April 28, 2021, members of the Serbian Parliament adopted the Law on Amendments to the Law on Personal Income Tax and the Law on Amendments to the Law on Contributions for Mandatory Social Insurance, which significantly reduced the debt based on the income of freelancers accrued from 2015 to end of 2021. As announced, a certain part of the changes will be applied from January 1, 2022, with the idea that, in the meantime, freelancers will be able to choose either the status of an entrepreneur or to set up a limited liability company. The drafting of a law that would regulate non-standard forms of work was also announced, with representatives of the Association of Internet Workers (URI) invited to the working group for drafting the law.
The problem of taxation of freelancers, which suddenly became a burning issue on October 14, 2020, after the decision of the Tax Administration of Serbia to collect 5-year retroactive tax debt of natural persons earning income from abroad by working for foreign employers, was temporarily ended. Namely, an undetermined number of freelancers did not pay personal income tax based on income earned abroad, either due to lack of information, due to uneven interpretations of tax authorities or since the existing tariff was disproportionately large in relation to the earned income. The details regarding the previous tax treatment are too complex to be covered in this text, so you can read about them here.
The Association of Internet Workers (URI) was set up simultaneously with the announcement of the Tax Administration. The Association articulated the demands of freelancers and organized a series of public debates, campaigns on social networks and protests in front of the Parliament at the same time. As a result, the number of people has surpassed all gatherings of this kind organized in the last year in Serbia. At the same time, those were some of the few recorded protests in Europe demanding the regulation of the employment status of freelancers working on global digital platforms.
While negotiating with the Government of Serbia, URI advocated that the Law on Personal Income Tax passed in 2001 does not specify the category of income earned by working online or income from abroad within the framework of Article 85, “Other income.” The Association thought that the prescribed tax of up to 50% is too high for any income from abroad. Also, the Association advocated that the internet is where almost one hundred thousand people earn their main or additional income, and that the law passed in 2001 could not be the basis for taxation, and that there is a need to change it.
The Association also claimed that excessive non-compliance with tax regulations resulted from the legal vacuum and that state institutions did not promptly recognize a growing category of workers on the internet and did not legally define their status, rights, and obligations. In addition, URI and some other experts believed that the Tax Administration did not exercise their advisory role in previous years, nor were they focused on informing taxpayers and educating citizens about tax obligations. Also, in previous years, the Tax Administration did not exercise its control role; that is, it did not inform or warn taxpayers to settle their tax liabilities.
According to a 2015 World Bank survey and some other surveys, Serbia, compared to the rest of the world, has one of the largest communities of freelancers working through digital platforms indeed, measured by the share of this workforce in the total active workforce. Many foreign and domestic studies have documented this phenomenon and pointed out that this area has not been regulated properly. In the countries of the Western Balkans, with a history of attempts to collect such taxes retroactively, more favourable tax solutions have been introduced meanwhile. In particular, this has been the case in Montenegro and Northern Macedonia. In addition to those, the tax treatment of these taxpayers is also generally more favourable in most other European countries.
The solution was adopted after several suspensions of negotiations and several meetings between the highest representatives of the Government of Serbia, the Ministry of Finance and the Tax Administration with the Association of Internet Workers and some other associations. As a result, the income for the period from January 1, 2015, to December 31, 2021, became the subject of tax exemption of up to RSD 384,000 per year for royalties from the copyright and related rights and for contracted fees for the work carried out, which are the subject of self-taxation. Additionally, there is a reduction of the tax base for standard costs in the amount of up to 50% revenues exceeding the introduced tax exemption. These changes erased the debt of freelancers with lower income almost completely and significantly reduced taxes for those freelancers whose income was below 500 euros per month. The latter will repay the determined tax debt in 120 monthly instalments, that is, over 10 years.
Also, an agreement was reached that taxpayers’ years of service would be accounted for based on paid contributions for mandatory social insurance, which was not the case until then. The way to do this calculation should be determined by by-laws.
From January 1, 2022, the tax base on such income will be determined by reducing the gross income generated in a given quarter by normative costs in the amount of three times the amount of tax exemption provided for salaries (which would currently amount to a total of RSD 54,900). In the meantime, other requests of freelancers concerning labour legislation should be addressed through the working group for drafting the law on the regulation of non-standard forms of work. The representatives of URI advocated the regulation of these rights through labour legislation.
Many associations and the media supported the freelancers’ protest, including the two largest unions – the Confederation of Autonomous Trade Unions of Serbia (SSSS) and the Trade Union Confederation “Independence” (UGS NEZAVISNOST) – as well as the Serbian Association of Employers, NGOs such as the Association for the Protection of Constitutionality and Law and “Kreni-Promeni” Team. Tax experts had different views on the possibilities to solve the problem of the incurred debt, although it can be said that there was a consensus that the existing legal solution imposed disproportionately high taxes on freelancers. Some of the freelancers who were not satisfied with such an outcome separated from URI and organized a separate association, Internet Workers of Serbia (IRS), advocating a complete write-off of the tax debt incurred in the last five years. The IRS said in a statement that the association was founded by activists who had been protesting, camping, and fighting for months for a fair solution and write-off of alleged debts of all internet workers, as well as for defining an acceptable model of taxation in the future – which has not been achieved with this deal as it refers to “only one part of internet workers” and “does not solve the legal status of this community in the future.”
Taxing freelancers who generate income through global digital platforms is an extremely complex issue because it represents a worldwide phenomenon and changes the classic relations between the employer and the employee who are taxpayers within the same national borders. Platforms themselves deny that they are employers and consider themselves only intermediaries between freelancers, as self-employed, and their clients. While this can be argued for some occupations because there are elements of an entrepreneurial relationship in their work, in cases of platforms setting workers the condition that they cannot work for other platforms, there is a clear relationship of subordination that characterizes the employer-worker relationship. Since platforms deny having the role of an employer, the burden of paying taxes and contributions is entirely on those who work through those very platforms. In addition to these, there are other dimensions of the complexity of determining the status of people working through global digital platforms. For some, this job is an additional one (in addition to other regular offline jobs they have), and for some, this job is a predominant or only source of income. This means that one solution does not suit everyone.
Some labour law experts and researchers argue that non-standard forms of work, including freelancers, should be regulated by the future Labour Law as the current law does not adequately recognize workers on the internet, nor does it define their rights and obligations.
URI advocates that online workers should be entitled to social protection, including the right to sick, pregnancy, and maternity leave. The current Law on Mandatory Social Insurance stipulates that persons receiving the agreed compensation are contributors, but – until the entry into force of the Law on Amendments to the Law on Pension and Disability Insurance in December 2019 – a natural person who does not have the status of an employee could not be in the capacity of an insured individual, i.e. their years of service are not accounted for nor do they have health insurance. This issue has not been completely resolved to this day. However, it is expected that by-laws will determine how years of service will be dealt with in proportion to the paid part of their obligations in the case of internet workers.
The deadline for the adoption of all legal regulations that will define the future status of workers on the internet has been put off to January 1, 2022. The terms agreed so far will remain valid until then.
The Association of Internet Workers believes that the solution they reached in the negotiations with the Government will bring relief to many freelancers, although it is far from ideal. They announced that they would ask the working group for the adoption of the law on non-standard forms of work to “regulate the legal status and introduce a fair model of taxation that will ensure our future.”


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