Serbia operates a structured payroll system that includes mandatory social security contributions, a flat income tax rate, and additional progressive annual taxation for high earners. Changes to contribution thresholds and non‑taxable salary amounts have a direct impact on both net salaries for employees and total employment costs for employers.
Maximum Contribution Base Increase
The maximum contribution base is:
RSD 732,820
Increase in the Non‑Taxable Salary Amount
At the same time, the non‑taxable portion of salary is:
RSD 34,221
This portion of the salary is exempt from personal income tax.
Overall Impact on Employees and Employers
Despite the increase in the non‑taxable salary amount, the combined effect of the higher maximum contribution base results in:
Lower net salaries for employees, particularly those with medium to high income levels
Higher total employment costs for employers, as social security contributions apply to a broader salary base
Income Tax Structure in Serbia
Monthly Income Tax
Serbia applies a flat personal income tax rate of 10% on employment income, after deducting the non‑taxable salary amount.
In addition, income tax applies when annual income exceeds a statutory threshold:
10% income tax applies to income exceeding RSD 312,117, which represents three times the average annual salary
Additional Annual Personal Income Tax (Progressive Component)
High earners are subject to additional annual income taxation, calculated progressively based on total annual income:
Income between 3× and 6× the average annual salary
→ Additional 10% taxIncome exceeding 6× the average annual salary
→ 10% base tax plus an additional 15% tax
This system introduces a progressive element on top of Serbia’s flat monthly income tax, significantly increasing the tax burden for high-income employees.
Summary
The increase in the maximum contribution base raises both employee deductions and employer expenses.
The higher non‑taxable salary amount provides limited relief but does not fully compensate for increased contributions.
The flat 10% income tax, combined with progressive annual taxation, results in a higher effective tax rate for high earners.