Employer of Record & PEO — 8 min
If you’re ready to take the next step in your career and strike out on your own, Serbia is an ideal location to get started.
Whether you’re planning to set up shop in the hip culture spots of Belgrade, the historic Danubian city of Novi Sad, or the picturesque winter landscapes of Kopaonik, this storied republic is an ideal place to merge work and lifestyle.
Before you can embark on your self-employment journey, though, you’ll need to know how to:
Register your business in Serbia
Avoid misclassification as an employee
Create compliant contracts that protect you
Invoice and collect payments from around the world
In this article, we’ll cover all these things, and help you navigate your tax responsibilities as a self-employed worker. We’ll also discuss some of the other risks and liabilities you should be aware of. So let’s begin.
First, it’s important to clarify how Serbia defines independent contractors.
Independent contractors are workers who provide paid services (or products) to another party. However, they are classified differently to employees, and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.
In Serbia, these differences are clarified by the country’s Labor Act. In general, you are considered an independent contractor if you:
Determine your own work schedule and hours
Perform (or are able to perform) work for other companies
Set your own rates and scope of work
Are able to delegate or subcontract work
Set your own working hours
Work without direction or supervision
When you work with clients, you must be correctly classified to avoid penalties and fines, and to ensure that you are paying the right taxes.
Before you can begin working as an independent contractor in Serbia, you’ll first need to choose a formal structure for your business. Some of the most popular models include:
Entrepreneur/sole proprietor (preduzetnik): A simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities. Note that there is a small distinction in the terms used; entrepreneurs practice liberal, regulated professions (such as medicine or law), while sole proprietors are generally tradespeople and artisans.
General partnership (generalno partnerstvo): A simple partnership agreement. Again, there is no legal separation between the individual and the business; you and your partners are personally responsible for any debts and liabilities. It’s possible to create a limited partnership to mitigate this risk.
Limited Liability Company (DOO): A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally (i.e. you are only liable for the capital you invest in the company).
There are pros and cons to each of these structures, but most independent contractors choose the sole proprietor model, as it is fairly simple to set up and operate. If you’re unsure, it’s a good idea to speak with a registered solicitor or accountant first.
To set up as a sole proprietor, you must register online with the Agency for Business Registers (APR). Note that, from June 2023, you will only be able to submit this registration through the Serbian government’s eID portal. If your business activity requires a permit or license (i.e. if you’re handling food or working in a regulated industry), you will need to provide the relevant permit as part of your application.
As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.
Some of the most common ways to collect payments include:
Digital transfer services like PayPal and Wise
These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides Serbia, the payment collection process can be even more complicated.
Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Serbian dinars (or other currencies) — and with no hidden fees. Learn more about how our platform can help.
As an independent contractor, you’re responsible for filing and paying your own taxes and social contributions.
The good news is that, as a sole proprietor, you pay personal income tax on your business profits (using your personal tax number). This means that you do not have to fill out a separate tax return, or pay additional corporate taxes.
In Serbia, the income tax structure is slightly unusual; you will need to pay a flat rate of 10% on your annual profits, plus an additional 10% if you earn over three times the national average salary. If your profits exceed six times the national salary, you will need to pay another additional 10%.
As a self-employed person, you must also make social insurance contributions of around 26% of your covered income. Note that the minimum amount of income you can make contributions on is 35% of the national average salary (over the previous three months), while the maximum is five times the national average salary (over the previous month).
You can see how the Serbian government defines average national salaries here.
In Serbia, there is no income threshold for VAT — all entrepreneurs and sole proprietors are required to register for VAT. If your annual turnover is lower than RSD 50 million (around $470,000), you will need to file your VAT returns every month.
The standard VAT rate in Serbia is 20%, although some goods and services are taxed at the lower rate of 10%.
To learn more about VAT rules in Serbia — including how to register and file your returns — check out the Ministry of Finance website.
As a sole proprietor, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.
It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Serbian and international clients.
As a sole proprietor, you don’t need to publish financial statements or accounts. However, you must still keep organized, accurate records of all your commercial activities (including receipts and invoices). As mentioned, you must also properly maintain your VAT records.
You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant.
As we’ve mentioned, independent contractors are classified differently to employees in Serbia. Many of the protections and benefits employees enjoy do not typically apply to contractors.
As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.
As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.
If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.
Work through this checklist to help determine if a new hire should have a contractor or employee relationship.
Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.
You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Serbian law.
As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:
Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.
Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Serbian dinars hassle-free, without any hidden fees.
When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Serbian laws, ensuring that you always stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.
With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.
Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.
Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.
By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:
Avoid intermediary fees and delays with international client payments
Draft compliant contracts for both Serbian and foreign clients
Enhance your invoice management and avoid manual processes
Comply with local labor laws regarding work practices
Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.
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Employer of Record & PEO — 8 min
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