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Writer's pictureСергей Морингевич

Unemployed director in Serbia

One of the most frequent and reasonable questions from our clients: is the hired owner of a company (primarily a DOO, an analogue of an LLC) obliged to pay social security contributions (doprinosi) from the date of company registration or from the date of employment (that is, after receiving a work permit)?


Our company received a detailed response from the tax advisor of one of the most authoritative specialized publications in Serbia, paragraf.rs .


"The question stated that the founder of the company is a foreigner, but it was not stated whether he performs any business functions within the framework of the company's activities before receiving a work permit, i.e. while outside of an employment relationship , whether he is listed as a legal representative of the company in the relevant register (APR).

Our assumption is that the founder is registered as a legal representative from the date of registration of the company. In this case, the company is obliged to submit the PP OD-O form for the previous month by the 15th of the month and, within the same period, calculate and pay the contributions (according to the general rules, the PIO contribution is calculated and paid at a rate of 24%, health insurance at a rate of 10.3% and unemployment insurance at a rate of 0.75%), at least on the lowest monthly contribution base (which in 2023 is 35,025 dinars).


After the establishment of an employment relationship with the founder, who is also the legal representative of the company, the obligation to pay contributions will be made through the PPP-PD tax return when paying wages, as well as for all other employees, i.e. a person in an employment relationship with the employer, therefore, from the date of employment, there is no obligation to pay contributions for the founder who established the employment relationship by filing the PP OD-O tax return.


On the other hand, a foreigner who has a work permit may only perform those tasks for which he has received a permit in the Republic, in accordance with the provisions of paragraph 2 of Article 14 of the Law on Employment of Foreigners (Official Gazette of the RS, No. 31/2019 - hereinafter: LZS). Taking into account these provisions, a foreigner will not be able to perform work until he has received the work permit itself.

However, it is also important to point out the provision of Article 1.3.3 of the Law on the Protection of the Rights of Foreigners, which stipulates that the conditions for the employment of a foreigner established by this law do not apply to a foreigner whose stay in the Republic does not exceed 90 days within six months from the date of first entry into the Republic, as well as to a foreigner who is the owner, founder, representative or member of a body of a legal entity registered in the Republic, in accordance with the law, if he does not work for this legal entity.


According to this provision, a foreigner in a specific case who is a legal representative of a legal entity registered in the Republic of Serbia and is not employed by this legal entity, does not have to obtain a work permit unless his stay here lasts more than 90 days within six months from the date of first entry into the Republic of Serbia.


A natural person who is a founder of a company registered in the Republic of Serbia falls under Article 6.1.15. of the Law on Mandatory Social Security Contributions, provided that he/she performs any business functions.


Work under the above-mentioned law, in addition to employment relationships, also includes representation of the company based on registration in the APR register.


This means that if in a particular case the founder of the company is not employed there, but is only registered as its representative , social contributions (doprinosi) are calculated at the lowest rate (at the time of publication of the article, the amount of contributions is about 8,000 dinars*) and are submitted to the tax office on form PP OD-O. This tax return is submitted by the company, and contributions are also paid by the 15th of the month for the previous month.


In the opposite situation , when the founder does NOT perform business functions in the company (the founder is not a legal representative and is not registered as another authorized person in this company, therefore the work is performed by another person), the company is not obliged to calculate and pay contributions for this founder."


*Note from AskMe.rs


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