Calculation Of Entrepreneur’s Personal Salary in 2024

Calculating the personal salary of an entrepreneur involves understanding various tax and legal regulations. This guide explains the parameters applied in 2023 for determining an entrepreneur’s personal salary, including the new non-taxable amounts, contribution bases, and the implications of different scenarios. Whether you’re an entrepreneur insured under another basis or managing your business independently, this comprehensive overview will help you navigate the complexities of personal salary calculations.

New non-taxable amount of RSD 21,712, the lowest monthly contribution base of RSD 35,025, and the highest monthly contribution base of RSD 500,360

The personal salary of an entrepreneur is a tax law concept, not labor law, and thus the possibility of paying an entrepreneur’s personal salary is regulated by:

  • The Law on Personal Income Tax (“Official Gazette of RS”, No. 24/2001, 80/2002, 80/2002 – other law, 135/2004, 62/2006, 65/2006 – corr., 31/2009, 44/2009, 18/2010, 50/2011, 91/2011 – US decision, 7/2012 – adjusted din. amounts, 93/2012, 114/2012 – US decision, 8/2013 – adjusted din. amounts, 47/2013, 48/2013 – corr., 108/2013, 6/2014 – adjusted din. amounts, 57/2014, 68/2014 – other law, 5/2015 – adjusted din. amounts, 112/2015, 5/2016 – adjusted din. amounts, 7/2017 – adjusted din. amounts, 113/2017, 7/2018 – adjusted din. amounts, 95/2018, 4/2019 – adjusted din. amounts, 86/2019, 5/2020 – adjusted din. amounts, 153/2020, 156/2020 – adjusted din. amounts, 6/2021 – adjusted din. amounts, 44/2021, 118/2021, 132/2021 – adjusted din. amounts, 10/2022 – adjusted din. amounts and 138/2022 – hereinafter: the Law)
  • The Law on Compulsory Social Insurance Contributions (“Official Gazette of RS”, No. 84/2004, 61/2005, 62/2006, 5/2009, 52/2011, 101/2011, 7/2012 – adjusted din. amounts, 8/2013 – adjusted din. amounts, 47/2013, 108/2013, 6/2014 – adjusted din. amounts, 57/2014, 68/2014 – other law, 5/2015 – adjusted din. amounts, 112/2015, 5/2016 – adjusted din. amounts, 7/2017 – adjusted din. amounts, 113/2017, 7/2018 – adjusted din. amounts, 95/2018, 4/2019 – adjusted din. amounts, 86/2019, 5/2020 – adjusted din. amounts, 153/2020, 6/2021 – adjusted din. amounts, 44/2021, 118/2021, 10/2022 – adjusted din. amounts and 138/2022 – hereinafter: the Law on Contributions)

Specifically, Article 13, Paragraph 3 of the Law stipulates that the salary, in terms of this law, includes the personal salary paid to the entrepreneur as determined by this law. Article 33a, Paragraph 1 of the Law states that an entrepreneur (an individual taxpayer on income from self-employment, registered with the competent authority or organization, and who pays tax on taxable profit) and a farmer-entrepreneur (a taxpayer on income from agriculture and forestry, registered as the head of a family farm in the agricultural holdings register, as per the regulations governing this field, maintaining business records and paying tax on taxable profit) can opt to pay a personal salary. According to Article 33a, Paragraph 2 of the Law, the personal salary referred to in Paragraph 1 of this Article, for the purposes of this law, is the amount of money that the entrepreneur referred to in Paragraph 1 of this Article pays and records in the business books as their monthly personal income, increased by the corresponding salary obligations.

Since the law does not set conditions for determining the amount of the entrepreneur’s personal salary, nor its minimum or maximum amount, it is left to the entrepreneur to determine the salary amount based on their capabilities.

On the other hand, Article 22 of the Law on Contributions states that the contribution base for entrepreneurs who pay a personal salary is the amount of the personal salary as per the law governing personal income tax, and according to Article 13 of this law – the contribution base is not reduced by the non-taxable amount from the salary. However, it should be noted that the lowest and highest monthly contribution bases are applied when calculating contributions on the entrepreneur’s personal salary, just as they are for employee salaries. Regarding the payment of contributions on the entrepreneur’s personal salary, we also point out the provision of Article 52a of the Law on Contributions, which stipulates that an entrepreneur who does not pay a personal salary by the last day of the current month for the previous month is obliged to calculate and pay contributions on the lowest monthly contribution base by that deadline.

By opting to pay a personal salary, the entrepreneur generally determines the gross personal salary (a salary that includes tax and contributions) on which they will calculate a 10% income tax, reduced by the non-taxable amount – which for 2023 is RSD 21,712, as well as contributions on the gross salary base (without reducing the non-taxable amount). However, when an entrepreneur determines their personal salary in net terms, the calculation for tax and contributions requires converting the net amount to the gross salary, using formulas adjusted for 2023 to reflect the new non-taxable salary amount, the new (lower) pension and disability insurance (PIO) contribution rate, and the monthly contribution bases (highest and lowest).

Thus, for calculating the entrepreneur’s personal salary in 2023, the following elements are relevant:

  • Income tax at a rate of 10%;
  • Non-taxable salary amount of RSD 21,712;
  • Contributions from the gross salary as specified in Article 44, Paragraph 1 of the Law on Contributions:
    • PIO at a rate of 24%,
    • Health insurance at a rate of 10.3%, and
    • Unemployment insurance at a rate of 0.75%;
  • The lowest monthly contribution base applied in 2023 is RSD 35,025 gross.
  • The highest contribution base applied in 2023 is RSD 500,360 gross.

The lowest and highest contribution bases are gross calculation categories, and converting these values to net amounts yields the boundary net amounts used to determine which formula to use for converting the entrepreneur’s net personal salary to gross.

The lowest monthly contribution base of RSD 35,025 corresponds to the net personal salary of the entrepreneur who is liable to pay all three contributions, amounting to RSD 21,417.44 (as the formula for converting from gross to net is: Net = (35,025 x 0.5495) + 2,171.20 = 21,417.44). For an entrepreneur liable to pay only the PIO contribution, this amount corresponds to a net personal salary of RSD 25,287.70 (as the formula for converting from gross to net is: Net = (35,025 x 0.66) + 2,171.20 = 25,287.70).

The highest monthly contribution base of RSD 500,360 corresponds to the net personal salary of the entrepreneur liable to pay all three contributions, amounting to RSD 277,119.02 (as the formula for converting from gross to net is: Net = (500,360 x 0.5495) + 2,171.20 = 277,119.02). For an entrepreneur liable to pay only the PIO contribution, this amount corresponds to a net personal salary of RSD 332,408.80 (as the formula for converting from gross to net is: Net = (500,360 x 0.66) + 2,171.20 = 332,408.80).

In this way, we obtain the boundary net amounts of the entrepreneur’s personal salary, which determine which formula to use for converting the net personal salary to gross. This is especially important when the entrepreneur has determined their personal salary in net terms.

As for the contribution rates, contributions are calculated and paid from the entrepreneur’s salary at the specified (combined) rates, and the rates from Article 44, Paragraph 2 of the Law on Contributions are not applied, where contributions are paid simultaneously from and on the base.

When calculating the entrepreneur’s personal salary, the following situations may arise:

  • The personal salary is determined in gross terms;
  • The personal salary is determined in net terms;
  • The personal salary is higher than the highest contribution base, between the highest and lowest contribution bases, and lower than the lowest contribution base;
  • Tax and all contributions are paid on the personal salary, and
  • Tax and only the PIO contribution are paid on the personal salary.

Below are examples of calculating the entrepreneur’s personal salary for all mentioned cases, using the parameters applied in 2023.

The personal salary of the entrepreneur is determined in gross terms

For an entrepreneur insured under another basis (if they are employed by another employer or are retired), a 10% tax and only a 24% PIO contribution are paid on the personal salary, while for an entrepreneur who is not insured under another basis, a 10% tax and all social security contributions (24% PIO, 10.3% health insurance, and 0.75% unemployment) are paid. The table below shows the calculation for both cases.

The personal salary of the entrepreneur determined in gross terms, which is higher than the lowest monthly contribution base but lower than the highest monthly contribution base – gross personal salary of RSD 100,000.00

No.DESCRIPTIONPays tax and all contributionsPays tax and PIO contribution
1Personal salary of the entrepreneur (gross)100,000.00100,000.00
2Non-taxable amount from the salary21,712.0021,712.00
3Tax base (no. 1 – no. 2)78,288.0078,288.00
4Income tax (no. 3 x 10%)7,828.807,828.80
5aLowest contribution base applicable on the payment date35,025.0035,025.00
5bHighest contribution base applicable on the payment date500,360.00500,360.00
6Contribution base (no. 1, because no. 5a < no. 1 < no. 5b)100,000.00100,000.00
7PIO contribution (no. 6 x 24%)24,000.0024,000.00
8Health insurance contribution (no. 6 x 10.3%)10,300.000.00
9Unemployment contribution (no. 6 x 0.75%)750.000.00
10Total tax and contributions (no. 4 + no. 7 + no. 8 + no. 9)42,878.8031,828.80
11Net personal salary of the entrepreneur (no. 1 – no. 10)57,121.2068,171.20

The personal salary of the entrepreneur is determined in net terms

If the entrepreneur determines the personal salary in net terms, this net amount must be converted to gross for tax and contributions calculation, by adding the above-mentioned tax and contributions.

The personal salary of the entrepreneur determined in net terms, which is higher than the lowest (net) monthly contribution base but lower than the highest (net) monthly contribution base

In this case, the tax is paid on the gross salary reduced by the non-taxable amount from the salaries, which from January 1, 2023, is RSD 21,712, and the contributions are paid on the gross salary.

Formulas for converting to gross:

  • If tax 10% and all contributions (24% PIO, 10.3% health insurance, and 0.75% unemployment) are paid from the salary – not insured under another basis:
    • Gross = (Net – 2,171.20) / 0.5495
  • For an entrepreneur insured under another basis (if employed by another employer or retired), only tax 10% and PIO contribution 24% are paid on the personal salary:
    • Gross = (Net – 2,171.20) / 0.66
Example of calculation when the personal salary of the entrepreneur is RSD 50,000.00 net – higher than (net) the lowest but lower than (net) the highest monthly contribution base
No.DESCRIPTIONPays tax and all contributionsPays tax and PIO contribution
1Personal salary of the entrepreneur – net50,000.0050,000.00
2Lowest contribution base – gross35,025.0035,025.00
2aLowest contribution base – net (as per previous explanation)21,417.4425,287.70
3Highest contribution base – gross500,360.00500,360.00
3aHighest contribution base – net (as per previous explanation)277,119.02332,408.80
4Formula for converting to grossB = (N – 2,171.20) / 0.5495B = (N – 2,171.20) / 0.66
5Personal salary of the entrepreneur (gross)87,040.5872,467.88
6Non-taxable amount from the salary21,712.0021,712.00
7Tax base (no. 5 – no. 6)65,328.5850,755.88
8Income tax (no. 7 x 10%)6,532.865,075.59
9Contribution base (no. 5)87,040.5872,467.88
10PIO contribution (no. 9 x 24%)20,889.7417,392.29
11Health insurance contribution (no. 9 x 10.3%)8,965.180.00
12Unemployment contribution (no. 9 x 0.75%)652.800.00
13Total tax and contributions (no. 8 + no. 10 + no. 11 + no. 12)37,040.5822,467.88
14Net personal salary for payment (no. 5 – no. 13)50,000.0050,000.00
15Total obligations based on the entrepreneur’s personal salary (no. 13 + no. 14)87,040.5872,467.88

The personal salary of the entrepreneur determined in net terms, which is lower than the lowest (net) monthly contribution base applicable on the day of calculation and payment of contributions

If the personal salary of the entrepreneur is determined in an amount lower than the lowest monthly contribution base, the contributions are calculated and paid on the lowest contribution base.

The tax is paid on the gross personal salary of the entrepreneur reduced by the non-taxable amount from the salaries, which is RSD 21,712.

Formulas for converting to gross:

  • When the entrepreneur pays tax and all social security contributions from the salary
    • Gross = (Net – 2,171.20 + (Lowest base x 35.05%)) / 0.90
  • When the entrepreneur pays tax and only the PIO contribution from the salary
    • Gross = (Net – 2,171.20 + (Lowest base x 24%)) / 0.90
Example of calculation when the personal salary of the entrepreneur is RSD 15,000 net – lower than (net) the lowest monthly contribution base
No.DESCRIPTIONPays tax 10% and all contributionsPays tax 10% and PIO contribution
1Personal salary of the entrepreneur – net15,000.0015,000.00
2Lowest contribution base – gross35,025.0035,025.00
2aLowest contribution base – net (as per previous explanation)21,417.4425,287.70
3Formula for converting to grossB = ((N – 2,171.20) + (No x 35.05%)) / 0.90B = ((N – 2,171.20) + (No x 24%)) / 0.90
4Personal salary of the entrepreneur (gross)27,894.5123,594.22
5Non-taxable amount from the salary21,712.0021,712.00
6Tax base (no. 4 – no. 5)6,182.511,882.22
7Income tax (no. 6 x 10%)618.25188.22
8Contribution base (no. 4 or no. 2 – higher amount)35,025.0035,025.00
9PIO contribution (no. 8 x 24%)8,406.008,406.00
10Health insurance contribution (no. 8 x 10.3%)3,607.580.00
11Unemployment contribution (no. 8 x 0.75%)262.690.00
12Total tax and contributions (no. 7 + no. 9 + no. 10 + no. 11)12,894.518,594.22
13Net personal salary for payment (no. 4 – no. 12)15,000.0015,000.00
14Total obligations based on the entrepreneur’s personal salary (no. 12 + no. 13)27,894.5123,594.22

STATT Sunny Day, Real Estate

The personal salary of the entrepreneur determined in net terms, which is higher than the highest (net) monthly contribution base applicable on the day of calculation and payment of contributions

The tax is paid on the gross salary reduced by the non-taxable amount from the salaries of RSD 21,712.

Contributions are paid on the highest contribution base applicable on the payment date.

Formulas for converting to gross:

  • When the entrepreneur pays tax and all social security contributions from the salary
    • Gross = (Net – 2,171.20 + (Highest base x 35.05%)) / 0.90
  • When the entrepreneur pays tax and only the PIO contribution from the salary
    • Gross = (Net – 2,171.20 + (Highest base x 24%)) / 0.90
Example of calculation when the personal salary of the entrepreneur is RSD 350,000 net – higher than (net) the highest monthly contribution base
No.DESCRIPTIONPays tax 10% and all contributionsPays tax 10% and PIO contribution
1Personal salary of the entrepreneur – net350,000.00350,000.00
2Highest contribution base – gross500,360.00500,360.00
2aHighest contribution base – net (as per previous explanation)277,119.02332,408.80
3Formula for converting to grossB = ((N – 2,171.20) + (Nvo x 35.05%)) / 0.90B = ((N – 2,171.20) + (Nvo x 24%)) / 0.90
4Personal salary of the entrepreneur (gross)581,338.87519,905.78
5Non-taxable amount from the salary21,712.0021,712.00
6Tax base (no. 4 – no. 5)559,626.87498,193.78
7Income tax (no. 6 x 10%)55,962.6949,819.38
8Contribution base (no. 2)500,360.00500,360.00
9PIO contribution (no. 8 x 24%)120,086.40120,086.40
10Health insurance contribution (no. 8 x 10.3%)51,537.080.00
11Unemployment contribution (no. 8 x 0.75%)3,752.700.00
12Total tax and contributions (no. 7 + no. 9 + no. 10 + no. 11)231,338.87169,905.78
13Net personal salary for payment (no. 4 – no. 12)350,000.00350,000.00
14Total obligations based on the entrepreneur’s personal salary (no. 12 + no. 13)581,338.87519,905.78

Understanding the nuances of calculating an entrepreneur’s personal salary is crucial for ensuring compliance with tax laws and optimizing your financial management. By following the parameters and examples provided, you can accurately determine your personal salary and meet your tax obligations effectively. For personalized advice and assistance, contact Stojković Attorneys (AK STATT). Our team of experts is ready to support you in navigating the intricacies of tax law and business operations.

2023, AK STATT, contribution bases, entrepreneur, financial management, non-taxable amounts, personal salary calculation, poreske obaveze, poreski propisi, Stojković Attorneys, tax obligations, tax regulations

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