The bylaws on the tax calculation for natural persons providing accommodation services has not yet been passed

On 07 December 2018, the National Assembly of the Republic of the Serbia adopted Bill amending and modifying the Personal Income Tax Law (“Law”), published in the Official Gazette No. 95/2018 dated 08 December, 2018, effective eight days after publishing in the Official Gazette on 16. December 2018.

The provisions of the Law relating to the taxation of natural person’s income from providing accommodation services have started to apply on 01 July 2019.

Amendments to the Law added the new article that stipulates that a natural person’s revenue is considered also to be income generated by the services prescribed by the Law on Hospitality Industry. This provision relates to the income generated from providing accommodation services for up to 30 days. The law states that the taxable sum amounts to 5% of the average monthly salary per employee, in the year for which the tax is calculated, multiplied by the number of individual beds.

The Law also prescribes that the Minister in charge of finance and the Minister in charge of tourism affairs shall closely regulate the conditions, criteria and elements for taxation of this revenue. The deadline for the adoption of the bylaws was 120 days from the moment of the Law’s entry into force. The provisions of the Law began to apply on 01 July 2019, while natural persons providing accommodation services had the deadline by the end of the June to register their activity to the tax administration authority. Since the bylaws that closely regulate conditions, criteria and elements were not adopted, even after six months of the Law’s entry into force, it remains to be seen how this provisions of the law will be applied in practice. The legislator decided to regulate the taxation of natural persons providing accommodation services because of an increased popularity of short term leases for tourists. These provisions also apply to the practice of “stan na dan”.

The main reason for the adoption of the Law was the creation of a systematic solution in terms of more effective suppression of illegal work of natural persons as providers of accommodation services. The main objective of the law is suppression of shadow economy in this business area. The goal of the legislator is to create favorable taxation conditions by regulating tax treatment in order to stimulate taxpayers to legalize their services in this area, which are today part of the shadow economy. The amendments to the Law are done in accordance with the changes in the new Law on Hospitality industry, which stipulates the conditions under which a natural person can provide accommodation services, as well as the obligations of a natural person when providing those services. The legislator expects these changes to have a positive effect on local government revenues.