How to hire and pay freelancers in Serbia

In recent years, Serbia has become a hotspot in the freelance landscape, attracting employers with its competitive rates, high-quality execution, and a large pool of professionals in tech, design, marketing, and other fields. There’s much to recommend Serbian freelancers, but working with them requires a good understanding of local legislation, taxes, and potential risks. 

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In this article, we’ll explain what companies need to consider when working with freelancers and contractors from Serbia and show how Mellow can simplify the logistics.

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Where to find freelancers in Serbia

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You can find qualified Serbian coders, designers, copywriters, and other freelancers on platforms like Upwork, Freelancer, and Fiverr. Features like ratings, reviews, and portfolios will make the selection process easier. You can also use local job boards such as Infostud and Poslovi.

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Social media platforms like LinkedIn, Facebook, Viber (widely used in Serbia), and, increasingly, Telegram are also popular with Serbian freelancers. Communities and topical channels can give companies access to a wide audience of candidates.

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Many companies that promote their brands in Serbia have blogs on Joberty (in English) and HelloWorld (in Serbian). The former is aimed at a younger and more general audience, while the latter focuses on established professionals, primarily in tech — the section "From a Developer's Point of View" (Iz ugla programera) is dedicated to IT and engineering.

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Remote work is popular for both local and foreign companies throughout the Balkans, with communities and events catering to digital nomads. For example, hundreds of people attend the Bansko Nomad Fest every year in Bulgaria, and in Serbia, there are special events for developers, including the expat-focused Peredelanoconf.

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What to know about local taxes for freelancers 

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Freelancers in Serbia are required to declare their income and pay taxes and social security contributions. Exactly what they pay depends on factors, including their tax status. Below, we’ll look at the two most common statuses for freelancers.

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Status 1: Self-employed individual

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An individual who provides services to companies from other countries can register on the Фриленсери (“Freelancers”) platform to be able to pay taxes and contributions easily. Foreign citizens can do so without obtaining a work permit. 

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The self-employed pay income tax and social security contributions.

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Income tax. There are two models to choose from:

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• Under Model A, no taxes are paid on income less than 96,000 RSD (~$900). Any income above this amount is taxed at 20%.
• Model B is typically preferable at higher income levels. To calculate taxable income, take total quarterly income, subtract RSD 57,900 (~$540), and then subtract 34% of total income. The resulting amount is taxed at 10%. 

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Here’s an example given a quarterly income of 150,000 RSD:

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• Model A: (150,000 RSD−96,000 RSD )×20%=10,800 RSD стало
• Model B: (150,000 RSD−96 ,000 RSD−[150 ,000 RSD×34% ])×10%=4 ,110 RSD

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• Social security contributions. Freelancers in Serbia are required to pay pension (24%) and health insurance (10.3%) contributions. Failure to pay may result in fines.

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Status 2: Sole proprietor (Preduzetnik) 

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A freelancer can register as a sole proprietor with the Serbian Business Register Agency (Agencija za prirodne registre). The process takes about five working days.

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Applicants will need to get a tax ID (Poreski Identizioni Broj, PIB) and pass an independence test regularly (to prove they work with more than one client). Foreign nationals need work permits before they can apply.

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Several tax models are possible for sole proprietors. Generally, freelancers choose the simplified lump-sum system, but not every type of activity qualifies for it.

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Tax models for sole proprietors

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1. Lump-sum taxes (Paušalno oporezivanje)

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This model is available for those with annual incomes less than 6 million RSD.The tax rate varies depending on factors including the type of activity (NACE code, šifra delatnosti), age, location, and period of registration. Freelancers can calculate their payments in advance using an online calculator. Taxes and contributions are due on the 15th of each month.

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A sole proprietor using this model can do side projects for pay as long as they account for less than 49% of total income.

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2. Self-taxation/Self-bookkeeping (Samooporezivanje)

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Sole proprietors who keep their own books can choose between receiving a personal salary and not doing so. (In any case, they’re advised to work with accountants to calculate their taxes.)

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With a salary

Under this approach, income is divided into:

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• Income received from entrepreneurial activities. It must be reported using the self-calculation model, but in addition to expenses, wages and insurance contributions paid on them are deducted from taxable income.
• Income received as salary. The sole proprietor pays income tax on it as a regular employee. The personal income tax in Serbia is progressive and depends on the ratio of the income received to the population’s average annual income.

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Without a salary

In this model, taxes and contributions are payable on the difference between income and expenses.

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• Tax rate: 10%
• Pension and disability insurance contribution: 24%
• Healthcare insurance contribution: 10.3%
• Unemployment insurance contribution: 1.5%

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Knowledge keeps you on the right side of the law

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While employers are not required to withhold taxes or make payments for freelancers, they still need to know about the tax system. This will help them draft legally sound contracts, comply with local labor laws, and avoid potential problems with tax authorities.

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The most important thing that employers should know is that if they don’t pay taxes and contributions for Serbian freelancers, the latter are required to do so themselves.

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An alternative is to use an umbrella company, which hires and concludes employment contracts with freelancers. In this case, the foreign organization pays the umbrella company, which, in turn, takes responsibility for paying salaries and taxes in accordance with local legislation.

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Potential risks when working with freelancers

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Working with freelancers in Serbia involves certain risks that may affect the legal, financial and commercial side of a foreign business.

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• Misclassification of employees. Serbian law makes a clear distinction between full-time employees and independent contractors. The former get more benefits (paid vacations, sick leave, and social benefits), but also more obligations to the employer. The latter has more flexibility but fewer perks. If a contractor performs the functions of a full-time employee, the tax authorities may review their status. If violations are found, the company will have to pay taxes and contributions for that employee and may also be fined.

• Currency fluctuations. If companies pay contractors in local currency, they face risks associated with unstable exchange rates. To protect yourself from fluctuations, you can set a fixed rate in euros or dollars. This will create more predictability and transparency for both parties.

• Difficulties with international transfers. Banks may charge high fees for international transactions, especially when transferring small amounts. Working with contractors may then become unprofitable for the company. In addition, international transfers can take several days, which is inconvenient for both the company and the freelancer. To avoid these difficulties, many employers prefer to use alternative payment systems that allow them to reduce fees and speed up the transfer process.

• Cultural differences. Business culture in Serbia involves a slightly more formal approach than in the U.S. For example, in the initial stages of a business relationship, local freelancers may prefer a formal tone in communication until a closer connection is established. It’s also important to remember that the language barrier means there’s always a risk of miscommunication, even if the freelancer speaks English well.

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Average salaries in the region

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Knowing the average salaries in the region will help your company make a competitive offer and attract qualified professionals on fair, favorable terms. 

You can get up-to-date data on salaries from the Statistical Office of the Republic of Serbia, as well as on sites like these:

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• Glassdoor tells you the average salaries of employees based on region, occupation, and experience. 
• Salary Explorer provides detailed reports on salary ranges for different positions, as well as the distribution of salaries by city. 
• Trading Economics provides detailed data on salaries in different countries and even offers forecasts for the coming months.