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Independent Contracting in Serbia

Independent contractors in Serbia

Serbian law recognises several non-employment engagement forms, each with a specific lawful use:

Form: Service contract (ugovor o delu)

Lawful use: One-off work outside the client's core business

Key limit: Repeated use for core-business work invites reclassification

Form: Author/copyright contract

Lawful use: Genuine copyright works (including software with rights transfer)

Key limit: Must be a copyrightable work

Form: Temporary and periodic work (PP ugovor)

Lawful use: Short-term tasks, may be within regular activity

Key limit: Maximum 120 working days per calendar year with the same engager

Form: Supplementary work

Lawful use: Person already employed full-time elsewhere

Key limit: Capped at about one third of full-time hours

Form: Registered sole trader (preduzetnik), incl. flat-tax paušal

Lawful use: Independent freelance/consulting activity

Key limit: Paušal turnover ceiling RSD 6 million; VAT registration above RSD 8 million

There is no statutory limit on how long an independent contractor’s contract may run. Duration still matters indirectly: an engagement of 130 or more working days with one principal is one of the nine independence-test criteria below, while continuous long-term work for a single client can indicate disguised employment.

Paušal is Serbia’s simplified flat-tax regime for smaller sole traders. Instead of taxing actual profit, the Tax Administration sets a fixed monthly tax amount based on factors such as the activity and municipality. It is commonly used by freelancers and consultants because it offers predictable tax payments and simpler bookkeeping.

What makes someone an employee

An employment relationship exists in substance, regardless of the label on the contract, where the work shows subordination, continuity, integration into the organisation, and employer-set hours. Two rules govern this:

  • If someone starts working without a written employment contract, they are deemed employed indefinitely from day one. A service or freelance contract does not prevent this if the relationship is actually employment.
  • Labour inspectors examine real working conditions (hours, reporting lines, continuity) and can order the employer to conclude an employment contract and register the worker.

The independence test (test samostalnosti)

For sole traders, the Personal Income Tax Law applies a statutory nine-criteria test against each principal (client) over a 12-month window:

  1. The principal sets the sole trader’s working hours, or their leave depends on the principal’s decision and pay is not reduced for time off.
  2. The sole trader habitually works from premises the principal provides or designates.
  3. The principal organises or funds the sole trader’s professional training.
  4. The engagement came about through a job advertisement or a recruitment intermediary.
  5. The principal provides the basic tools, equipment or other core assets for the work (or finances them), or habitually directs the work process beyond ordinary commissioning and oversight.
  6. At least 70% of the sole trader’s total revenue in the 12-month window comes from the one principal.
  7. The work falls within the principal’s own business and carries no genuine entrepreneurial risk toward the principal’s clients.
  8. The contract restricts working for other clients (full or partial exclusivity).
  9. The engagement runs 130 or more working days with that principal within the 12-month window.

If the sole trader meets five or more of the nine criteria, or it is very likely that they will   at the start of the engagement that they may receive income from that principal, the income will need to be reclassified as “other income.”

That income is then subject to significantly higher tax and contribution treatment than under the paušal regime. The test has applied since 2020 and remains a key compliance consideration in Serbian contractor arrangements.

Freelancer self-taxation (foreign-source income)

Individuals paid directly by foreign clients, without a Serbian withholding agent and without a registered business, self-assess quarterly through the Tax Administration’s freelancer portal, choosing per quarter between:

  • Model A: A fixed quarterly deduction of RSD 110,647, with 20% tax on the remainder.
  • Model B: A fixed quarterly deduction of RSD 66,733 plus 34% of gross income, with 10% tax on the remainder.

Pension contributions of 24% and health contributions of 10.3% apply to the same base.

The deduction amounts are set by the Personal Income Tax Law and adjusted annually; the figures above are the statutory amounts in force for 2026. Model B generally favours steadier, higher quarterly income; Model A favours low or irregular income.

Returns are due within 30 days of each quarter’s end.

Penalties for misclassification in Serbia

If a company is found to be misclassifying employees, they may be subject to a number of penalties including:

  • Fines: Engaging a person without a written employment contract carries fines of RSD 800,000-2,000,000 for a company (RSD 300,000-500,000 for an entrepreneur, plus fines for the responsible person). If the work is carried out as part of the business and meets the characteristics of employment, the person may be treated as an employee regardless of any other contract used. Late or missing CROSO registration is fined separately.
  • Deemed employment: The worker is treated as an indefinite-term employee, with everything that follows: leave, notice, severance, dismissal protection.
  • Back taxes and contributions: Retroactive salary tax and both sides’ social contributions, with interest.
  • Tax reclassification: under the independence test for sole-trader arrangements, at roughly 36-40% effective load on the reclassified income.

Fixed-term employment with the same person is generally limited to 24 months, and a break of less than 30 days does not reset this period. Switching the same ongoing role to a service contract can lead to the relationship being treated as employment.

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