Tax obligations of “FREELANCERS”

Although there were announcements that the work of so-called “freelancers” will be defined by a special law with the working title “Law on Flexible Forms of Work”, for now we have no information that such a law is being drafted.
However, on December 20, 2022, amendments were made to the Law on Personal Income Tax, which defines the somewhat peculiar tax treatment of this category of workers.
Who are freelancers?
This question remains undefined by now. Only by interpreting the Law on Personal Income Tax we can come to the conclusion that we are dealing with persons who generate remuneration from copyright and related rights, or on the bases of the performed work, on which the tax is paid through self-taxation. A tax payer is a resident for the income he earns in the RS and abroad, and a non-resident, for the income he earned in the RS (in condition that RS and his native country didn’t conclude a contract on double taxation). Practically, however, we cannot completely cover the list of occupations, even the common characteristics of all those forms of work, except for the clear fact that the income of most of them has not been taxed until now.
What does self-taxation mean?
Self-taxation, in accordance with the law, is the obligation of an individual to calculate and pay the personal income tax on his income, whenever the tax is not previously paid by the income payer, or the income payer is not obligated by the law to calculate and pay withholding tax ( proscribed by the Article 99 of the Law on Personal Income Tax).
What is the specificity of the “freelancer” position?
According to the aforementioned amendment to the Law, two models of taxation of freelancers are foreseen, and when submitting a tax return, freelancers will be able to choose the option that is more suitable for them, taking into account the amount of obligations based on taxes and contributions, and the rights they exercise in the field of pension and disability insurance. Freelancers will pay taxes and contributions quarterly, and submit the tax return for each quarter separately, within 30 days from the end of the calendar quarter. Therefore, reports are submitted quarterly, and not within 30 days from the day of income generation, as is the case with other self-tax payers.
According to the First Model, all freelancers who earn up to 96,000 dinars per quarter are covered, and they will not pay any taxes and contributions, except for health insurance, which will amount to 1,400 dinars per month. If the individual who chooses the first model exceeds that 96,000 dinars, he will be obliged to pay pension and disability insurance (PIO), health and income tax.
The second model is intended for freelancers who have more frequent and higher incomes, where the non-taxable part amounts to 19,300 dinars per month, or 57,900 per quarter, while 34 percent of normalized expenses will be deducted from the gross income. On the remaining amount, 10 percent of income tax, health and PIO will be paid. The second model proposed for the taxation of freelancers has a non-taxable part in a fixed amount, and the amount of income tax is 10 percent, so it is considered a more favorable choice for higher incomes.
We remind you that the taxable income that a individual achieves based on the agreed remuneration for the work performed, on which the tax is paid through self-taxation, is the gross income in the quarter minus the expenses.
The specificity of the freelancer’s position is also reflected in the way Law proscribes their obligations to settle the nonpaid income tax due December 31, 2022. The Tax Authority will bring a formal decision on the incomes realized in the period starting from January 1, 2015 and ending on December 31, 2022. Law proscribes that no payment should be paid if the income in this period was lower than 384,000 dinars per the calendar year.
Standard deduction for income from the period in question are recognized in the amount of 50% of the realized income, and the tax determined by the decision is paid in 120 equal monthly amounts, with the first amount due for payment on the 15th of the month following the month that is next in relation for the month in which the decision of the tax authority was made.
According to the information available to us on the day of the creation of this text, even the proposed, much reduced solutions for the collection of unpaid taxes (from 2017) were not unanimously accepted by the association of freelancers, because they were not informed in time about their due tax obligations. We remind you that the right of the Tax Administration to determine the tax expires within five years from the first day of the following year from the year in which the tax should have been determined, however, it is a constitutional and general obligation of us all to pay tax, within the time limit and in the manner regulated by tax regulations and to calculate the tax accurately within the legal deadlines, when we are required by law to do so, and in that sense the positions of both sides are equal, and it will be interesting from the aspect of tax law theory to represent both positions.