Which taxes do I pay on my salary?
When you look at your payslip, the difference between Gross and Net amounts can look confusing. The reason for this are mandatory payments - contributions and taxes. On this page, we explain in detail exactly which taxes the state charges on your work in Serbia.
1. Income Tax (Main salary tax)
Income tax from dependent employment (salary) is the most important and largest tax you pay on your earnings. Unlike contributions (which go to pension or health insurance for your direct benefit in the future or in case of illness), income tax is revenue for your municipality or city.
This money is used to finance local infrastructure: kindergartens, schools, public transport, street maintenance, and local administration.
How is it calculated?
Income tax is NOT PAID on the entire Gross amount! It is always paid exclusively on the so-called Tax Base.
The tax base is obtained by subtracting your Personal Deduction (the non-taxable part of earnings that the state guarantees every citizen for basic living needs) from your salary (after pension contributions are deducted).
2. Local Taxes (Surtax / Municipal Tax)
In addition to the basic state income tax, many systems allow local units (cities and municipalities) to collect an additional, local tax to "thicken" their budget. This can be implemented as an addition to the state tax (surtax) or through the city's autonomy to set its own tax rate (depending on what the current law of the selected region prescribes).
Are Contributions the same as Taxes?
In everyday speech, citizens often confuse contributions and taxes, saying "the state takes 40% of my salary through taxes". While it is true that you do not receive that money in your account, it is important to legally and fundamentally distinguish these two terms:
- Taxes: Money you give to the state/city for general, common financing. You do not receive anything concrete and measurable back in your name.
- Contributions (Pension/Health): Purpose-built funds. Pension insurance goes into your personal account and serves exclusively for the payout of your future pension, while health insurance pays for your hospital treatment (it is important to note that in some countries, depending on the degree of solidarity, this still functions as a flow-through, similar to a tax).