New Legislative Framework for Taxation of Seafarers and Regulating their Social Security Rights

Author: Attorney-at-Law Pantović R. Đorđe, Law Firm “VUK Tax Attorneys”

Date: 1st December 2024

On 27th November 2024, the National Assembly of the Republic of Serbia adopted the Law on Amendments to the Law on Personal Income Tax (“PIT Law”), as well as the Law on Amendments to the Law on Mandatory Social Security Contributions (“MSSC Law”), both of which will start to apply as of 1st January 2025.

Subject amendments to the said Laws regulate tax regime of income earned by individuals – seafarers, engaged on ships and other vessels in international sailing and navigation with foreign flag.

Provisions of the newly introduced Article 84v of the PIT Law define what is considered as income of seafarers, specify who is deemed a seafarer for the purposes of this Law, proving the number of days spent on ships and other vessels, the type of work performed by the seafarer, the methodology for determining taxable income, as well as conditions for tax exemption of seafarers’ income.

In the sense of PIT Law, income of seafarers is defined as income earned by an individual taxpayer from a foreign employer, who works as a crew member or as a member of support staff, for work performed on ships and other vessels waving flag of a foreign country.

Number of days spent on a ship, as well as nature and type of work performed, will be proved by Seafarer’s Book and other relevant documents issued by competent authority within the Ministry of Construction, Transport and Infrastructure, that most likely will be the Port Authority. The amount of seafarers’ income is determined on a daily basis, in accordance with the Rulebook of the said Ministry, which is expected to be adopted by the end of 2025. Taxable income for the calendar year represents the sum of daily incomes, proportionate to the number of days spent on vessels.

Key addendum is introduction of the exemption from payment of personal income tax for seafarers who have worked on ships for more than 174 days in the calendar year. For other taxpayers, who do not meet the requirement for full tax exemption, tax rate of 10% is applicable, while seafarers’ income is also included in the taxable base of annual income tax, in accordance with the amended Article 87 of the PIT Law.

The deadline for filing tax declaration is 31st March of the current year for previous calendar year, meaning that for the first time this will be 31st March 2026 for 2025 calendar year, while for individuals who are on-board during this period, the deadline is extended for 15 days from the date of their first disembark.

Likewise, the amendments to the MSSC Law define the method for determining and paying mandatory social security contributions on income earned by seafarers for work performed on ships and other vessels waving flag of a foreign country.

Specifically, newly added point 3. in paragraph 2. of Article 28 of the Law on CMSI which relates to determination of base for contributions for health insurance for calendar year for seafarers, defines that said base may not be lower than twelve-times the lowest monthly base for contributions. However, if the base for health insurance contributions for the calendar year is lower than the taxable income, then taxable income will constitute base for health insurance contributions. Furthermore, the amendments to the Article 60. of the MSSC Law align the deadline for paying contributions for seafarers, in a way that it corresponds to the deadline for paying personal income tax.

Nevertheless, despite these amendments, the issue of recognizing service period for pension of seafarers remains unclear, both for the period for which they paid contributions retroactively as well as for the future periods, i.e. whether the payment of contributions for pension and disability insurance will result in recognition of corresponding service period for pension. This issue is of great importance for significant number of seafarers who have regularly met their obligations in the Republic of Serbia in previous years and will presumably continue with this practice, so It would be highly inappropriate that now, despite making timely payments, they are deprived of adequate status within the system of pension and disability insurance.

In conclusion, while the new legislative framework provides higher degree of regulation regarding the tax status of seafarers and their health insurance rights, it still leaves certain questions open, particularly regarding recognition of insurance service periods for pension based on paid contributions. Additionally, adoption of bylaws – Rulebooks is expected in the coming period, that should further regulate all afore said amendments to the PIT Law and the MSSC Law. Our law firm will closely monitor these developments in order to efficiently assist clients in resolving any uncertainties, through our expertise and professional analysis.