Independence Test in Serbia: 9 Criteria and What Failing Means

The independence test is a legal mechanism used to check whether a sole proprietor really operates independently or is in fact in an employment relationship with the principal. It is based on criteria set out in the Personal Income Tax Act. If the entrepreneur "fails" the test, they are treated as an employee, which brings significant tax liabilities and penalties.

Purpose of the test

The aim is to prevent the abuse of service agreements with entrepreneurs instead of establishing an employment relationship. Engaging an entrepreneur is cheaper for the principal because it does not pay contributions and other obligations that apply to employers.

Who it applies to

Formally the test applies to all entrepreneurs, both flat-rate (paušal) taxpayers and those who keep books, but in practice it mostly affects flat-rate entrepreneurs. The Tax Administration checks compliance with the criteria. Checks are currently carried out on a random sample basis, but from 1 July 2026, with the use of advanced software, all flat-rate entrepreneurs will be under review.

Consequences of "failing" the test

If the entrepreneur "fails" the test, the Tax Administration treats them as an employee, so taxes and contributions on salary are calculated retroactively, with interest and fines of up to 500,000 dinars. In practice, the difference between the flat-rate tax (for example 30,000 to 40,000 RSD per month) and the contributions due under employment (often 70,000 to 100,000 RSD per month) must be paid for the whole period of the engagement. In most cases these entrepreneurs are also required to change their legal form to a DOO.

Tax liabilities after failing the test:

• Pension and disability contributions, calculated as if the entrepreneur were employed (around 24% of gross salary).
• Health insurance contributions, around 10.3% of gross salary.
• Salary tax, 10% of the base.
• Unemployment insurance contribution, 0.75% of gross salary.
• Interest, calculated retroactively on all unpaid liabilities.

The nine criteria of the test

The test consists of 9 key criteria. If the entrepreneur meets the majority of the criteria that indicate dependence, they are deemed not to be independent:

1. Working hours: whether the principal determines when and how much you work.
2. Place of work: whether the principal provides the premises and equipment.
3. Supervision: whether the principal oversees your work and gives instructions.
4. Integration into the organisation: whether you are part of the company's internal structure.
5. Payment: whether you receive a fixed monthly fee similar to a salary.
6. Business risk: whether you bear the risk or everything falls on the principal.
7. Equipment and resources: whether you use your own resources or those of the principal.
8. Multiple clients: whether you have several principals or work for only one.
9. Responsibility: whether you are responsible for the result of the work or are merely an executor.

Practical advice

• Document your independence: multiple clients, your own equipment, flexible working hours.
• Align your service agreements with the criteria of the test.
• Follow the guidance the Tax Administration publishes and the checks it carries out.