Since the amendments to the Law on Personal Income Tax (the Law) came into effect in 2019, companies in Serbia have the opportunity to take advantage of tax relief on expenses related to organizing team-building, recreational, and sports activities for employees. This relief can significantly reduce employer costs, provided that specific legal provisions and conditions outlined in the Rulebook on Exercising the Right to Tax Exemption (the Rulebook) are met.
Key Conditions for Tax Exemption
- Regulation through a General Act – A company that wishes to claim tax exemption must regulate the right of employees to recreation through general acts, such as the Work Regulations or a special decision on the organization of events. This act must clearly specify the type of activities, their goals, and scope, as well as the conditions under which recreation or team-building is provided.
- Equal Access for All Employees – The Law and the Rulebook require that all activities must be available to all employees under equal conditions. This means that each employee must have the right to the same type, quality, and scope of recreational services. If, due to business specifics (e.g., a larger number of employees or different business units), identical access cannot be provided, the employer may organize activities adapted to specific circumstances, but they must be of the same type and quality for all employees.
- Documentation of Costs and Direct Payment – To qualify for tax exemption, the costs must be clearly documented. This means that the employer must make payments directly to service providers (e.g., for renting sports venues or organizing recreational activities), and the type and amount of expenses must be precisely determined from the documentation.
- Additional Conditions for Team-building – For team-building activities, an additional condition is that at least 70% of employees have the right to participate, and 70% of those employees must actually take part. This is evidenced by invitations sent and attendance records.
The Tax Exemption Applies to Costs for:
- Creating and maintaining conditions for employee recreation in the workplace (e.g., gyms, pools, sports fields),
- Organizing sports events and activities aimed at improving employee health or building better relationships between employees and employers.
If, due to the number of employees or functional divisions, a company cannot provide recreation at the same time and place, the employer must organize an appropriate time and spatial arrangement to ensure equal access for all employees. This must be specified in the company’s general acts.