Tax exemptions for Social Security Contributions for newly established businesses

A newly established legal entity and a newly established entrepreneur will have the right to tax exemptions from paying taxes and social security contributions.

The Law on Personal Income Tax and the Law on Contributions for Compulsory Social Insurance stipulates that from 1 October 2018 the employer – a newly established legal entity, as well as a newly established entrepreneur, registered in the registry of the competent authority or organization, can exercise the right to exemption from paying taxes;

  • based on the earnings of the founder
  • based on the personal earnings of the entrepreneur
  • based on earnings of employees

The exemption is valid for nine newly employed persons employed by the business owner.

It also exempts the business owner from the payment of contributions for compulsory social security.

This right to tax exemptions based on the founder’s earnings can be achieved:

– if the founder, or each of the founders, if more than one, has established a working relationship within the legal entity in question, or on the basis of earnings for a maximum of nine newly employed persons within the a legal entity of the business owner.

– if a person has been registered for compulsory social security in the Central Registry of Compulsory Social Security and has been registered as unemployed for a period of at least six months uninterrupted prior to the date of establishment of a legal entity or an employment contract with the employer through the National Employment Service

– in the period of 12 months prior to the date of employment, the employee acquired secondary, or higher level education.

The tax exemption referred to in Article 21d of the Law may be realized by an employer – a legal entity or an entrepreneur, established or registered as of 31 December 2020.

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