Service and Copyright Contracts

A service contract (ugovor o djelu) is for the independent making or repair of a thing or independent performance of a specific physical or intellectual job — for tax purposes it is income from occasional independent activity (Art. 16 of the Personal Income Tax Law). A copyright contract covers works of authorship (written, musical, photographic, audiovisual works, computer programs, architecture, design…) and related rights (Art. 37l). Temporary and occasional work (Art. 200 of the Labour Law) covers jobs outside the job systematisation that need no special expertise and last no more than 120 working days per year — the contract may only be concluded with a person on the Employment Agency's unemployment records, in writing. Supplementary work (Art. 202) is a contract with a person already working full time, up to half of full working hours. A permanent position must be covered by an employment contract.

A person earning a contractual fee (service contract, copyright contract etc.) is liable to pension contributions only if not liable on another basis — e.g. not employed and not an entrepreneur (Art. 4 item 14, Art. 5 para. 1 item 13 of the Contributions Law). If the contractor is employed elsewhere or is an entrepreneur, no pension contribution is due on the service or copyright contract; the unemployment contribution is never due on contractual fees at all (Art. 7 does not list them). By definition the contractual fee is a gross amount containing the tax and contributions borne by the contractor (Art. 4 item 15).

Service contract: a payer that is a legal entity or entrepreneur calculates, withholds and pays tax at each payout at 15 % on the fee less 30 % standard costs (Art. 20 para. 2 and Art. 48a) — effectively 10.5 % of the gross fee. Copyright contract: 15 % on the fee less standard costs — 60 % for fine-art works, 50 % for architecture and urban planning, 30 % for performers and all other copyright and related-rights fees (Art. 37lj, 37m, 50c). Documented actual costs may be used instead of standard costs. If the fee is paid by someone who is not a legal entity or entrepreneur, the recipient pays the tax with the annual return (Art. 48a para. 2). The municipality also adds a surtax on the withholding tax for a service contract — up to 13 % (up to 15 % in Podgorica and Cetinje) — because tax on occasional independent activity is one of the surtax bases (Art. 8 of the Law on Financing of Local Self-Government); no surtax applies to copyright fees, which are a separate income category.

The contribution base is the taxable income (fee less standard costs), rate 10 % borne by the insured — withheld from the fee (Art. 9 item 8 and Art. 15 item 2 of the Contributions Law). The payer calculates and pays it by the 15th of the current month for the previous month (Art. 21 para. 5). For temporary and occasional work and supplementary work the payments are personal income (Art. 14 para. 1 items 5 and 6 of the Income Tax Law) — contributions are paid as on salary: pension 10 % and unemployment 0.5 % from the fee, unemployment 0.5 % borne by the employer (Art. 5 para. 1 item 2, Art. 7 para. 1 item 2, Art. 15 and 18), and tax at 0 % up to €700, 9 % from €700 to €1,000, 15 % above €1,000 per month (Art. 10).

Net fee = gross − tax − pension contribution (if due). Tax is paid together with the payout (Art. 46 para. 2 and Art. 48a), contributions by the 15th of the month for the previous month at the latest (Art. 21 para. 5 of the Contributions Law). Fine for uncalculated or unpaid contributions: €2,000–20,000 for a legal entity, €500–1,000 for the responsible person, €1,000–6,000 for an entrepreneur (Art. 26 of the Contributions Law).

By the 15th of the month for the previous month the payer files the IOPPD report with the Tax Administration covering all payments of that period — salaries, service contracts, royalties etc. (Art. 47 para. 3 of the Income Tax Law; Tax Administration calendar). The payer gives the recipient a statement of fees paid and tax withheld by 31 January of the current year for the previous year (Art. 47 para. 5). A contractor with income that was not subject to withholding reports it in the GPP-FL return by 30 April.