The independence test

What is the independence test?

The independence test (test samostalnosti) is a set of nine criteria introduced in 2020. The Tax Administration uses it to check whether a sole proprietor genuinely operates independently — or is in practice an employee of a single client, formally repackaged as a business in order to pay less tax.

If five or more criteria are met in relation to one client, the sole proprietor fails the test for the income received from that client, and that income is taxed far less favourably.

Who does the test apply to?

All sole proprietors — both flat-rate taxpayers and those keeping business ledgers under the personal salary regime. A common misconception is that moving from flat-rate to a personal salary "solves" the test. It does not. Only an LLC is outside the scope of the test, which is why founding one is the safest solution where the risk is high.

The nine criteria

• Working hours — the client sets the sole proprietor's working hours, breaks and leave.
• Premises — the work is performed on premises provided by the client.
• Training — the client organises or pays for the sole proprietor's professional training.
• Method of engagement — the client found the sole proprietor through a job advertisement or a recruitment agency.
• Equipment and tools — the client provides the tools, equipment or materials for the work.
• 70% of income — at least 70% of income over 12 months comes from a single client.
• Business risk — the sole proprietor performs work within the client's own field of business and does not bear business risk towards the client's customers.
• Non-compete — the contract prohibits providing services to other clients.
• 130 working days — the sole proprietor works for the same client for at least 130 working days in a 12-month period.

What happens if you fail the test?

Income received from that client is taxed as "other income" of a natural person: 20% tax and 24% pension contributions, with no deduction for standardised costs — a total burden of roughly 44% of the fee, and more where health contributions are also due. Where the client is a Serbian entity, the payer calculates and withholds the liability; where the client is foreign, the sole proprietor files the return personally. Interest is added on top, and penalties may follow depending on the audit findings.

How the risk is reduced in practice

• Several clients — so that none exceeds 70% of your income over 12 months.
• Your own equipment and premises — work on your own computer, from your own space or a coworking space you pay for yourself.
• A contract without employment-like elements — no non-compete clause, no working hours set by the client, and a clearly defined deliverable rather than hours worked.
• Genuine business risk — responsibility for the result, the ability to engage subcontractors, and your own marketing.

Important: what counts is the substance of the relationship, not just the contract. If the risk remains high on assessment — for example long-term, full-time work for a single foreign client — we usually recommend an LLC, because an LLC is not subject to the test.

Frequently asked questions

Does the personal salary regime solve the independence test?

No. The test applies to all sole proprietors — both flat-rate and personal-salary. Switching to a personal salary does not remove the risk; only an LLC is outside the scope of the test.

How many criteria may be met?

At most four. If five or more of the nine criteria are met in relation to a single client, the sole proprietor is treated as non-independent for the income received from that client.

Who applies the test, and how?

The Tax Administration, during an audit. The test is assessed separately for each sole proprietor–client relationship, based on the contract and the actual way of working — not on paperwork alone.

Does the test apply to work with foreign clients?

Yes. The test applies where the client is a foreign entity too. The difference is that the payer cannot calculate and withhold the liability, so the sole proprietor files the return personally.

Note: this content is informational and does not constitute tax or legal advice. Assessment of the test always depends on the specific circumstances.