In our previous article, we addressed a topic that was relevant at the beginning of the year – the labor law and tax aspects of reimbursing employees for commuting expenses.

The introduction of free public transportation in Belgrade as of January 1, 2025, has raised numerous questions among employers regarding their obligations to reimburse commuting expenses.

The most common concerns were:

• Is it still necessary to reimburse commuting expenses to employees who use free public transportation?
• Are employers required to reimburse employees who commute by taxi, personal vehicle, or other means, even though free public transport is available?

In this context, we highlighted the following key points:

• The obligation to reimburse commuting expenses has not been abolished, as the relevant provision of the Labor Law has not been amended or repealed.
• Employees are not obligated to use public transportation – the Labor Law provides for the reimbursement of actual commuting expenses, regardless of the means of transport.
• Employees who use other forms of transport still incur costs and are entitled to reimbursement.
• What has changed is that the scope of this right can no longer be determined in the same manner as previously defined by the Labor Law.
• Even though users of free public transport do not have actual expenses, court practice in some cases recognizes the right to reimbursement even when no actual costs are incurred.

As we interpreted the situation, the Ministry of Labor, Employment, Veteran and Social Affairs issued Opinion No. 340029 2025 13400 001 001 011 024 on January 31, 2025, in which it took the position that commuting costs always exist, except in cases where the employer organizes its own transportation. Therefore, the employee is entitled to reimbursement of these expenses in accordance with the employment agreement or the employer’s general act, whereby the employer determines the criteria for reimbursement based on the last amount paid before the new situation arose.

What remained unclear at the time was whether the requirement to document commuting expenses would continue to apply under tax regulations in cases where the right to reimbursement is recognized despite the complete absence of actual commuting costs due to the use of free public transportation.

In this regard, on April 25, 2025, the Ministry of Finance issued Opinion No. 1915441 2025 10520 004 000 011 001, stating the following:

• The employer is obligated to reimburse employees for commuting expenses, unless it provides its own transportation. This right and the amount of the reimbursement should be regulated by the general act and employment agreement;
• To qualify for the tax exemption under Article 18 of the Personal Income Tax Law, in the context of free public transportation within the integrated system in the territory of Belgrade, actual commuting expenses must be documented by an appropriate credible accounting document;
• Such reimbursements are not considered salary and are not subject to mandatory social security contributions, regardless of the tax treatment of such income under the Personal Income Tax Law.

Accordingly, for commuting expenses within the city of Belgrade, if documented by appropriate credible accounting documentation, personal income tax is not paid on the actual cost of transportation up to RSD 5,630 per month (the current non-taxable threshold). Any amount exceeding this limit is taxed at a rate of 10%.

If commuting expenses are not documented, the entire amount of the reimbursement is taxed at a 10% rate.

This article is for informational purposes only and does not constitute legal advice. If you require additional information, please feel free to contact us.