Personal allowance

The part of income the tax does not touch

The personal allowance (лично ослободување, also called the tax reduction / даночно намалување) is a fixed monthly amount that is left out of the reach of income tax. It is 10.932,00 ден a month, which comes to 131.184,00 ден over a full year. Everyone earning income from employment gets it; it is not something you apply for or a benefit that depends on circumstances — it is built into the way the tax is calculated. The values shown are those in force for 2026.

Where it enters the sum

The order matters, and it is the point most worth getting right. The personal allowance reduces the tax base, not the tax itself, and it is applied after the contributions have been deducted. So the sequence is: start from gross, take off the employee’s contributions (28% of the base), then take off the personal allowance (10.932,00 ден); what remains is the tax base, and the flat income tax of 10% is charged on it.

In one line: tax base = gross − contributions − personal allowance, then tax = 10% × tax base. Because the allowance shrinks the base rather than the computed tax, its worth to you is 10% of the exempt amount each month — modest per month, but steady, and the same for every salary regardless of size.

A worked example

Picture a salary where, after the contributions come off, some taxable amount is left. The personal allowance of 10.932,00 ден is subtracted from that amount before the rate is applied, so the 10% tax is charged on a smaller base than it otherwise would be. Raise the salary and the allowance stays the same fixed 10.932,00 ден — it does not scale up — so as a share of a larger salary it quietly matters a little less, while in absolute terms the tax saving it produces is the same 10% of 10.932,00 ден every month.

When the base falls to zero

At the lower end something worth knowing happens. If the contributions and the personal allowance together add up to as much as — or more than — the gross salary, the tax base is zero. And a zero base means no income tax is due for that month: the rate applied to nothing is nothing. This is why the very lowest salaries can end up paying contributions but no income tax at all. It is not a special exemption, just the arithmetic of subtracting the allowance after the contributions.

To see the allowance at work on any figure, enter a gross salary in the net-pay calculator — the breakdown shows the personal allowance as its own line, so you can watch exactly how much of the base it removes before the tax is charged.