Serbia, Republic of
Belgrade
EY
Vladimira Popovića 8a
11070 Belgrade
ey.com/globaltaxguides
+381 (11) 209-5800
Fax: +381 (11) 209-5891
Email: ey.office@rs.ey.com Republic of Serbia
Principal Tax Contact
Ivan Rakic
+381 (11) 209-5794
Mobile: +381 (63) 635-690
Fax: +381 (11) 209-5891
Email: ivan.rakic@rs.ey.com
Business Tax Services, Tax Policy and Controversy, and Global Compliance and Reporting
Ivan Rakic
+381 (11) 209-5794
Mobile: +381 (63) 635-690
Fax: +381 (11) 209-5891
Email: ivan.rakic@rs.ey.com
The Union of Serbia and Montenegro ceased to exist on 25 May 2006. The following chapter provides information on taxation in the Republic of Serbia only.
A. At a glance
(a) This tax applies to nonresident companies. Under the Personal Income Tax Law, dividends and interest paid to resident and nonresident individuals are taxed at a rate of 15%.
(b) This tax applies to nonresident companies. Under the Personal Income Tax Law, royalties paid to resident and nonresident individuals are taxed at a rate of 20%.
(c) This tax applies to nonresident companies. Under the Personal Income Tax Law, individuals are taxed at a rate of 20% on rent and service fees.
(d) As of 1 April 2018, only fee payments related to market research services, accounting and audit services, and other legal and business advisory services are subject to withholding tax regardless of the place where the services were provided or used.
(e) This tax applies to nonresident companies. Under the Personal Income Tax Law, individuals are taxed at a rate of 15% on capital gains.
B. Taxes on corporate income and gains
Corporate income tax. Companies resident in the Republic of Serbia (RS) are subject to tax on their worldwide income. A company is resident in the RS if it is incorporated in the RS or if its central management and control is actually exercised in the RS. Nonresident companies are subject to tax only on their income derived from the RS. Nonresident companies are companies registered in other countries that have a permanent place of business in the RS. Foreign representative offices may not derive profits from their activities in the RS. However, if they do derive such profits, the profits are subject to tax in the RS.
Rate of corporate income tax. The rate of corporate income tax in the RS is 15%.
Tax incentives. A company qualifies for a 10-year tax exemption if it invests RSD1 billion (approximately EUR8 million) in its own fixed assets and if it employs at least 100 new workers in the period of investment.
Double the amount of costs directly connected to research and development (R&D) activities that the taxpayer conducts in Serbia can be deducted.
Up to 80% of income accrued in connection with use of intellectual property rights may be excluded from the tax base if certain conditions are met. Also, 80% of capital gains derived from the transfer of intellectual property is excluded from the tax base.
Taxpayers that invest in newly formed companies conducting innovative business activity can be granted a tax credit of 30% of the investment in such companies if certain conditions are met.
A taxpayer’s income deriving from the transfer of non-monetary assets without reimbursement under concession agreements is excluded from the tax base if the value of a concession agreement is more than EUR50 million. In this context, a concession agreement is an agreement between a competent state authority (including a publicly owned company) and a legal entity based on which the competent state authority gives to a domestic or foreign legal entity the commercial right to use natural resources or resources in general or public use or allows it to perform activities of general interest for the respective period under the conditions prescribed by law, with the payment of the concession fee.
The effects of the change of accounting policies caused by the first application of International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS) for small and medium enterprises that cause changes of positions in the balance sheet are recognized as income or expense in the tax balance
C. Determination of trading income
General. The assessment is based on the profit or loss shown in the financial statements prepared in accordance with International Accounting Standards and domestic accounting regulations, subject to certain adjustments for tax purposes.
Taxable income is the positive difference between income and expenses. For tax purposes, income consists of income from the following:
• Sales of products, goods and services
• Financial income
• Capital gains
• Income resulting from transfer-pricing adjustments
Tax-deductible expenses include expenses incurred in performing business activities. Expenses must be documented. Certain expenses, such as depreciation (see Tax depreciation), donations and entertainment expenses, are deductible up to specified limits. Impairment of assets may not be deducted unless the assets were alienated or damaged as a result of force majeure.
Inventories. Inventories must be valued using average prices or the first-in, first-out (FIFO) method.
Bad debt provisions and write-offs. Legal entities may deduct as expenses write-offs of receivables if such actions are in conformity with the Accounting Law. This conformity exists if the following conditions are satisfied:
• Receivables were included in the taxpayer’s revenues.
• Receivables have been written off from the taxpayer’s accounting books as uncollectible.
• The taxpayer has sued the debtor or claimed the debt in a liquidation or bankruptcy procedure, or the execution procedure has been initiated.
Write-offs of receivables that were not recorded as revenues in the taxpayer’s accounting records are also tax-deductible expenses if the second and third conditions above are met.
Bad debt provisions are tax-deductible expenses in the period in which at least 60 days have elapsed since the due date for the payment of receivables.
Tax depreciation. Fixed assets are divided into five groups, with depreciation and amortization rates prescribed for each group. New rules for the calculation of tax amortization were introduced as of 1 January 2019 (the declining-balance method has been abandoned and the straight-line [linear] method has been introduced). Old assets, which were present at the beginning of the application of the new rules, are depreciated using the old rules until 2028. The new rulebook on amortization has been introduced.
The straight-line method must be used for all five groups. New depreciation rules also prescribe that if the depreciation calculated for accounting purposes is lower than the depreciation calculated in accordance with corporate income tax rules, the amount of accounting depreciation should also be used for tax purposes.
The following are the depreciation and amortization rates.
Group I includes immovable assets.
Starting from the 2018 tax year, tax depreciation of intangible assets should be equal to the accounting depreciation of such assets.
In addition, if the assets are acquired from a related party, the depreciation base is the lower of the following two amounts:
• Purchase price for the transfer of the fixed assets
• Acquisition price of fixed assets determined by applying the arm’s-length principle
Relief for losses. Tax losses incurred in business operations may be carried forward for five years. Loss carrybacks are not allowed.
Groups of companies. Under group relief provisions, a group of companies consisting only of resident companies may offset profits and losses for tax purposes. The group relief provisions are available if a parent company holds directly or indirectly at least 75% of the shares in subsidiaries. To obtain group relief, a group must file a request with the tax authorities. If tax consolidation is allowed, the group companies must apply tax-consolidation rules for five years. Each group company files its own annual income tax return, and the parent company files a consolidated tax return based on the subsidiaries’ tax returns. Any tax liability after consolidation is paid by the group companies with taxable profits on a proportional basis.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax
Value-added tax (VAT), on supplies of goods and services in the RS and on imports of goods; certain tax exemptions with or without the right to deduct input VAT are granted; VAT taxpayers are legal entities and entrepreneurs who had turnover of goods and services in excess of RSD8 million (approximately EUR65,000) in the preceding 12 months or who expect to have annual turnover greater than the threshold
Property tax, paid on ownership rights over immovable property in the RS (including residential and business buildings, apartments, garages and other underground and surface buildings) and on usage rights over city construction land; certain tax exemptions are prescribed; tax base equals the market