Tax Incentives
Serbia’s tax regime provides various incentives for investors seeking ways to reduce their overhead costs:
- A 10-year corporate profit tax holiday for investment over €7.5 million and 100 new employees;
- Corporate profit tax credits up to 80% of the fixed assets investment;
- Carrying forward of losses over a period up to 10 years;
- Accelerated depreciation of fixed assets;
- A 5-year corporate profit tax holiday for concessions;
- Salary tax base deduction in the fixed amount of €60 a month;
- Salary tax exemptions for employees under 30 and over 45 years;
- Annual income tax deductions up to 50% of the taxable income;
- Social insurance contributions exemptions for employees under 30 and over 45 years;
- Customs-free imports of equipment based on foreign investment.
Corporate Profit Tax
In Serbia, corporate profit tax is paid at the rate of 10%. Non-residents are taxed only based on their income generated in Serbia.
Tax Holidays
Companies are exempt from corporate profit tax for a period of 10 years, starting from the first year in which they report taxable profit if:
- They invest in fixed assets an amount exceeding RSD 600 million (approximately €7.5 million);
- Throughout the investment period they employ at least 100 additional employees on an indefinite contract.
Tax Credits
The amount of tax due can be reduced by 20% of the amount invested in fixed assets for the respective tax period. This reduction cannot exceed 50% of the total tax liability. If not used entirely in the course of one year, this tax credit can be carried forward for a maximum period of 10 years.
A number of sectors (agriculture, fishing, production of textile yarn and fabrics, garments, leather, base metals, standard metal products, machines, office machines, electrical machines, radio, TV and communication equipment, medical instruments, motor vehicles, recycling and video production) are entitled to receive a tax credit in the amount of 80% of investment made in fixed assets. The unused part of any such investment can be carried forward for up to 10 years.
For small companies, a tax credit is also granted for fixed assets in the amount of 40% of the investment made in the current year. The credit may not exceed 70% of the tax due.
A taxpayer who employs new workers is entitled to tax reduction for the amount equal to 100% of the gross salaries, increased by the related contributions paid by the employer. This tax credit is recognized for a period of 2 years from the day of employment of new workers, provided that the number of employees is not reduced during that period.
The taxpayer generating profit in a newly established unit in an underdeveloped region will receive a tax credit for a period of 2 years in an amount proportionate to the profit of that unit in the total profit of the company.
Carrying Forward of Losses
The tax loss stated in the tax return can be carried forward and offset against future profits over a period of up to 10 years.
Accelerated Depreciation
The taxpayer has the right to accelerated depreciation of fixed assets at rates of up to 25% above the prescribed ones. This relief is provided for fixed assets that are used for ecological purposes, i.e. the prevention of air pollution, water and soil pollution, noise reduction, energy savings, forestation, and collection and utilization of waste for industrial raw materials and fuels. Scientific research, education and staff training, and computer hardware also fall within this category.
Intangible and fixed assets are divided into five groups, with depreciation rates prescribed for each (I – 2.5%, II – 10%, III – 15%, IV – 20%, and V – 30%). A straight line depreciation method is prescribed for the first group including real estate, while a declining balance method is valid for assets in the other groups.
Tax Exemptions for Concessions
A 5-year tax holiday is granted for concession-related investment, starting from the day the concession investment has been completed. No tax is due if income is derived before the completion of the concession investment.
Personal Income Tax
Personal income tax is payable by individuals on different sources of income including salaries, income from agriculture and forestry, income from self-employment, income from royalties and industrial property rights, income from capital, income from real estate and other income. The rate is 12% for salaries, while other personal income is predominantly taxed at a rate of 20%. Non-residents are taxed with respect to income generated in Serbia.
The taxpayer has the right to a tax credit in the amount of tax already paid on income earned abroad.
Salary tax is not payable on any employee’s receipts based on the following:
- Public transport allowance (to and from the place of work), up to the price of a monthly ticket or up to the actual cost if a monthly ticket is not available, but no more than RSD 2,000;
- Meal allowance on business trips in the country, but no more than RSD 1,200 a day, and per diem allowance on business trips abroad, up to the amount set by the competent authorities;
- Accommodation allowance on business trips, against presented bills;
- Transport allowance on business trips against public carrier bills and when the use of the employee’s own motorcar for business trips or other business purposes is permitted under laws and regulations, up to 30% of the price of a liter of super petrol, but no more than RSD 3,500 a month;
- Solidarity relief in the event of sickness, medical rehabilitation or disability of an employee or member of his/her family, up to RSD 20,000;
- New Year and Christmas presents for employees’ children aged up to 15, up to RSD 5,000 per child;
- Awards for employees, up to RSD 10,000 a year.
The salary tax base is deducted by RSD 5,000 a month for an employee working full working hours.
An employer who employs new workers for an indefinite period is exempt from paying salary tax for newly employed workers over the following period:
- 3 years: 1) for apprentices aged under 30 who have been declared as unemployed by the National Agency for Employment, and 2) for disabled persons;
- 2 years: 1) for persons aged under 30 who have been declared as unemployed by the National Agency for Employment for no less than 3 months, and 2) for persons aged 45 or older who have been declared as unemployed by the National Agency for Employment for no less than 6 months or receive salary compensations;
- 1 year: for all persons, regardless of age or other criteria.
Annual Income Tax
For non-Serbian citizens, the annual income is taxed if exceeding the amount of 5 times average annual salary in Serbia. The tax rate is 10% for the annual income below the amount of 8 times average annual salary, and 15% for the annual income above the amount of 8 times average annual salary. The taxable income is further reduced by the amount of 40% of an average annual salary for the taxpayer and by the amount of 15% of an average annual salary for each dependent member of the family. The total amount of deductions cannot exceed 50% of the taxable income.
Social Insurance Contributions
The rates for mandatory social security contributions are:
- 11% for pension and disability insurance,
- 6.15% for health insurance, and
- 0.75% for unemployment insurance.
The total contribution percentage of 17.9 is applicable to both the employer and the employee.
The employer is exempt from paying social insurance contributions over the following period:
- 3 years: 1) for apprentices aged under 30 who have been declared as unemployed by the National Agency for Employment, and 2) for disabled persons;
- 2 years: 1) for persons aged under 30 who have been declared as unemployed by the National Agency for Employment for no less than 3 months, 2) for persons aged 50 or older who have been declared as unemployed by the National Agency for Employment for no less than 6 months, and received compensation for unemployment, and 3) for employees aged between 45 and 50 (an 80% exemption).
Double Taxation Treaties
If a taxpayer earns profit by conducting business in another country and tax was paid on that profit, it is entitled to a tax credit on its company profit tax account in Serbia amounting to the already paid tax. The same right is enjoyed by a taxpayer who earns revenue and pays personal income tax in other country, provided there is a Double Taxation Treaty with that country. Countries that have a Double Taxation Treaty with Serbia are the following: Belgium, Belarus, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Egypt, Finland, France, Germany, Ghana, Great Britain, Italy, Kuwait, Macedonia, Malaysia, Netherlands, Norway, PDR Korea, Poland, Romania, Russia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, and Ukraine.
Customs Exemptions
Customs duties are not paid in the following cases:
- Imports of equipment, other fixed assets and building material based on foreign investment;
- Imports of goods not manufactured in Serbia for one of the following purposes:
- Replacement of equipment destroyed by a natural disaster, fire, explosion, armed conflict or traffic accident;
- Scientific research, education and cultural activities, health care, professional training and employment of disabled persons, if such goods directly serve the purpose of such activities;
- Immediate environmental protection.
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