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TAX INCENTIVES
Highly competitive tax regime accompanied with a number of related incentives makes Serbia highly conducive to doing business
Corporate Income Tax Holiday
Companies are exempt from Corporate Income 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 approximately EUR 9 million, and throughout the investment period they employ at least 200 additional employees.
Corporate Income Tax Credits
The amount of tax payable can be reduced by 20% of the amount invested in fixed assets for the respective tax period. This reduction cannot exceed 33% of the total tax liability for a single year. If not used entirely in the course of one year, this tax credit can be carried forward for a maximum period of 10 years. For small companies, tax credit of 40% is granted for fixed assets investments in the current year and may not exceed 70% of the tax due.
Carrying Forward of Losses
Net operating losses stated in the tax return can be carried forward for 5 years. Capital losses may be carried forward and offset against future capital gains over a period up to 5 years. The carryback of losses is not permitted.
Salary Tax Social Insurance Charges Exemptions
A company who hires new personnel from certain categories of workers on a permanent basis is exempt from paying salary tax over the period of 3 or 2 years.
The employer is exempt of paying SIC for a period of 3 years for apprentices aged fewer than 30 registered as unemployed by the National Employment Service and for disabled persons.
In case of employees under 30 registered as unemployed for no less than 3 months, those aged 50 or older registered as unemployed for no less than 6 months and received unemployment compensations as well as all employees aged between 45-50 the release period would last 2 years.
Annual Income Tax Deductions
The annual income tax due by Serbian residents on net worldwide income in excess of a prescribed threshold (3 average annual salaries) is levied at progressive rates ranging from 10% to 15%. The annual income is taxed if exceeding the amount of threefold the average annual salary in Serbia. The tax rate is 10% for the annual income amounted in the range between 3 and 6 times average annual salary in Serbia, and 15% for the part of the annual income exceeding 6 times average annual salary in Serbia. The taxable income is further reduced by 40% of an average annual salary for the taxpayer and by 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.
Avoiding Double Taxation
If a taxpayer already paid tax on the profit generated abroad, he is entitled to a Corporate Income Tax credit in Serbia to the already paid amount. The same right is enjoyed by a taxpayer who earns revenue and pays Personal Income Tax in another country, provided there is a Double Taxation Treaty with that country.
Double Taxation Agreements (DTA) Signed by Serbia
OTHER INCENTIVES
Customs-Free Imports of Raw Materials and Semi Finished Goods
Foreign investors in Serbia can enjoy the benefit of customs free import of raw material and semi finished goods for export oriented production. This benefit can either be achieved by operating in one of the free zones in Serbia or by a permit from custom office for outward processing production. In both cases finished products must be 100% designated for export.
Customs-Free Imports of Machinery and Equipment
Foreign investors are exempt from paying customs duty on imported equipment and machinery which represents the share of a foreign investor in a capital of a company in Serbia.
Local Incentives
A wide array of incentives is also available at the local level, varying in scope and size from one city to another. The major ones comprise the following:
- City construction land lease fee exemptions or deductions, including the option of paying in installments, with the prior consent of the Serbian Government;
- City construction land development fee relief such as fee exemptions or discounts for one-off payments.
In the Serbian Province of Vojvodina, investors are awarded financial grants for new employment, amounting to RSD130,000 (approx. EUR 1,122) with the possibility of receiving additional RSD 20,000 (approx. EUR 173) for employing person older than 50 years old, this totals RSD 150,000 (approx. EUR 1,295).
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