Object of taxation
Income
Tax rate
15 % flat rate
Tax liability
Companies, permanent establishments, branches
unlimited
Corporations resident or managed in Serbia, on worldwide income
limited
Foreign legal entities neither resident nor managed in Serbia, on certain income in Serbia
Financial year
Calendar year; alternative fiscal year possible if financial year differs from the calendar year (under approval of the Ministry of Finance / National Bank and the Tax Authorities)
Accounting
Double-entry bookkeeping (mandatory application of IFRS, IFRS for SMEs and IAS for certain entities).
Loss carryback
Not possible
Loss carryforward
Loss carry forward for limited period of 5 years
Shell company purchase
In case of acquisition of shares and restructuring the loss carryforward can be used for limited period of 5 years.
Operating expenses
Expenses of the business.
Operating expenses
Expenses of the business.
Transfer prices
Arm’s-length basis. Companies are obliged to prepare and submit a transfer pricing documentation to the Tax Authorities in case of related party transactions together with annual corporate income tax calculation. Ultimate parent entities of international group are obligated to submit Country-by-country (CBC) report, if total consoli- dated revenue reported in the consolidated financial statements exceed revenue of EUR 750 million in RSD equivalent.
Interest on debt financing of acquisition
Deductible under the same conditions as interest payable on other type of borrowings made in the course of business
Debt / equity
Between related parties maximum tax deductible interest is based on debt / equity ratio 4:1 (for banks and leasing companies 10:1 ratio applies)
Tax depreciation
For tax purposes fixed assets, except intangible assets, are divided into five groups:
I group (immovable) = straight line method Intangible assets = straight line method, whereby the depreciation rate would be determined on the basis of useful life or the duration of contract on the right to use intangible asset.
II - V group (all other assets) = straight line method Fixed assets consisting of movable and immovable parts will be classified on the basis of the applied accounting treatment of such assets.
Accounting depreciation depends on accounting policy of the company. If the amount of accounting depreciation is lower than the amount of depreciation costs calculated by using tax depreciation rates, accounting depreciation will be recognized as a tax-deductible cost in the tax period. However, depreciation of intan- gible assets will be always recognized in the amount of accounting depreciation costs.
Provisions
Tax deductible provisions:
- long-term provisions for renewal of natural wealth
- warranty period costs
- retained caution money deposits
- mandatory provisions in line with special laws for banks, insurance companies etc. are tax deductible to the extent legally required
- all other long term provisions made in accordance with IAS and IFRS/IFRS for SMEs are deductible on deferral basis i.e. when used
Motor vehicle expenses
10 % tax depreciation rate; straight-line method
Non-deductible expenses
- non-documented costs
- interest costs for late payment of taxes
- penalties imposed by the authorities, contractual and other penalties
- non-business driven expenses
- expenses for investments in culture and expenses for humanitarian aid, i.e. the elimination of consequences incurred in case of an emergency exceeding 5 % of total revenues
- representation expenses exceeding 0.5 % of total revenues
- membership fees exceeding 0.1 % of total revenues
- impairment of assets (recognized when disposed)
- penalty interest between related parties, etc.
Tax incentives:
Costs directly related to R&D carried out by the tax- payer in Serbia may be deducted for CIT purposes in a doubled amount.
The qualified royalty income generated by the taxpayer, holder of a copyright or related right on the basis of compensation for the exploitation of the rights, may be excluded from tax base in the amount of 80 %, under certain conditions.
Only 20 % of capital gains arising from the sale of the entire copyright and related rights, or rights related to the invention will be included in the taxable base. Exceptionally, the taxpayer may decide not to include capital gains realized by transferring intellectual property rights (royalties and related rights, as well as invention rights) to the capital of a resident legal entity in the taxable base, provided that the resident legal entity does not alienate such acquired rights within two years as of the date of acquisition, as well as that the right is not conceded for use in whole or in part at a price lower than the market price, if the cession was made to a related party.
Taxpayer who makes monetary equity investment into newly established business entity, which performs innovative activities, will be granted tax credit in the amount of 30 % of the investment made, under certain conditions.
Interest barrier
Between related parties maximum tax deductible interest is based on debt / equity ratio 4:1 (for banks and leasing companies 10:1 ratio applies).
Interest and royalties to intra-group companies
Non-deductible: Interest payments to intra-group companies, if the interest rate is above the rate as published by the Ministry of Finance.
Withholding tax
Statutory withholding tax rate is 20 %. A lower rate can apply, provided it is envisaged by a double taxation agreement (DTA).
Exceptionally, on income from royalties, interest, rental fees and services generated by non-residents who are established, have their seat or effective place of management in a state with a preferential tax system, withholding tax rate of 25 % will apply.
Interest
20/25% (a lower rate may be provided in the applicable DTA)
Royalties
20/25% (a lower rate may be provided in the applicable DTA)
Dividends
20% (a lower rate may be provided in the applicable DTA)
Controlled foreign corporation (CFC) rules
Ultimate parent entities of international group are obligated to submit Country-by-country (CBC) report, if total consoli- dated revenue reported in the consolidated financial statements exceed revenue of EUR 750 million in RSD equivalent.
Hybrid mismatches
None
National parent-subsidiary exemption
No minimum holding period / no threshold
- Dividends are tax exempt
- Capital gains are subject to tax
- Capital losses are generally deductible over 5 years
International investments
None
International parent subsidiary exemption and portfolio investments
None
Goodwill amortisation
Not tax deductible
Group taxation / pooling
Tax group
Tax consolidation allowed on request if all associated parties in group are Serbian residents and if parent company indirectly or directly hold more than 75 % of the shares of the associated companies.
Pooling
None
