30 Reasons to invest in Serbia – part three – Serbia tax opportunities
This is the last text in a series 30 Reasons to invest in Serbia. So far we presented 19 reasons: 7 of them were related to grant opportunities and 12 of them were related to the positive aspects of Serbian business environment. Now it is time for final 11 reasons: Serbia tax opportunities. We divided those opportunities in four groups:
- Corporate income tax opportunities
- Personal income tax opportunities
- Double non-taxation opportunities
- Indirect taxation opportunities
Corporate income tax opportunities
Among corporate income tax opportunities, we state following reasons to invest in Serbia:
- Low corporate income tax rate: corporate income tax rate in Serbia is 15%, which is unified for all legal entities. Serbian tax rate is among lower European corporate income tax rates.
- Preferable tax regime for innovating companies: companies who perform research & development (R&D) activities on the territory of Republic of Serbia (i.e. at least 90% of employees engaged on the project of R&D perform activities in Serbia) may deduct those costs in double amount. Some of expenses that may be recognized are costs of salaries of employees engaged in R&D project, costs of materials, costs of purchasing fixed assets used on a project etc. In addition, tax payers may exclude revenue from intellectual property (except transfer of ownership) from tax base after certain adjustments. Intellectual property must be registered in Serbia
- Tax holiday for large investors: companies who invest more than 1.000.000.000 RSD (approximately 8.400.000 EUR) in fixed assets and employ at least 100 permanent new employees are granted with tax holiday of 10 years, proportionate to the level of made investments. Investments must be related to registered business activities. Number of employees and level of investments must be maintained during period of tax holiday
- Tax credit for investing in start-ups: taxpayers who invest in innovative start-ups are granted with tax credit in amount of 30% of investment. Investment must be kept for at least 3 years. Maximum amount of tax credit for investment in one start-up is 100.000.000 RSD (app. 800.000 EUR). However, maximum amount of tax credit used in one fiscal year is 50.000.000 RSD (app. 400.000 EUR)
- Carrying forward for losses: The tax losses may be carried forward and offset against future profits over a 5 year period.
Personal income tax opportunities
Among personal income tax opportunities, we state following reasons to invest in Serbia:
- Low personal income tax rate: personal income tax rate is 10%. In case of generating annual income above three average Serbian annual salaries (approximately 23.000 EUR) after paid taxes and contributions, the income above that amount will be taxed with 10%. For annual income above six average Serbian annual salaries (approximately 46.000 EUR) after paid taxes and contributions applicable tax rate is 15%
- Low costs of salaries: Salary tax and contributions are approximately 65% of net salary, if gross salary is less than maximum contribution base (2.800 EUR). Above maximum contribution base only personal income tax rate of 10% is applied
Double non-taxation opportunities
Among double non – taxation opportunities, we state following reasons to invest in Serbia:
- Serbia signed 59 double taxation treaties, among which are all EU members (except Portugal), border countries, Russia, China, Turkey etc. : more information on Serbia’s double taxation treaties were already presented on our blog.
- Double non-taxation measures in local laws: if a resident of Republic of Serbia earns income in another country and pays tax on it abroad, he or she is granted with a tax credit in amount of paid tax, but not higher than tax liability that would be calculated in accordance with Serbian regulation. Similar tax credit is granted for Serbian resident legal entities which pay tax on permanent establishment income in another country
Indirect taxation opportunities
Regarding indirect taxation opportunities, we state following reasons to invest in Serbia:
- Relatively attractive VAT tax rate: General VAT rate in Serbia is 20%, which is lower than rates in many European countries. Reduced rate of 10% is applicable for certain types of goods, such as bread, milk, sugar, medication, newspapers etc.
- Free zones: there are 15 free zones in Serbia which provide benefits in terms of VAT exemption, exemption on tariffs for importing materials and equipment for export production. According to the Development agency of Serbia, more than 200 multinational companies employing more than 35.000 employees operate in those free zones. Those free zones are situated in following cities: Pirot, Subotica, Zrenjanin, Novi Sad, Kragujevac, Šabac, Užice, Smederevo, Kruševac, Svilajnac, Apatin, Vranje, Priboj and Belgrade.
Texts on our blog are of indicative character and they are based on information available at the very moment of preparing text.
I hope you enjoyed reading our 30 reasons to invest in Serbia and that you are interested in visiting and doing business in our country. If you are planning to start a business in Serbia or expand existing one, please contact our consulting team.