Do you use tax incentives and reliefs?
WTS assists taxpayers to consider the possibility of using incentives, analyses specific effects and compiles all relevant documentation including keeping specific records required by relevant regulations.
Depending on the position in which they operate, the types and volume of investments, the types of activities they are engaged in, the following options are available to taxpayers:
Exercising the right to a tax credit for a period of ten years for investments in fixed assets and employment
In accordance with Article 50a of the Law on Corporate Income Tax, a taxpayer who invests in his own fixed assets, or if another party invests in his fixed assets more than one billion RSD, and who uses the mentioned assets for the purpose of performing the predominant activity and who in the period of investment employs at least 100 persons for an indefinite period of time is exempt from corporate income tax for a period of ten years in proportion to that investment.
An investment in fixed assets by another party is also considered an investment in basic capital and an increase in basic capital in accordance with the law.
The tax reliefs is applied after the fulfillment of the above-mentioned conditions, from the first year in which the profit was realized.
Tax incentives related to research and development expenditures
Expenditures on research and development may be recognized in the tax balance in twice the amount, in accordance with the provisions of Article 22g paragraph 1 of the Law on Corporate Income Tax.
However, in order to achieve this incentive, it is necessary to make an analysis of costs that are considered costs in research and development, as well as to prepare quite complex documentation and keep special records in accordance with the Law.
The taxpayer who exercises the right to recognition of research and development costs is obliged to submit the following documentation for each individual project with the tax balance:
- description (specification) of the project with specially highlighted project objectives, planned project phases as well as planned activities within each of the project phases;
- records of the time each employee spent working on a particular project;
- a conclusion stating the data on the amount of all research and development costs.
In addition, the taxpayer is obliged to have the following paper documentation at the time of submitting the tax balance:
- project budget approved by management with performance projections expected from a specific project;
- procurement plan related to a specific project;
- opinions of experts in charge of project implementation;
- invoices from which the value of assets or services procured for research and development can be seen;
- contracts with third parties engaged in the project;
Also, the taxpayer is obliged to keep records of expenses in the manner prescribed by Law.
Tax incentives related to income from the exploitation of intellectual property
In the event that the taxpayer earns income from the deposited copyright (software, film works, books, databases, etc.) of the subject of related law or from the assignment of rights related to the invention, such income may be subject to tax exemption, under appropriate conditions.
From the total realized income, it is necessary to reach the amount of qualified income that is exempt from the tax base in the amount of 80% of qualified income.
It is determined by reducing the amount of total income generated on the basis of the fee for the use of deposited copyright or subject related rights in that tax period by the amount of qualified expenses, and then multiplied by the percentage of the share of total qualified expenses in total costs incurred in connection with that copyright or subject of related law, or in connection with the invention.
Qualified expenditures are considered to be total historical or current tax-deductible expenditures related to research and development activities that resulted in the creation of a deposited copyright or subject matter of a related right, ie invention.
Current tax deductible expenses are expenses incurred in the period of realization of qualified income.
Historical tax deductible expenses (incurred before 31 December 2018) were determined in 60% of the total income from the deposited copyright or subject of related right, or invention (in the first tax period), in the second tax period in the case of 40% of total revenue and third increase over a period of 20% of total revenues.
The Rulebook prescribes numerous records and documentation that need to be kept and submitted to the tax administration in order to acquire the right to exemption.
Tax incentives for new employment
Are you planning a new employment? Do you qualify for tax and contribution exemptions for new employees?
If the company hires people who were previously engaged as entrepreneurs or other entities, and who were not employed during 2019, the exemption from paying part of the tax on salaries and contributions for the pension and disability insurance (PDI) is envisaged. This reliefs applies to the above entities if they establish labor relation with employer in the period from January 1, 2020 to April 30, 2020.
The legislator has prescribed the following dynamics of using reliefs:
- In 2020, 70% of taxes and 100% of contributions for PDI,
- In 2021, 65% of taxes and 95% of contributions for PDI,
- In 2022, 60% of taxes and 85% of contribution for PDI.
If you have any questions, contact one of the WTS tax experts.