The new draft of Corporate Income tax law presents tax advantages for companies with intellectual property registered in Serbia, as well as for companies who perform research and development activities in Serbia or perform/invest in innovative business activities.
For tax purposes, depreciation of fixed assets will be calculated by using proportional method on the purchase value for each asset separately (in existing law degressive method is used), while for assets acquired during tax period, proportional method is implemented in proportion with the period between acquisition period and the end of tax period. In case the depreciation calculated in line with accounting regulation (IFRS) is determined in lower amount than the tax depreciation, as expenses in tax balance sheet accounting depreciation will be recognized.
The limit for recognizing promotion costs in tax balance sheet (10% of total revenue) is eliminated.
According to the new draft of law, revenue of tax payer, who registers software/copyright from 2019, in accordance with the law which regulates copyrights and similar rights, generated from this right (e.g. selling licences) will not be taxed in amount of 80% after certain adjustments. The example of calculating corporate income tax according to the new and the old law is presented here.
Research and development costs
The costs directly related to research and development activities in Republic of Serbia can be deducted twice in tax balance sheet.
According to the proposed changes, in income tax base will be included 20% of capital gains generated in transfer of rights in total of: 1) Copyright or similar right 2) Right on the invention in accordance with the law which regulates patents.
Tax resident, which generates capital gains by selling assets in other country and pays capital gains tax in that country, can reduce its corporate income tax in Serbia for the amount of taxes paid in other country.
Tax advantage for investments in newly founded companies which perform innovative business activities
The goal of new regulations is to ease access to capital to newly founded companies which perform innovative business activities, as well as to make other companies invest in innovative companies more easily. The suggested changes present the right for tax credit in amount of 30% of invested funds (but not higher than 100 million dinars of tax credit) for tax payer which invests in capital of newly founded company which performs innovative business activities.
The newly founded company which performs innovative business activity, is a company not older than 3 years, mainly performing innovative business activities, according to the law regulating innovative activities (activities of creating new products, technologies, processes and services or significantly changing existing products, technologies, processes and services, all according to the market needs).
Besides, draft presents five additional conditions company must meet in order to qualify as a newly founded innovative company, which you can read about in the draft of the law.
For additional information, please contact our consulting team.