Tax alert: Serbia


Wednesday, October 30th, 2019

December 2018 saw changes in many tax regulations, to be initiated that month or in January 2019. These included:

 

  • Law on Personal Income Tax (PIT Law) – amended in the domain of tax exemptions (recreation of employees), the rights of the employers of the newly established company to tax exemption, ways of determining and paying income tax on catering services, etc.
  • Law on Contributions on Mandatory Social Insurance (CMSI Law) – abolishing the unemployment contribution at the expense of the employer in the amount of 0.75%, as well as a number of other changes.
  • Law on Corporate Income Tax (CIT Law) – a new method of calculating the tax depreciation of fixed assets has been established, and new issues have been adopted regarding the recognition of certain revenues and expenditures in the tax balance (expenses for advertisement and propaganda, costs related to research and development [R&D], etc.).
  • Law on Tax Procedure and Tax Administration – foresees the establishment of the Directorate for Games of Chance.

Here, we will focus on amendments to the CIT Law that introduce significant tax incentives. The main reason for the amendments is creating more favourable conditions for performing business activities and a better application of the provisions of the CIT Law, where most of the amendments refer to tax incentives intended for knowledge industry and investment in R&D.

The most significant amendments include:

  • Change of method for calculation of tax depreciation.
  • Suspension of limit for deductibility of marketing expenses, so marketing expenses are now fully deductible.
  • Deductibility of R&D
    • New tax incentive provides that expenses directly related
      to R&D activities performed in the Republic of Serbia are
      tax deductible at the double amount of the expenditure.
  • Special tax treatment of intellectual property (IP) income
    • New tax incentive for taxpayers who derive income based on compensation for the use of IP, on condition that the IP is registered.
  • Tax credit for investments in startup companies.
    • A taxpayer which is not a newly established company performing innovative business activities, and which invests in the share capital of the newly established company performing innovative business activities, has a right to a tax credit in the amount of 30% of such investment.
  • Exemption of part of the capital gains derived from disposal of IP developed in Serbia from taxation.
    • Disposal of IP is the subject of capital gains tax.
    • A new tax incentive has been introduced, which provides that only 20% of capital gains will be included in the tax base if derived from the transfer of full property rights on:
    • Registered IP.
    • Patents, in accordance with the law governing patents.
  • Tax credit for capital gains tax paid abroad.
    • A Serbian resident taxpayer who realised capital gains from the sale of assets in foreign country, and paid tax in that country, could decrease the calculated CIT in the Republic of Serbia for the amount of tax paid in that other country.

Author
Jelena Mihic Munjicć
Managing Partner
Kreston MDM

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