The general corporate income tax rate is flat and amounts to 15%. Tax is applied to both resident and non-resident companies. Resident companies are taxed on their worldwide income, and non-residents are taxed only on income generated in Serbia. The tax base is the pre-tax profit modified by several increasing and decreasing items. Also, capital gains are included in the annual corporate profits tax return. Losses can be carried forward for 5 years while the carry back of losses is not permitted. There are several tax deductions available on investments in relation to the number of employed persons and investment funds, investing into the capital of newly incorporated companies performing innovative activities and income from the use of deposited IP rights. Serbia applies thin capitalization ratios 4:1 (10:1 for banks). Also, there is a requirement that interests paid to a non-resident must be on arm’s length terms.
A withholding tax at the rate of 20% is applicable on dividends, interests, capital gains, royalties and other intellectual property rights, income from rent of immovable and movable property and income from specific services such as market research, accounting, audit and other services related to business and legal consulting. Also, there is tax rate of 25% applicable to revenues realized by non-resident legal persons from jurisdictions with a preferential tax system. Serbia has a wide international treaty network> with more than 50 double tax treaties.
|Transfer pricing in Serbia|
|Arm’s lenght principle||since 2013|
|Documentation liability||since 2013, prepare and submit transfer pricing documentation together with the CIT return|
|Master file-local file (OECD BEPS 13) applicable|
|Lack of documentation||~ EUR 16.900 for missing documentation|
|Tax shortage||30% on tax underpayment + late payment interest|
|Related parties||25% <||direct or indirect control or common managing director, close family members, non-resident entities from tax havens|
|Safe harbours||Interest as described in Governmental Rulebook, transactions (other than financial) below EUR 67.000 are not subject to TP rules|
Level of attention paid by Tax Authority:
Transfer pricing is a relatively new topic in Serbia. Transactions between related parties must be at arm’s length. The comparable uncontrolled price method may be used, but in the absence of this method, the taxpayer may use the cost-plus, the resale price method, the profit sharing method or the net profit method. There is an obligation to enclose transfer pricing documentation with the annual tax returns.
The transfer tax of 2.5% is applied on transfers listed in the Property Tax Act. There is no surtax or alternative minimum taxes.
The general rate is 20%, reduced rates are 10% (e.g. bread, milk, accommodation services, medications, fertilizer, etc.) and VAT-exemption for exports, transport and other services which are associated with the importation of goods. Taxpayers with revenue in excess of approximately EUR 67,000 must register for VAT purposes. Non-residents may register for VAT purposes only through a tax representative.
The options/limits based on the Serbian VAT Act are as follows:
|VAT Options in Serbia||Applicable / limits|
|VAT group registration*|
|Cash accounting||approx EUR 405,000/year|
|Import VAT deferment|
|Local reverse charge||sale of secondary raw materials and services that are directly related to these goods, transactions of construction buildings, construction work|
|Option for taxation|
|- letting of real estate|
|- supply of used real estate|
|VAT registration threshold||approx EUR 67,000/past 12 months|
Other indirect tax type in Serbia is excise duty.
In Serbia, resident individuals are taxed based on their worldwide income, while non-residents are taxed only on income in Serbia. There is a flat rate of 10% for gross salaries. Capital gains are taxed at 15%. Furthermore, the tax rate on income from agriculture and forestry is 10%. Income from the letting of real estate is taxable at 20%, but before that, the gross basis is reduced by standardized costs equalling 25%. The tax rate on income from royalties and other intellectual property amounts to 20%. Active incomes fall under the scope of the SSC system: individual social contributions are 19.90% of the gross salary. These include contributions for pension and disability insurance (14%), health insurance (5.15%) and unemployment insurance (0.75%). Employers contributions amounts 17.15%. The difference is that contributions for pension and disability insurance are 12% (2% less than employee’s obligation) and the contribution for unemployment (0.75%) is not payable by the employer. Personal deductions are applicable.
The examples below show the cost of the employer and the employee in case of minimum wage level and the average wage in the private sector:
|Wage-related taxes in Serbia||Minimum wage||Average wage in private sector|
|Exchange rate RSD/EUR 118,2716||in EUR||in RSD||in EUR||in RSD|
|Non-taxable amount||129||15 300||129||15 300|
|202||23 921||578||68 345|
|Total wage cost||237||117,15%||677||117,15%|
|Social contribution tax||35||17,15%||99||17,15%|
|Personal income tax||7||3,60%||45||7,76%|
* Net salary differs on monthly basis approximately +/- 15 EUR