Before investing in a foreign country, it is strongly advised to get familiar with its corporate tax laws and regulations. This especially applies to those who plan on opening a new corporate branch in a foreign country. Corporate tax laws and regulations in Serbia look promising for foreign investors.
In fact, Serbian corporate tax is very beneficial for business activities. When compared to other European countries, Serbia has one of the lowest corporate income taxes. Additionally, the value-added tax, or VAT, is also among the lowest in central and eastern Europe. Below you can find essential information about corporate tax in Serbia.
Corporate Income Tax
Companies in Serbia have to pay a flat income tax rate, which currently stands at 15%. The taxable period is as the financial year, during which all incomes add to the final taxable sum. There is nothing special to pay attention to here, so let’s move on to Withholding Tax.
Withholding Tax
Withholding tax, or WTH, is calculated and paid at the rate of 20%. What are the payments that are taxable by WTH? The list is quite extensive:
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Dividends/share in profits.
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Royalties (intellectual property rights, neighboring authorship rights, and related rights).
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Interest income.
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Fees for services provided or used in Serbia.
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Income from a distributed surplus of a company in bankruptcy.
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Revenues derived from the liquidation surplus of a company in liquidation.
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Lease payments for real estate and other assets made to a non-resident.
You should also be aware that as of April the 1st 2018, the WTH also applies to market research services, accounting and audit services, and any other legal or business consulting services. Since the CIT law shapes the Serbian tax policy, and it is susceptible to change, we suggest you consider finding reliable legal help in Serbia.
Residents of the countries in the Double Taxation Treaty have to provide a tax residency certificate to benefit from tax cuts. WTH is higher for residents that come outside the DTT. In this instance, WTH is payable at the rate of 25% and it applies to:
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Royalties
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Interests
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Income from lease of immovable property
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Service feed paid to non-residents (both to those inside and outside the DTT)
As you might have already picked up from the context, there are two types of non-resident taxpayers. Ones that come from countries Serbia has signed the DTT with, and those who come from those outside the DTT.
Beside DTT, Serbia has special international agreements with some countries, such as the Netherlands and Switzerland. These agreements place their citizens outside the zone of double taxation. Non-residents coming from these countries only pay the tax at a 5% tax rate for the profit generated in Serbia.
A 0% tax rate is applicable in the following cases:
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When the income recipient is the government or government-owned banks.
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When the dividend income recipient is the government of the contracting state.
Tax Incentives
To attract more foreign investors, the Serbian government has not only made the company registration process straightforward, but it also offers numerous tax incentives, one of them being the “Tax Holiday”.
To qualify for this tax cut, a company has to invest a minimum of RSD 1 billion in property, plant, and equipment. Furthermore, a taxpayer has to employ at least 100 workers and sign work contracts on an indefinite period with them.
The larger the investment, the longer the Tax Holiday lasts. The maximum duration of the Tax Holiday is 10 years. To remain qualified for this tax cut, a taxpayer has to retain the same number of employees they had at the beginning of the tax period.
Personal Income Tax
The personal income tax in Serbia is flat and it amounts to 10%. Starting from January the 1st 2018, the monthly non-taxable amount is RSD 15,000.
Annual Income Tax
Beside Personal Income Tax, there are additional annual tax rates. These include:
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Annual income that does not exceed RSD 2,375,136 is non-taxable.
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Annual income that ranges between 2,375,136 and 7,125,408 is taxed at 10%
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Annual income of over 7,125,408 is taxed at 15%
These are the essential pieces of information about the corporate tax in Serbia. If you have any further questions, feel free to contact us.
