Tax Law in Serbia General Provisions Value Added Tax (VAT) The general rate of VAT levied for the turnover of goods and services, or the import of goods subject to taxation in Serbia is 18%. A special VAT rate of 8% is applied for certain turnover of goods and services, or import of goods. i.e. bread, milk, flour, sugar, edible oil of sunflower, maize, rape, soy and olives, edible fats originating from animals and plants; fresh and chilled fruits, vegetables, meat, fish and eggs; medicines from the list of medicines prescribed and issued at the expense of social security according to provisions on health insurance, e.a. Profit Tax According to the Law on Company Profit Tax, all companies in Serbia are taxpayers of profit tax, as of 1 January 2005 of only 15%. This obligation is valid for both domestic and foreign legal persons. Companies must submit tax returns and tax balance sheets to the Tax Administration by 8 March of the current year for the previous year. The tax established by the tax return, based on the tax balance sheet, represents the tax obligation. Profit tax is paid in advance in monthly intervals, on the 15th of the current month for the previous month, and the final account is made based on the tax balance sheet. Sums for advance payments are calculated based on the profit tax established in the previous year. The final sum of profit is established based on the tax balance sheet which must be submitted within 10 days from the day of submitting the annual financial statement, i.e. by 10 March of the current year for the previous year. If there is the obligation to pay a difference for profit tax according to the tax balance sheet, the taxpayer must pay the established difference by the day of submitting the tax return and the the tax balance sheet. Taxes and contributions for salaries Employers are obliged to pay contributions for invalidity- pension insurance (11%), health insurance (6,15%), and for insurance in case of unemployment (0.75%). The same rate is applied for contributions for social security paid by employees, and these Together with the tax for salaries represent a part of the gross salary. Income tax in 2009 was 12% of for the gross salary, decreased by an untaxable amount of about 6000 RSD.
The relationship between burdens for taxes and contributions for salaries and net salaries is not linear, and depends on a series of criteria. In 2009, the average burden for taxes and contributions amounts to 62.7% of net salaries. Both employers, and employees have the obligation to pay contributions for social security of employees (contribution for pension, health and unemployment insurance). For the employer, the tax and contributions for social security of employees, which form part of the gross salary are treated as operating expenses. Property Taxes Property taxes in Serbia are: property tax, tax for inheritance and gift, and tax for transfer of absolute rights. Legal persons who keep business books are taxpayers for property tax, the base being the book value of immovables at a rate of 0.40%. For natural persons, the tax base is the market value of immovables established by the tax authority. Recently tax rates for property belonging to natural persons have become progressive. Property tax is paid quarterly. As of 1 January 2005, property tax is not paid for property from shares issued in the name of and for the share in limited liability companies. The tax for transfer of absolute rights for immovables is paid at the transfer of ownership of immovables or intellectual property, at a rate of 2,5% of market value (recently adopted regulations have abolished tax for transfer of absolute right for purchase of the first apartment), while since 1 January 2005 the tax rate for turnover of agricultural land and woodland amounts to 2.5%. Excise Tax Tobacco products, oil derivatives, alcoholic beverages, refreshing non-alcoholic beverages, coffee and luxury products are burdened by excise tax. As a rule, excise tax is prescribed for each individual product, with the exception only of luxury products for which excise tax is calculated ad valorem. The sum of excise tax calculated in the period from the 1st to the 15th of a month must be paid by the taxpayer at the latest on the last day of the month. The sum of excise tax calculated for the period from the 16th to the end of the month must be paid by the taxpayer at the latest by the 15th of the following month.
Income Tax Natural persons, residents and non-residents in Serbia are taxpayers of income tax. Income tax is paid for income from all sources, except those specifically exempt by law. Income subject to taxation is the difference between gross income of the taxpayer and expenses sustained to earn the income. Residents pay income tax for income earned in the country and abroad, while non-residents pay income tax only for income earned in Serbia. The general rule is that a legal person has resident status if it was founded in Serbia, or if its seat is in Serbia. A natural person is resident if he stays in Serbia a minimum of 183 days during a fiscal year. Following income is subject to taxation: salaries and other income originating from employment, income from agriculture and forestry, income from individual activities, income from copyrights and industrial property rights, income from capital, income from real estate, capital income and other income. The income tax rate for natural persons for other income (contract of engagement, author s fee, fees for members of management and supervisory boards, lease of immovable and movable objects, income from gambling, etc.) is 20% after reduction for recognized costs. Natural persons who have had income during a fiscal year above a certain limit are taxpayers for the annual income tax. This tax is paid at a rate of 10%. The taxpayer must submit a return containing precise data about the income, no later than on 15 March of the following year for the year when the income was earned. Tax is paid within 15 days from submission of the decision of the tax authority. Since 1 January 2007, domestic natural persons pay this tax for a base equal to the triple sum of the average annual income per employee, and foreigners-residents pay tax for a base equal to ten times the sum of the average annual income per employee. Tax benefits Tax incentives for companies: accelerated depreciation of ecological, educational and computer equipment; exemption from profit tax for concessions for a period of five years; Reduction of the base for calculation of income tax based on investment in assets; tax incentives in the amount of 100% of gross salaries for new employees within the taxation period when employment began; exemption from payment of profit tax within 10 years in case of major investments (investment in assets of over 600 million RSD and new employment of over 100 persons). Accelerated depreciation of ecological, educational and computer equipment used for environmental protection, scientific research, education and training of employees. Accelerated depreciation is calculated applying rates that are up to 25% above those prescribed.
Decrease of the base for calculating profit tax based on investment in capital assets the tax obligation can be reduced by a maximum of 50% for large and medium sized legal persons, and up to 70% for small legal persons, relevant to the amount of calculated tax for the year when the investment in capital assets for the registered activity was made, provided that the level of tax exemption amounts to 20% 40% of the value of investment in capital assets, depending also on company size. If 20% i.e. 40% of the value of investment in capital assets is above 50% i.e. 70% of the calculated tax, the difference represents a tax loan that can be used in the next 10 years. Passenger vehicles, office furniture, and works of art are not considered to be capital assets. Procured capital assets can not be disposed of during a period of three years. Investments of foreign persons in equipment are not subject to customs obligations and other customs contributions. Tax exemption is possible for investments in capital assets in small enterprises, to a level of up to 40% of the investment, and to a maximum of 70% of the total company liability for profit tax. A company falls within the group of small enterprises if it fulfills two of the following three conditions: employs less than 50 employees, realizes an income of under 2.5 million Euro, and if the average value of company assets is under 1 million Euro. Tax exemption of up to 80% of the calculated profit tax (without limitation relevant to the percentage of the total sum of investment) is approved for investments in capital assets for one of the following activities: 01 agriculture; 05 fishing; 17 production of textile yarns and fabrics; 18 production of clothing, additional processing and dying of fur; 19 leather processing and production of leather objects; 27 production of base metals; 28 production of standard metal products; 29 production of machines and devices; 30 production of office and calculating machines; 31 production of electrical machines and apparatures; 32 production of radio, TV and communication equipment; 33 production of medicinal, precise and optical instruments; 34 production of motor vehicles, sidecars and semi sidecars, 35 production of other traffic means; 37- recycling; 92 Group 9211 cinematography and video production. Tax exemption based on newly employed workers during one year in the amount of 100% of gross salaries paid to such workers. This reduction is approved also in case when the taxpayer terminates the labor contract with a certain number of employees, if in that same tax period he employs more persons for an indeterminate period of time than the number of persons with whom the labor contract had been terminated. Tax exemption for a period of ten years for investments in capital assets with a value of over 600 million dinars, if this investment creates the possibility for permanent employment of 100 new workers. If the number of workers is decreased, the company stops performing the activity, or stops to use the
subject capital assets, or sells them, without reinvesting the adequate sum of money, the tax exemption can not be applied, and the company shall be obliged to pay profit tax during the entire period. Operating, financial and non operating losses established in the tax balance can be transferred to the subsequent calculation period for a maximum of ten years, with a decrease in this base of the profit subject to taxation established in the tax balance. This means that profit tax will not be paid until the losses from the tax balance are fully transferred to profits also presented in tax balances in the next ten years. This tax exemption remains valid in case of change of company status. Double Tax Treaties Serbia has concluded bilateral agreements to avoid double taxation of income and capital with several countries.