Serbia

Corporate taxes and other direct taxes

There is a flat 15% general corporate income tax rate. Tax is levied on 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. Capital gains are also included in the tax return for annual corporate profits. Losses can be carried forward for 5 years, but 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 a thin capitalization ratio of 4:1 (10:1 for banks). There is also a requirement that interest paid to a non-resident must be on arm’s length terms.

A 20% withholding tax is applied to 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, auditing, and other services related to business and legal consulting. There is also a 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 60 double tax treaties.

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, taxpayers can use the cost-plus method, 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.
A transfer tax of 2.5% is applied to transfers listed in the Property Tax Act. There is no surtax or alternative minimum taxes.

Transfer pricing in Serbia
Arm's length principle		Since 2013
Documentation liability		Since 2013, transfer pricing documentation is submitted along with the CIT return
APA		-
Country-by-Country liability		Tax resident that is the ultimate parent entity of a MNE.
Master file-local file (OECD BEPS 13) applicable
Penalty
- 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 harbors		Interest as described in the Governmental Rulebook, transactions (other than financial) below EUR 68,000 are not subject to TP rules.

Level of attention paid by Tax Authority:

8/10

VAT and other indirect taxes

The general rate is 20%, reduced rates are 10% (e.g. bread, milk, accommodation services, medications, fertilizer, etc.) and VAT-exemption is provided for exports and for transport and other services that are associated with the importation of goods. Taxpayers with revenue in excess of approximately EUR 68,000 must register for VAT purposes. Non-residents may register for VAT purposes only through a tax representative.

The other indirect tax type in Serbia is excise duty.

VAT options in Serbia	Applicable / limits
Distance selling
Call-off stock
VAT group registration
Cash accounting - yearly amount in EUR (approx.)*	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 involving the construction of buildings, and construction work services.
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold*	Approx. EUR 68,000/past 12 months

Personal income tax / Social security system

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 equaling 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: social contributions payable by employees amount to 19.90% of the gross salary. These include contributions for pension and disability insurance (14%), health insurance (5.15%), and unemployment insurance (0.75%). Contributions payable by the employer amount to 15.15% and include contributions for pension and disability insurance totaling 10%, and health insurance (5.15%). There is no unemployment insurance payable on behalf of the employer. Personal deductions are applicable.

Wage related taxes in Serbia	Minimum wage		Average wage in private sector
Exchange rate RSD/EUR 117,25	in EUR	in RSD	in EUR	in RSD
Non-taxable amount	213	25,000	213	25,000
	545	40,480	1,063	103,797
Total wage cost	758	138.96%	1,276	120.06%
Social contribution tax	213	15.15%	213	15.15%
Gross salary	545	100,00%	1,063	100.00%
Personal income tax	33	6.09%	85	7.99%
Employees' contributions	109	19.90%	212	19.90%
Net salary*	404	74.01%	767	72.17%

*Net salary differs on monthly basis approximately +/- 15 EUR