Foreign entrepreneurs are increasingly opting for Serbia to establish companies abroad. What makes this country so enticing for business ventures and relocation? Primarily, it’s due to having some of the lowest tax rates in Europe.
- Under what conditions does a foreigner become a tax resident of Serbia?
- What taxes do freelancers pay in Serbia?
- Taxation of companies in Serbia
- Tax incentives for employing foreigners
- Incentives for research and development (R&D)
- Tax incentives related to startups
- Tax incentives for investments and capital growth
Situated in the heart of Europe on the Balkan Peninsula, Serbia enjoys a favorable geographical location. The country boasts a well-developed infrastructure and established trade connections with the European Union and other regions worldwide. Thanks to free trade agreements and double taxation avoidance treaties with various jurisdictions, Serbia offers significant advantages compared to most other countries. These factors make Serbia an attractive destination for business and investment.
In recent years, Serbia has gained a reputation as an appealing location for foreign investment owing to its accessible tax incentives and subsidies. Furthermore, it continues to provide a low cost of living and some of the lowest utility expenses in Europe, including electricity, gas, and rent. These factors contribute to attracting foreign investors and make Serbia an enticing place to live and conduct business.
Before delving into the tax rates and benefits description, let’s examine the requirements and conditions for obtaining tax residency in Serbia.
OUR EXPERT COMPANY REGISTRATION SERVICES IN SERBIA
Under what conditions does a foreigner become a tax resident of Serbia?
The status of a tax resident in Serbia is granted to an individual under the following conditions:
- physical presence on the territory of the country for 183 days or more per year
- Serbia is recognized as the center of their vital interests.
The last point requires clarification. The circumstances that establish Serbia as the center of an individual’s vital interests include:
- purchasing real estate in Serbia
- residing in the country together with their family
- educating minor children in educational institutions in Serbia.
The basis for personal income tax in Serbia is the worldwide income of Serbian tax residents. It must be paid by employees of foreign companies residing in Serbia, as well as non-residents working for Serbian enterprises.
Personal income tax rates are as follows:
- minimum income (up to RSD (Serbian dinars) 19,300 or USD 178) is not subject to tax
- 10% – annual income up to three times the average annual salary in the country (approximately USD 31,000)
- additional 10% (total of 20%) – annual income ranging from three to six times the average annual salary (from USD 31,000 to USD 61,300)
- additional 15% (total of 25%) – if the income exceeds the mentioned amounts.
The overall rate for pension, social, and health insurance contributions for employees is 19.9%, while for employers, it is 16.15%. The total social security contributions amount to 36.05% of the payroll fund.
Make sure that Serbia aligns with your needs and objectives effectively! Take advantage of a free consultation to select the jurisdiction for changing your tax residency:
информация от специалиста о налогах
и возможных налоговых льготах юрисдикции,
подходящей структуре компании.
информация от специалиста о налогах и возможных налоговых льготах юрисдикции, подходящей структуре компании.
What taxes do freelancers pay in Serbia?
Freelancers also frequently choose Serbia as their place of residence. Let’s examine how their activities are taxed:
- If a freelancer is a non-resident of Serbia, they only pay personal income tax on income earned from working for Serbian clients. At the same time, they have to pay taxes at the place of their tax residence.
- Residents of Serbia pay personal income tax for freelance services provided to clients from any country. Additionally, they are responsible for contributing to social security, with a total contribution of 36.55% of their income.
Find out why it is advantageous to outsource to Serbia.
Taxation of companies in Serbia
- The applicable corporate income tax rate in Serbia is 15%.
- Value-added tax (VAT) is levied as a consumption tax on most taxable goods and services at a rate of 20%. However, a reduced rate of 10% applies to essential items, including food products, public transportation services, and medicines. There is also a zero-rate VAT, for example, on exported goods and services, specific services predominantly related to exports, and international air transportation.
- Customs duties are imposed on nearly all goods and services imported into Serbia, with rates ranging from 0% to 57.6%. Most goods are subject to customs duties below 30%.
- Excise duties are levied on goods and services with adverse external effects. Examples of goods subject to excise duties include petroleum products, tobacco and related goods, and alcoholic beverages.
- Property tax in Serbia is paid annually by enterprises that own real estate with ownership or usage rights. With proper accounting, the property tax does not exceed 0.4%.
- Real estate transfer tax is imposed when selling property. In this case, the contractual price is used as the tax base. Commonly, the transfer tax rate is 2.5%.
- Stamp duties are not levied in Serbia.
- Capital gains derived by non-residents are subject to a 20% capital gains tax.
Explore the Serbian national economy and income level in 2023.
Tax incentives for employing foreigners
Serbia provides tax incentives for businesses related to the employment of foreign workers. The country actively encourages the attraction of highly skilled professionals from abroad.
Employers hiring foreign workers are entitled to incentives amounting to a 70% reduction in personal income tax for each newly hired foreigner and a 100% deduction of mandatory pension and disability insurance contributions. These incentives enable foreign entrepreneurs to relocate their businesses to Serbia along with their employees.
Incentives for research and development (R&D)
If you are seeking a country with the most favorable investment climate for business research and development (R&D) projects, Serbia offers the following advantages.
Firstly, expenses incurred by a company for research and development can be recognized in the tax balance sheet as a double deduction. This effectively reduces the tax base, resulting in a decrease in corporate income tax obligations.
For example, if research and development expenses of 2 million dinars are recorded in the company’s books, these expenses can be reported in the tax balance sheet as 4 million dinars, significantly reducing the tax base for corporate income tax.
Furthermore, Serbia provides tax incentives for employing staff engaged in research and development. Specifically, a company conducting R&D activities in Serbia is entitled to a 70% exemption from the calculated and withheld personal income tax for employees directly involved in R&D. The employer may also be exempted from paying 100% of the social insurance contributions for the same employees.
Discover the benefits of relocating to Serbia from other countries.
Tax incentives related to startups
Serbia offers several tax incentives for startups:
- When the founder of a company also occupies a position as an employed worker within the startup, a complete exemption from taxes and contributions for oneself in Serbia is provided. However, to qualify for this tax benefit, the founder’s minimum salary must be at least 150,000 dinars, approximately equivalent to USD 1,400.
- A company that is not a startup also has the right to a reduction in corporate income tax if it invests in a startup, amounting to 30% of the total invested amount.
Tax incentives for investments and capital growth
For those planning significant investments in Serbia, a program for additional tax reduction may be available. Companies that invest over one billion dinars (approximately USD 9.2 million) in the fixed assets of a Serbian enterprise and employ at least 100 indefinite-term employees are granted a ten-year exemption from paying corporate income tax.
Individuals and legal entities that register their intellectual property rights as a non-monetary contribution to a company may, under certain conditions, be exempt from paying capital gains tax.
Moreover, they may also be exempt from capital gains tax on income derived from the sale of digital assets, such as cryptocurrencies and digital tokens, if they reinvest it into the company’s share capital.
Serbia also offers tax incentives for digital nomads, a reduction in the annual personal income tax for individuals up to 40 years old, full recognition of marketing expenses for companies, exemption from taxes and contributions on team-building expenses, as well as various other incentives and financing methods involving digital assets, and more.
Even without all the mentioned privileges and incentives, the corporate tax regime in Serbia is more favorable than in most countries. Serbia’s corporate income tax rate is 15%, which is lower than in most European countries.
Find out how you can get a residence permit in Serbia through company registration with our expert assistance.
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I want to start my own business. How much is business tax in Serbia?
Calculating tax obligations in any country is a rather complex procedure, so we recommend consulting with our experts before making a decision. The information below is intended for general reference and should not be regarded as direct guidance.
The tax rates for businesses in Serbia are as follows:
Corporate Income Tax (CIT) – 15%. The payment should be made by June 30 of the following year, and it is advisable to pay monthly advances.
– Value-Added Tax (VAT) – standard rate is 20%.
– Withholding Tax (WHT) – for non-residents, the rate is 20%. For non-residents in a tax haven, the rates are 20%/25%/25%.
– Capital Gains Tax (CGT) – 15%.
– Net Wealth/Worth Tax – not applicable.
– Inheritance and Gift Tax – not applicable.
To provide an accurate answer regarding the specific amount of business tax in Serbia, our expert would need to review your particular case.
I heard that Serbia is a tax-free country. Do Serbians pay taxes?
Just because a country has low taxes doesn’t mean they don’t exist at all. Do Serbians pay taxes? Yes, they do. The tax rates depend on the type of income. Another important aspect relates to the status of an individual. Residents have to consider worldwide income when calculating their tax base, while non-residents only include sources within Serbia. Worldwide income is taken into account only to the extent that it is connected to Serbia.
Personal taxes in Serbia include:
– Personal Income Tax – ranging from 10% to 20%, with fixed rates.
– Social security contributions (for employees): 14% for pension and disability insurance, 5.15% for healthcare, and 0.75% for unemployment. Employers pay social contributions separately.
– Property tax – not exceeding 0.4%.
– Annual tax – 10% or 15% (depending on income level), paid once a year.
Components of the taxable base include:
– primary employment (gross salary considering all exemptions)
– other types of income, such as licensing fees, private business, investments, real estate, and capital gains
– income earned in or from another country.
Do Serbians pay taxes if they have exempted income? In Serbia, citizens are exempted from paying taxes on the portion of their income that does not exceed the legally established amount and meets the required criteria.