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Your Detailed Guide on Taxes in Serbia

It is due to the current political realities that the tax system in Serbia is a really important subject to discuss. As an independent state, Serbia is a good choice for those foreign nationals who want to live or do business there without thinking about any potential implications. Even more so if they come from any sanctioned countries. Beware though that you should truly understand how the tax system functions in Serbia to deal with your taxes properly.

Serbia has taxes for both businesses and individuals. It’s an open and transparent place without any hidden offshore schemes. The good news is that tax rates in Serbia are quite low, so moving there and paying taxes in the jurisdiction is easy. If you consider setting up a small business, it’s good to know that the tax rate for individuals with their own businesses is only 10%. And even if you want to keep your original citizenship, the income tax for foreigners living in Serbia is reasonable, ranging from 10% to 20%. Serbia is welcoming foreigners, with no discrimination or xenophobia to worry about.

Taxes in Serbia
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The taxation system in Serbia is designed to create a safe, comfortable, and peaceful environment for all people living in the country. Let’s explore its 3 main parts:

  • Value Added Tax (VAT)
  • Corporate Income Tax
  • Personal Income Tax (PIT).

In the article below, we’ll also touch on taxes for non-residents, taxes for self-employed individuals a.k.a. sole proprietors in Serbia, mandatory fees and contributions, as well as tax deductions and benefits in broad brushstrokes.

NB: The rules and laws regarding taxes in Serbia may change. While major changes are unlikely, specific details, figures, numbers, and individual rules might vary. For the most accurate and up-to-date information about taxes in Serbia, we recommend contacting International Wealth experts for personalized guidance!

Value Added Tax

Below, you will find the key information and data on corporate taxes and VAT in Serbia:

  • Imposition date: January 1, 2005
  • Effective rates: 20% (standard rate), 10%, and 0% (preferential ones)
  • VAT number format in Serbia: 9 digits
  • VAT declaration filing: on a monthly or quarterly basis
  • Qualification requirement: threshold of RSD 8,000,000 (equals to approximately USD 67,200).

Here’s when corporate taxes and value-added tax (VAT) apply in Serbia:

  • When goods and/or services are sold or provided, as long as they are made or provided in Serbia and sold by Serbian taxpayers. NB: Both conditions shall be met for the above taxes to apply.
  • When goods are brought into Serbia through imports, regardless of the importing company’s tax status.
  • When Serbian taxpayers receive services from foreign suppliers, with Serbia as the place where the services are finally provided.

Corporate taxes and value-added tax (VAT) in Serbia have specific rules and regulations regarding registration. Here are the key points:

  • In Serbia, companies shall register for VAT if their total turnover exceeds RSD 8 million (excluding cases eligible for VAT exemption) in the past 12 months.
  • The responsibility for submitting VAT registration applications lies with the taxpayer in Serbia. NB: you shall complete the registration before the initial VAT filing period ends.
  • If a company doesn’t meet the qualification requirement of RSD 8 million, VAT registration is optional but not mandatory.
  • It is only allowed to cancel VAT registration after 2 years have passed.

Here are the rules and regulations applicable to corporate taxes in Serbia, VAT, foreign companies, and commercial organizations acting as goods and services suppliers:

  • Foreign companies that operate in Serbia and sell goods or services shall register for VAT and get help from a tax agent in Serbia.
  • If a foreign company doesn’t have a physical presence in Serbia but sells goods or services there, they don’t need to appoint a tax representative. However, they still have to pay VAT using a reverse charge method.
  • A foreign company registered as a VAT payer in Serbia may be able to get a refund if they meet all the applicable requirements.
  • In Serbia, a company group can’t register as a VAT payer.
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FYI: In Serbia, you will come across different ways to be exempt from taxes. They all can be divided into 2 main groups. The first group includes tax benefits for value-added tax (VAT) when selling goods and/or services, where you can subtract the VAT you paid. The second group encompasses exemptions where you cannot subtract the VAT. For more information about these exemptions, it’s best to talk to International Wealth experts. They will provide you with the top personalized advice available out there.

To protect your assets in Serbia, incorporating an association in the country is an ideal solution. Here’s how you can make it possible supported by International Wealth experts: Registration of an Association in Serbia to Protect your Assets.

OUR EXPERT COMPANY REGISTRATION SERVICES IN SERBIA

Corporate or company tax in Serbia

The main tax for businesses in Serbia is a corporate income tax. The said tax is set at a standard rate of 15%. Due to this, Serbia is an excellent place to do business. The country’s favorable geographical location makes it even more appealing.

Key information on corporate taxes in Serbia is provided below:

  • Capital gains tax rate: 15%.
  • Corporate tax rate: 15%.
  • Applicable in most cases, withholding tax still implies certain exceptions. The standard rate is 20%. Yet, for commercial transactions that utilize preferential tax regimes, it is 25%.
  • The carryforward of net operating losses depends on the timeframe and direction. Carryback is not allowed, and carryforward is limited to a maximum of 5 years.
  • The tax year in Serbia starts on January 1 and ends on December 31. Companies have the flexibility to choose a 12-month period of their preference. Yet, to do it, they require a special confirmation.
  • Tax returns shall be filed within 180 days after the last day of the reporting (i.e., tax) period.

In Serbia, companies have the following payment obligations for corporate taxes:

  • Tax-resident companies pay taxes on their income, regardless of where it is earned.
  • In Serbia, non-resident companies pay corporate tax on the income they generate from operations within the country only.

Corporate tax in Serbia comes with substantial tax incentives to enjoy:

  • Tax exemption for 10 years if your company fulfills the conditions listed below:
    • Invests RSD 1 billion in its working capital.
    • Creates and maintains at least 100 new jobs throughout the investment period.
  • Possibility of receiving tax credits, subject to specific requirements.
  • Double deduction of company expenses for research and development conducted in Serbia. This benefit is granted at a local level.
  • Potential deduction of up to 80% of the income generated from intellectual property.
  • 80% of the income from capital gains that result from intellectual property transfer is subtracted from the taxable amount.

As concerns corporate taxes in Serbia, certain expenses are excluded from taxation. Here’s what they include:

  • expenses with no proper records to confirm them
  • provisions or balances for doubtful receivables
  • donations to political parties and groups
  • promotional gifts
  • interest fees due to late tax payments
  • costs incurred for collecting overdue taxes (including court expenses)
  • fines and penalties
  • interest charged when a related party defaults on a payment
  • expenses not related to business activities.

Corporate tax in Serbia allows for the inclusion of certain expenses, provided they do not exceed 5% of the total:

  • expenses for healthcare, education, religious practices, humanitarian activities, sports events, and environmental conservation
  • contributions to social security institutions
  • in emergency circumstances, officially received humanitarian aid
  • expenses associated with cultural initiatives.
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FYI: Since January 1, 2019, Serbia implemented new rules for calculating depreciation in taxes. The method of declining balance is no longer used, and it has been replaced by the straight-line method. Mind that existing assets will be depreciated using the old rules until 2028.

Other corporate taxes in Serbia

Serbia is known as a traditional onshore destination. Yet, industry experts who compare it to a midshore jurisdiction are mostly correct. The tax system in Serbia is beneficial for businesses, making it a good choice for commercial activities. This applies to both existing companies and potential businesses.

When it comes to capital gains and corporate taxes in Serbia, the following assets are included in the taxable base:

  • real estate used as the main asset for business, even if it’s still under construction
  • legally recognized intellectual property rights
  • long-term financial investments like deposits and shares that follow the IFRS and IAS standards. Exceptions do exist for certain bonds issued by the Serbian government or the National Bank of Serbia.
  • specific investment units.
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FYI: To ensure accurate tax assessment, you should submit all transfer pricing documents within 180 days after the end of the tax year. The above documents include an analysis of transactions with related parties, along with your financial report.

Withholding tax and double taxation treaties

The standard withholding tax rate in Serbia is 20%. It applies to income non-resident companies earn when they receive money from businesses incorporated in Serbia.

Corporate taxes in Serbia include different things that are subject to withholding tax:

  • dividends
  • royalties
  • interest
  • movable and immovable property rentals
  • services governed by special secondary legislation.

Here is some more information on corporate taxes in Serbia, specifically about withholding tax:

  • If a non-resident company from outside Serbia qualifies for a special tax arrangement, they pay tax at a rate of 25%.
  • Serbia has made agreements with more than 60 states to avoid double taxation, but not all of them are in effect at present.
  • If a company can prove it is based in another country, it might benefit from lower tax rates when paying taxes.

Different countries enjoy different tax rates for royalties, dividends, and interest in Serbia:

  • Albania, Bulgaria, Canada, Denmark, Greece, Hungary, India, Moldova, North Macedonia, Poland, San Marino, Slovakia, Turkey, and United Kingdom: 5% / 15%, 10%, and 10%.
  • Armenia: 8%, 8%, and 8%.
  • Austria and Israel: 5% / 15%, 10%, and 5% / 10%.
  • Azerbaijan, Cyprus, Iran, Italy, North Korea, Pakistan, Romania, and Tunisia: 10%, 10%, and 10%.
  • Belgium: 10% / 15%, 15%, and 10%.
  • Bosnia and Herzegovina, Croatia, Georgia, Kuwait, Libya, Lithuania, Qatar, and Ukraine: 5% / 10%, 10%, and 10%.
  • Mainland China: 5%, 10%, and 10%.
  • Czech Republic and Montenegro: 10%, 10%, and 5% / 10%.
  • Egypt: 5% / 15%, 15%, and 15%.
  • Estonia, Ireland, South Korea, Latvia, Luxembourg, Malta, Slovenia, and Spain: 5% / 10%, 10%, and 5% / 10%.
  • Finland and Netherlands: 5% / 15%, –, and 10%.
  • France and Sweden: 5% / 15%, –, and –.
  • Germany: 15%, –, and 10%.
  • Indonesia: 15%, 10%, and 15%.
  • Kazakhstan, United Kingdom, and Vietnam: 10% / 15%, 10%, and 10%.
  • Norway: 5% / 15%, 10%, and 5% / 15%.
  • Sri Lanka: 12.5%, 10%, and 10%.
  • Switzerland: 5% / 15%, 10%, and – / 15%.
  • United Arab Emirates (UAE): – / 5% / 10%, 10%, and 10%.

For more information about company incorporation in Serbia and opening corporate accounts with Serbian banks, please refer to the International Wealth article below: Your Corporate Account in Serbia | Branch of a Foreign Company in Serbia.

Personal income taxes in Serbia

Serbia is a good choice for individuals because its personal income tax rates are relatively low. This means people have to pay less in taxes compared to many other European countries, allowing them to have a less financially burdensome life in Serbia.

The standard income tax rate for individuals in Serbia is only 10%. Non-residents pay income taxes at slightly higher rates, ranging from 10% to 20%, depending on the type of payment.

Here are the main points about personal income tax in Serbia:

  • Standard personal income tax rate: 10%.
  • Capital gains tax: 15%.
  • Tax rate for self-employed individuals (people who work for themselves) and sole proprietorships: 10%.
  • Tax on intellectual property rights and related rights: 20%.
  • Capital yields tax: 15%.
  • Tax on income from personal insurance: 15%.
  • Real estate income tax: 15%.

Here’s what the things that are considered when you calculate personal income tax in Serbia include:

  • salary
  • income from being self-employed (for people who work for themselves in Serbia)
  • money earned from copyrights and related rights
  • capital
  • income from real estate
  • capital gains
  • any other sources of income.

If you reside in Serbia, you will have to pay personal income tax no matter what. It doesn’t depend on whether your income comes from Serbia or another country. Non-residents, on the other hand, only have to pay taxes on income earned in Serbia. 

Here’s when you become a tax resident in Serbia automatically:

  • Most of your fundamental interests are in Serbia.
  • You spend more than 183 days in Serbia during the year.
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NB: Individuals who pay personal income tax in Serbia enjoy various tax benefits and deductions. If you want to know more about this, a personal consultation with International Wealth experts to discuss it in detail is a great idea.

If you don’t have a residence permit to comfortably settle down in Serbia,  International Wealth industry pros are here to help you obtain it. Look how easy it is with expert assistance: Help with Serbian Residence Permits and Serbian Tax Residency By Real Estate Investment.

Understanding indirect taxes in Serbia

This subject often confuses people. In Serbia, there are different kinds of indirect taxes that the consumer pays instead of the company. These taxes are added to the final price of goods and services. It’s the company’s responsibility to collect the tax and give it to the tax authorities. For customers, this means they have to pay extra money, which makes the prices of goods and services higher.

Below, you will find the different types of indirect taxes in Serbia:

  • value-added tax (VAT), which is the main tax to pay
  • customs duties
  • excise taxes
  • business license fees
  • stamp duties and administrative fees.

Here are some more details about indirect taxes in Serbia:

  • The current VAT rate is 20%, but lower rates of 10% and 0% are available.
  • Foreign companies shall choose a tax matters person to handle their taxes.
  • If tax laws are broken, individuals and companies can face fines ranging from RSD 50,000 RSD to RSD 2 million.
  • Most companies have to submit VAT returns every month (or every 3 months if their turnover is up to RSD 50 million).
  • Certain types of goods may require additional forms to be filled.
  • It’s possible to deduct VAT in some cases.
  • Along with your VAT return, an explanation of how VAT was calculated shall be submitted.

To calculate indirect taxes in Serbia, these conditions shall be met:

  • The transaction involves buying or selling goods and/or services.
  • The person involved is a registered VAT taxpayer (being just a tax resident is not enough).
  • The transaction takes place only in Serbia.
  • Only supplies that are subject to tax are considered.
  • The transaction is part of standard business operations.

Here’s what the VAT invoice used for calculating indirect taxes shall include:

  • unique number
  • issue date and place
  • information about the seller and buyer (taxpayers)
  • tax point
  • total advance payment amount
  • clear description of the goods or services
  • tax base amount
  • VAT rate and the total amount of VAT
  • 2 notices: one stating that there is no VAT (for cases with no tax or zero tax rates) and one for using a billing system.

More info on the subject

Social insurance in Serbia covers various aspects such as pension funds, disability insurance, medical insurance, and unemployment insurance. The contributions are divided between the employer and the employee:

Employer’s contributions:

  • Pension fund: 11.5%.
  • Disability insurance: 5.15%.
  • Medical insurance: Not applicable.

Employee’s contributions:

  • Pension fund: 14%.
  • Disability insurance: 5.15%.
  • Unemployment insurance: 0.75%.

Totalization agreements have been made with the states listed below:

  • Austria
  • Belgium
  • Bulgaria
  • Bosnia and Herzegovina
  • United Kingdom
  • Hungary
  • Germany
  • Denmark
  • Italy
  • Canada
  • Cyprus
  • Libya
  • Luxembourg
  • Netherlands
  • Norway
  • Panama
  • Poland
  • Romania
  • North Macedonia
  • Slovakia
  • Slovenia
  • Turkey
  • France
  • Croatia
  • Montenegro
  • Czech Republic
  • Switzerland
  • Sweden.

Here are the countries Serbia made double taxation treaties with:

  • Albania
  • Armenia
  • Austria
  • Azerbaijan
  • Hungary
  • Pakistan
  • Belgium
  • Bosnia and Herzegovina
  • Bulgaria
  • Canada
  • China
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Egypt
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Greece
  • Kazakhstan
  • India
  • Iran
  • Indonesia
  • Ireland
  • Italy
  • North Korea
  • South Korea
  • Kuwait
  • Latvia
  • Libya
  • Lithuania
  • Luxembourg
  • Turkey
  • North Macedonia
  • Malaysia
  • Malta
  • Moldova
  • Montenegro
  • Norway
  • Ukraine
  • Poland
  • Qatar
  • Romania
  • San Marino
  • Slovakia
  • Slovenia
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Tunisia
  • United Arab Emirates
  • United Kingdom
  • Vietnam.

Official employment for foreign nationals in Serbia

While the option does exist, a few important things should be kept in mind. Serbian authorities prioritize protecting local jobs, which means they give preference to Serbian citizens. In this situation, a work permit may only be issued if the employer asks for it.

Here are the requirements for the employer:

  • They are not allowed to fire a Serbian citizen from a job just to hire a foreigner for the same position.
  • They shall make a genuine effort to find potential candidates for the job among Serbian citizens, people who can work in Serbia without restrictions, or foreigners who already have a work permit. According to the law, the process shall be completed within 10 days.
  • They are obliged to officially apply for hiring a foreign employee.
  • The employment is based on a contract that guarantees all the rights of the foreign worker are protected.

If foreigners want to work legally in Serbia, here’s what they need to remember:

  • They shall have a valid residency permit and meet the required qualifications.
  • Getting a work permit is mandatory for working in Serbia.
  • The work permit is valid for 45 days (make sure not to confuse it with the length of the employment contract).
  • Although the work permit covers the entire employment period, its validity initially depends on the expiration date of your residency permit.

For business owners in the IT sector looking to maximize their profits, an outsourcing company in Serbia may be a perfect solution. Go ahead and contact International Wealth consultants to learn how you can make it possible.

Summary and recommendations

Serbia has tax rules that help businesses grow, which makes it a great place for entrepreneurs and investors. The personal income tax system in Serbia is favorable for regular people who don’t have businesses. If you want to run a small business by yourself, Serbia’s tax system for sole proprietors is a great option.

Serbia is friendly to foreigners, and it’s easy for them to get visas and visit the country. The latter is a great advantage for those who intend to come to Serbia to put out a few feelers, test the ground and evaluate the jurisdiction’s potential for their future business.

For any assistance you might need with Serbia, your business in the country, or personal interests therein you are welcome to contact International Wealth experts by emailing them at [email protected]

What is the Value Added Tax (VAT) rate in Serbia?

The standard VAT rate in Serbia is 20%. However, some products like essential items, newspapers, medicines, and computers enjoy a lower VAT rate of 8%.

NB: In Serbia, VAT falls into 2 categories, namely Input VAT and Output VAT. 

The Output VAT in Serbia applies to companies that supply goods and/or services, make prepayments, and import goods.

As for the Input VAT that the Output VAT amount may be reduced by, it applies to buying goods and services and/or importing them.

To get a refund for Input VAT, you need to provide the tax authorities with all the required documents. Keep in mind that not all goods and services are eligible for VAT reimbursement.

VAT declarations shall be submitted either monthly or quarterly, depending on the company’s sales. The deadline for their submission is either the 15th or 20th day of the month immediately following the reporting period.

What is the Capital Gains Tax (CGT) in Serbia? Do both individuals and companies have to pay it?

The Capital Gains Tax (CGT) in Serbia is a regular tax that applies to individuals and companies when they sell assets and make a profit.

For individuals, the Capital Gains Tax applies to various sources of income like selling properties, receiving rent, making money from intellectual property, owning shares in companies, and some types of securities (excluding bonds). The taxable amount may be adjusted based on the applicable tax laws. The tax rate for 2023 is 15%.

For companies, the Capital Gains Tax involves adding the value of investment units to the taxable amount. It is calculated by finding the difference between the purchase and sale prices of assets. If the difference is positive, it’s considered a capital gain, and if it’s negative, it’s a capital loss. Capital gains and operating profits are reported together in a single tax return but are taxed separately. Capital gains cannot be used to reduce commercial losses or income. You can carry forward capital losses for up to 5 years. Unless a special tax agreement is in place, the tax rate is 15% for residents and 20% for non-residents.

If you need more information or have questions about the Capital Gains Tax in Serbia, don’t hesitate to contact International Wealth experts for further help and consultations.

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