Taxation of a business
The Most Favorable Tax Regime In The Region
- The lowest corporate tax rate in Europe – 10%
- a 10 year Tax Holiday for investing over €8 million and creating 100 jobs
- Tax credits for investments in fixed assets up to 80% of assets value
- Various government subsidies and tax exemptions for creating new jobs
CORPORATE PROFIT TAX
All legal entities which generate revenue by selling products and providing services on the market are obliged to pay the corporate profit tax on generated profit at the uniform rate of 10%, currently the lowest in Europe.
Taxpayers include both residents and non-residents. Residents are taxed based on their worldwide income. Non-residents are taxed only based on their income generated from the sources within Serbia.
The tax base or basis is taxable profit shown in the tax balance sheet.
This taxable profit is profit before tax as presented in the income statement, further adjusted in the tax return for tax purposes.
Capital gains are recognized for the purpose of corporate income tax assessment. Capital gains are generated by the sale or transfer of real estate, rights related to industrial property, as well as shares, stocks, securities and certain bonds.
A withholding tax is calculated and paid at the rate of 20% on certain forms of income (dividends, shares in profits, royalties, interest income, capital gains, lease payments for real estate and other assets) by a non-resident.
VALUE ADDED TAX
The new Value Added Tax (VAT) Law came into effect on 1 January 2005. The VAT is payable at each stage of the turnover of goods and services, as well on the import of goods.
Those with an obligation to pay VAT are all legal entities and entrepreneurs, who in 2004 had a turnover of goods and services in excess of CSD 2,000,000 (or approximately € 24,000), or who predict that they will have turnover above this amount.
For purposes of calculating VAT, the taxable base is the fee for sold products and services which does not contain any VAT in it. The taxable base should also contain Customs Duties, Excise Taxes paid, transportation and insurance costs or any other cost relating to the sale of goods and services.
Tax liability arises on the first day that any of the following events occur:
• sale of goods and services;
• collection of a fee, if the fee or a part of the fee has been collected prior to sale of goods and services;
• on the date of the origin of Customs Duties (in case of imported goods).
Input VAT is the VAT calculated and paid by a taxpayer to its supplier upon purchasing goods and services.
Output VAT is the VAT which a taxpayer calculates and charges on goods and services provided to customers. A taxpayer can offset input VAT against its output VAT. However, input VAT paid on some products and services (such as cars, motorcycles, entertainment costs, hotel accommodations, meal costs, home electric appliances, etc,) cannot be deducted against VAT calculated on output.
The tax rates prescribed by the VAT Law are as follows:
• the standard VAT rate - 18% (applicable for most taxable supplies);
• the lower VAT rate - 8% (applicable for basic food stuffs, daily newspapers, communal services etc.).
In addition to these tax rates, a 0% tax rate is also applicable. A 0% tax rate with the right of deduction of input VAT applies to turnover of the following goods and services:
• export of goods;
• international air transport.
A 0% tax rate without the right of deduction of input VAT applies to turnover of the following goods and services:
• trading with shares and other securities;
• insurance and reinsurance;
• the lease of apartments and business premises etc.
The VAT Law has determined two reporting periods:
• each calendar month for taxpayers whose turnover in the previous 12 months was over CSD 20,000,000 (or approximately EUR 245,000) or who predict that turnover in the next 12 months will be above the CSD 20,000,000 threshold;
• for taxpayers whose turnover does not exceed the above CSD 20,000,000 threshold, the reporting period is three months.