Taxes in Serbia

Taxes in Serbia, Taxation in Serbia, Taxes system in Serbia

Serbia personal Income Tax In Serbia, the personal income tax rate depends on the type of income. The personal income tax rates are: 12% for residents of Serbia for employment income (gross salary and wages) 10% for business income 20% for royalty income, rental income and other income and 10% for income from capital. 15% for self-employed persons and non-residents The annual income tax due by Serbian residents on net worldwide income in excess of a prescribed threshold is levied at progressive rates ranging from 10% to 15%. Self Employment Tax The tax rate on a self-employed person is 10%, except a special rate of 15% is charged on self-employed income exceeding 6 times the average annual salary, after deducting exemptions. (Only the self-employed are subject to the 5% surcharge.) Salaried and self-employed receive an exemption on all income up to 3 times the average annual salary. Taxation of Non-residents For non-Serbian citizens, the annual income is taxed if exceeding the amount of 5 times the average annual salary in Serbia. The tax rate is 10% for the annual income below the amount of 8 times the average annual salary, and 15% for the annual income above the amount of 8 times average annual salary. The taxable income is further reduced by 40% of the average annual salary for the taxpayer and by 15% of an average annual salary for each dependent member of the family. The total amount of deductions cannot exceed 50% of the taxable income. Basis – Serbian residents are taxed on their worldwide income; nonresidents are taxed only on Serbian-source income. Residence – An individual is considered resident for income tax purposes if he/she has a residence or centre of business and/or vital interests in Serbia, or stays in Serbia for at least 183 days in the aggregate during the tax year. Tax Filing status – Spouses are taxed separately. Taxable income – The principal taxable forms of income are employment income, business income, royalties, rent, capital gains and other income. Residents receiving income of 3 or more times the average wage in the tax year are subject to annual income tax under the worldwide system. Capital gains – Capital gains are taxed at a rate of 10%. Tax Deductions and allowances – Personal allowances are available to members of the taxpayer's family that are financially supported by the taxpayer. Other taxes on individuals: Capital duty – No Stamp duty – Stamp duty is payable according to a tariff based on the value of the document. If there is no value, a flat rate applies. Capital acquisitions tax – No Real property tax – Tax is levied on the occupation of real estate at progressive rates ranging from 0.4% to 3%. Inheritance/estate tax – Tax is levied on inheritances and gifts at progressive rates between 2% and 2.5%. Net wealth/net worth tax – No Social security contributions Social insurance contributions are paid paid by employers on behalf of their employees at the following rates: - 11%, for pension and disability insurance; - 6.15%, for health insurance and - 0.75%, for unemployment insurance Social contributions are paid by unemployed individuals at 22%, 12.3% and 1.5%, respectively (exactly 2 times the rate of an employed person). Social insurance is paid by both employers and employees. Each pays one half of the total insurance sum. The minimum base for the insurance contribution is 40% of the average monthly salary in Serbia, with the maximum 5 times the average monthly salary. Serbia Tax year – Serbia tax year is the calendar year Filing and payment of tax – Tax on employment income is paid under the PAYE system, whereby tax is deducted at source by the employer. Other income is self-assessed. Individuals must file a tax return or pay withholding tax, depending on the type of income. Penalties – Monetary penalties may be imposed for failure to comply with the law. Serbia Corporate Tax All companies in Serbia are subject to 10% corporate tax at all taxable profits. Residence – A legal entity is considered resident if it is incorporated in Serbia or managed or controlled from Serbia. Basis – Resident entities are taxed on their worldwide income; nonresidents are taxed only on income generated in Serbia. The taxable base is calculated in the tax balance sheet, based on the profit and loss account adjusted for tax purposes. Taxable income – Taxable income includes both business income and capital gains. Taxation of dividends – Dividends paid by a Serbian-resident company to another Serbian company are exempt from corporate income tax. Dividends received by a Serbian resident company holding at least 25% of the shares in a nonresident distributing company for 1 year are eligible for a credit for foreign tax paid on the dividends. Capital gains – Capital gains are subject to a 10% tax for residents and 20% for nonresidents (based on the tax assessment). Losses – Net operating losses may be carried forward for 5 years. Capital losses may be carried forward and offset against capital gains for 5 years. The carryback of losses is not permitted. Surtax – No Alternative minimum tax – No Foreign tax credit – Credit is available for foreign tax paid but is limited to the amount of Serbian tax payable on the foreign income. Participation exemption – See under "Taxation of dividends". Holding company regime – No Withholding tax: Dividends –Dividends paid to a nonresident are subject to a 20% withholding tax unless the rate is reduced under a tax treaty. Interest – Interest paid to a nonresident is subject to a 20% withholding tax unless the rate is reduced under a tax treaty. Royalties – Royalties paid to a nonresident are subject to a 20% withholding tax unless the rate is reduced under a tax treaty. Branch remittance tax – No Other taxes on corporations: Capital duty – No Payroll tax – No Real property tax – Property tax is levied on immovable property located in Serbia at a rate of 0.4% of the book value of the property as at 31 December of the previous year. Social security contributions – Employers are required to pay social security contributions on an employee's salary at rates of 11%, 6.15% and 0.75%, respectively, for pension and disability insurance, health insurance and unemployment insurance. Stamp duty – Stamp duty is payable according to a tariff based on the value of the document. If there is no value, a flat rate applies. Transfer tax – A 2.5% tax applies on transfers listed in the Property Tax Law, i.e. the transfer of real property, intellectual property, etc. Anti-avoidance rules: Transfer pricing – Transactions between associated entities (as defined) must be on arm's length terms. There are no specific documentation requirements. Thin capitalisation – Under the thin capitalisation rules, interest and related expenses are deductible on loans that do not exceed 4 times equity for companies (10 times equity for banks). In addition, under the transfer pricing rules, a taxpayer must demonstrate that interest that is deductible under the thin capitalisation rules is also at an arm's length level. Otherwise, an adjustment of taxable income may be required. Companies are considered related if 1 company has the ability to control or influence the business decisions of the other company or if a company holds at least 50% of the shares, stock or votes in the governing body of the other company. Controlled foreign companies – No Other – There is a statutory general anti avoidance rule. Serbia Tax year – Serbia tax year is the calendar year, but may be shorter than 12 months where activities start or terminate during a calendar year or there is a change in the status of the entity. A taxpayer can opt for tax year different than the calendar year. Consolidated tax returns – Resident companies may elect for group status and file a consolidated return. Companies are considered a group where one company (parent company) owns at least 75% of the shares or stock of another company. The parent company files a consolidated tax return in which gains and losses of group companies are offset and each company pays its share of the tax. Once initiated, tax consolidation must be applied for 5 years. Tax Filing requirements – Serbia operates a self assessment tax regime. Advance corporate tax is payable in monthly instalments. A tax return must be filed within 10 days after the deadline for the submission of the financial statements. Penalties – Monetary penalties may be imposed for failure to comply with the provisions in the Corporate Income Tax Law. Entities also may be prevented from carrying out their activities. TAX INCENTIVES IN SERBIA Tax Credits 20% Tax Credit – The amount of tax due can be reduced by 20% of the amount invested in fixed assets for the respective tax period. This reduction cannot exceed 50% of the total tax liability and can be carried forward for a maximum period up to 10 years. 80% Tax Credit – A large number of sectors are entitled to receive a tax credit in the amount of 80% of the investment in fixed assets. The unused part can be carried forward for 10 years. 40% Tax Credit for SMEs – Tax credit of 40% is granted for fixed assets investments in the current year and may not exceed 70% of the tax due. Incentives for Employing New Workers A two-year tax reduction amounting to 100% of gross salaries and related employee contributions is available for the employment of new workers, providing that their number is not reduced during this period. Tax Holiday Tax Break for Large Investors: Companies are exempt from corporate profit tax for a period of 10 years starting from the first year in which they report taxable profit if: – They invest in fixed assets an amount exceeding RSD 600 million (approximately €7 million), and – They hire at least 100 additional full-time employees during the investment period. Tax Exemption for Concessions 5-Year Tax Break – A 5-year corporate profit tax holiday is granted for concession-related investments starting from the day the concession investments have been completed. No tax is due if income is derived before the completion of the concession investment. Carrying Forward of Losses 10-year Transfer – The tax loss stated in the tax return can be carried forward and offset against future profits over a period of 10 years. Accelerated Depreciation 25% Higher Rates – The taxpayer has the right to accelerated depreciation of fixed assets at rates of up to 25% above the prescribed ones. This tax relief is provided for fixed assets that are used for ecological purposes, as well as for scientific research, education and staff training, and computer hardware. Avoiding Double Taxation If a taxpayer already paid tax on the profit generated abroad, he is entitled to a corporate profit tax credit in Serbia in the amount already paid. The same right is enjoyed by a taxpayer who earns revenue and pays personal income tax in another country, provided there is a Double Taxation Treaty with that country. Serbia vat (Value Added Tax) Rate The standard VAT rate in Serbia is 18%, with a reduced rate of 8%. Certain items are exempt or zero-rated. Taxable transactions – VAT is imposed on the provision of goods and services. VAT Registration – The registration threshold for VAT purposes is an annual turnover of RSD 4 million. Filing and VAT payment – VAT taxpayers are required to file tax returns within 10 days after the end of the tax period (calendar month or trimester, depending on the previous year's turnover) and pay the difference between the amount specified in the tax return and the input VAT incurred.

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