Taxation in Serbia
Taxation in SerbiaUpdated on Wednesday 16th November 2022
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The flexible incorporation process, the stable economy with tendencies for modernization and development, and the favorable taxation structure have made Serbia a suitable and appreciated business destination for foreign investors interested in setting activities in the central part of Europe. Businesspersons from abroad should solicit details and information about the taxation system in Serbia before opening a company. Legal advice and complete information in this matter can be offered by our Serbian lawyers.
Company taxation in Serbia
Limited liability companies, joint stock companies, limited and general partnerships in Serbia are obliged to pay the corporate tax and are seen as taxpayers in this country. The financial year observes two types of taxpayers in Serbia and those are the residents and the non-residents with establishments in Serbia. You can solicit legal support for the above-mentioned types of entities and for the tax legislation imposed from our team of attorneys in Serbia.
What is the corporate tax in Serbia?
The corporate tax rate in Serbia is set at 15%, one of the lowest in Europe, and it is collected from companies with establishments in the country and represents an important source of income for the state. We remind that the corporate tax is imposed on entities with residencies in Serbia or on the ones controlled in Serbia. It is good to know that the dividends paid by a company in Serbia to another Serbian business are not subject to the corporate income tax.
There are various opportunities for those who want to immigrate to Serbia and start a new life. If this is also your decision, we recommend the legal services of our lawyers. Our experts can manage the formalities imposed by the authorities, prepare the necessary documents and apply for the necessary visa. You can also receive support for obtaining a residence permit in Serbia.
Taxable incomes in Serbia
Residents in Serbia are subject to taxation on their worldwide income, as settled in the country. The non-resident persons in Serbia must pay the taxes on incomes generated in this country. The capital gains, the employment income, the business income, the profit generated in agriculture or the ones derived from the immovable property are subject to taxation in Serbia. Here is an infographic that explains more:
What is the VAT in Serbia?
Just like many countries worldwide, Serbia aligns with the requirements related to the VAT imposed on products and services, except the exports from Serbia. At the moment, the standard VAT rate in Serbia is set at 20%, but a reduced rate of 10% is imposed on particular items like foods, certain medicines and medical devices, utility services, accommodation services, and newspapers. If you want to understand better the tax regime when setting up a business, you can ask our attorneys in Serbia for support. The following matters regard the ways in which the VAT can be claimed or not:
- the VAT recovery can be done based on the invoices issued by providers or contractors;
- evidence or a document showing that the VAT has been paid is necessary;
- VAT imposed on the purchase of fuel, aircraft, vehicles, on rentals and repairs cannot be claimed;
- the import of home appliances and the entertainment expenses are not subject to VAT return.
We mention that the tax returns in Serbia can be submitted on a quarterly basis and will depend on the income registered by the taxpayer. Our advisors can help you in this matter and can also provide support for obtaining the EORI number.
What is the withholding tax in Serbia?
In Serbia, the withholding tax of 20% rate is imposed on dividends which are paid to a non-resident or foreign shareholder in the country. If a double tax treaty is signed by Serbia, then the withholding tax will be reduced. As for the interests and royalties paid to a foreigner in Serbia, these are levied with the same tax percentage.
Tax minimization in Serbia
Numerous financial tools can be used in companies established in Serbia, to cut the amount of taxes. Tax minimization methods are great options for company owners in Serbia, so if you would like to adopt a specific method, you can solicit the guidance and support of our Serbian lawyers. They will, first of all, develop a tax plan in agreement with the company’s financial operations. This way, you can avoid paying more taxes, if it is not the case. Here are a few examples of tax minimization methods that can be adopted in your firm:
- Deductions from bonuses, gifts, office suppliers, subscriptions can enter the discussion for tax minimization.
- Charities in Serbia can be other important tax minimization methods, as such companies are exempt from taxation.
- Some credits can be paid in advance in order to cut the commissions and other fees involved.
- Entrepreneurs can think of reinvesting a part of the profits in equipment because tax exemptions can be considered.
For complete information and details about the tax minimization methods that can be used in your company, please feel free to talk to one of our lawyers in Serbia. We also remind that our advisors can help foreign investors start a business in Serbia, by handling all the formalities involved. We can represent your firm and interests if you appoint us with a power of attorney and also explain the Serbian tax rates.
How do I register for VAT in Serbia?
VAT registration is mandatory for companies established in Serbia. Economic operators dealing with the supply of goods and services within the territory of Serbia must register for VAT before running any activity. First of all, a local tax representative will have to deal with this registration, and that because he/she knows all the formalities involved in such a procedure. The company’s documents are solicited for VAT registration in Serbia, such as the Articles of Association, and the Certificate of Incorporation. It is important to note that the VAT registration is made after the company registration is made. The entire process can be overseen by one of our lawyers in Serbia, so feel free to ask for our help.
Double tax treaties signed by Serbia
Serbia signed several double taxation treaties with countries worldwide with the purpose of avoiding taxation on incomes twice. Among the 65 countries that have a double taxation agreement with Serbia, we mention Germany, Romania, Belarus, Austria, Armenia, Canada, Cyprus, the Netherlands, Poland, Georgia, Morocco, Norway, Lithuania, Belgium, Albania, Pakistan, Russia, Slovenia, Switzerland, Tunisia, Spain, Sweden, Macedonia, the UAE, Greece, Kuwait, the Czech Republic, Moldova, Malta, Estonia, Bulgaria, Ukraine, Vietnam, Croatia, Hungary, Ireland, Indonesia, Bosnia, and Herzegovina, etc. Among the provisions of the double tax treaties signed by Serbia, the avoidance through tax exemption is the most important. This way, company owners will pay the taxes only in the country where the activities and operations are developed. If you want to know more about the taxes in Serbia, feel free to talk to one of our legal advisors.
Other taxes in Serbia
The property tax in Serbia is imposed on the immovable assets in the country and it represents 0,4% of the market value of the property. The social contributions in Serbia (pensions, unemployment, health insurance) enter the responsibilities of the employer in the country, whether it is a local or a foreign entrepreneur. One should know that in Serbia there is no branch remittance tax, no capital duty, no payroll or capital acquisitions tax.
Making investments in Serbia
Serbia gained lots of confidence among international entrepreneurs interested in starting companies in this part of Europe. Even though Serbia is not yet part of the European Union, the appealing business conditions and possibilities are measured by abroad investors. The tax system is one of the lowest in Europe, and a reason to consider Serbia for investments. The ease of starting a business in Serbia, the skilled workforce, and the encouraging incentives provided through all sorts of programs make Serbia a great business destination for overseas entrepreneurs. The following facts and figures show the business direction of Serbia:
- Around USD 40,000 million was the total FDI stock for Serbia in 2018.
- Around 28% of the total FDI in 2018 was directed to the manufacturing industry.
- Around 107 greenfield investment projects were registered in Serbia in 2018.
- Serbia ranks 44th out of 190 economies in the world, according to the World Bank and the 2020 Doing Business report.
If you want more details about the tax regime in Serbia or about how you can register a company in this country, please feel free to contact our Serbian law firm.