Serbia is not an offshore or a midshore jurisdiction: both personal and corporate taxes are charged there. However, they are rather low by European standards, which attracts foreign entrepreneurs to the country.
The taxation system in Serbia makes living and working there very comfortable. Below we discuss the main three elements of the country’s fiscal system: the added value tax, the corporate income tax, and the personal income tax. We also briefly touch upon some other issues such as taxes for non-residents, mandatory payments, and tax deductions.
We have checked all the figures carefully but you have to understand that the rules and regulations can change. Any global shifts are highly unlikely to occur but some details might change over time. Please seek advice from a tax lawyer in Serbia if you are planning to go into business in the country.
Before we go on to talk about taxes in Serbia, we would like to illustrate the claim that the tax climate is beneficial in the country. If you are a small business owner (a sole proprietor) in Serbia, your tax is only 10%. Moreover, freelancers who pay taxes in Serbia also feel quite relaxed. Taxes on non-residents in Serbia vary between 10% and 20%, which is rather humane too. Besides, Serbians are friendly to all foreigners no matter where they come from.
VAT in Serbia
The taxation system in Serbia is designed in a way that business people have few questions: everything is clear and transparent.
Key facts about the VAT in Serbia:
- Date of introduction – January 1, 2005.
- Current rates: 20% (standard), 10% and 0% (reduced).
- Number of digits in the VAT number: 9.
- Submission of VAT declaration: monthly or quarterly.
- Qualifying condition: annual turnover exceeding 8 million RSD (approximately 67.2 thousand. USD).
Spheres of VAT application:
- Supply of goods and services if they are a) produced in Serbia and b) the supplier is a tax resident of Serbia (both conditions have to be satisfied).
- Import of goods to Serbia (the tax status of the importer is irrelevant).
- Services used by tax residents of Serbia and provided by foreign companies if the Serbian clients are end users of the services.
Registering for the VAT in Serbia:
- The company has to register for the VAT when its turnover exceeds 8 million RSD over the last 12 months (there are exceptions, however).
- The taxpayer is responsible for registering for the VAT.
- If the qualifying condition (8-million turnover) is not satisfied, the company can register for the VAT but does not have to.
- Cancellation of the VAT registration is possible only after paying the tax for 2 years.
VAT for foreign companies in Serbia:
- If the company conducts business operations in Serbia, it has to register for the VAT. Services of a Serbian tax agent are required.
- If the company is not present in Serbia but only sells its goods to the country, no tax agent is required but the VAT has to be paid anyway.
- A foreign company registered for the VAT in Serbia can apply for a VAT refund (if the conditions for that are satisfied).
- A group of companies cannot register for the VAT in Serbia.
Corporate income tax in Serbia
This is the main tax that Serbian companies have to pay and the standard rate is 15%. Together with a favorable geographical position, the low tax rate makes Serbia an attractive country for launching a business venture.
Key facts about the corporate income tax in Serbia:
- Tax rate: 15%.
- Capital gains tax: 15%.
- Withholding tax (there are many exemption possibilities): 20%. The rate is 25% for commercial transactions using preferential tax regimes.
- Duration of the fiscal year: January 1 – December 31. The start and end dates of the fiscal year can be changed on a special request from the company.
- The latest date when the tax return can be filed is 180 days after the end of the reporting period.
Companies that have to pay the corporate income tax in Serbia:
- Fiscal residents of Serbia. Incomes derived from any jurisdiction form the taxable base.
- Non-resident companies pay the tax on incomes derived from operations in Serbia only.
Corporate income tax in Serbia: tax incentives and deductions:
- A 10-year tax exemption if the following conditions are satisfied: a) the company invests 1 billion RSD in its development and b) it gives employment to at least 100 more people during the investment period.
- Tax credits are possible (several conditions need to be satisfied).
- Double deduction of corporate expenses for Serbian companies engaged in R&D in Serbia.
- It is possible to deduct up to 80% of the income from the taxable base if its source is intellectual property.
- It is possible to deduct up to 80% of the income from the taxable base if its source is capital gains from transfer of intellectual property rights.
Personal income tax in Serbia
Serbia is among the European countries that charge the lowest taxes on personal income. The standard rate is 10% for Serbians. For foreigners, it can be from 10% to 20% depending on the source of income.
Key facts about the personal income tax in Serbia:
- Standard rate: 10%.
- Capital gains tax rate for individuals: 15%.
- Tax rate for sole proprietors (self-employed individuals): 10%.
- Tax on intellectual property rights and related rights: 20%.
- Tax on interest: 15%.
- Tax on rent: 15%.
- Tax on income from insurance of individuals: 15%.
Taxable base:
- Salary and wages.
- Income from private business activities.
- Income from copyrights and related rights.
- Income from capital.
- Income from real property.
- Capital gains.
- Any other sources of personal income.
Fiscal residents of Serbia have to pay the personal income tax regardless of the country where the income has been made – in Serbia or abroad. Non-residents are taxed only on the income made in Serbia. A foreign national automatically becomes a fiscal resident of Serbia if s/he a) has a center of vital interests in the country or b) has spent more than 183 days in Serbia within a year.
Employment for foreigners in Serbia
It is possible for a foreign national to find employment in Serbia but several important conditions need to be satisfied because the country’s legislation protects Serbian workers. The obligations of the employer include the following ones:
- S/he cannot fire a Serbian citizen to make the position vacant for a foreigner.
- S/he has taken all possible steps to find a suitable candidate among Serbians and foreigners already holding work permits. The employer has 10 days to do that.
- S/he has to apply for official permission to hire a foreigner.
- S/he has to sign a job agreement with the foreign national that respects all his/ her legal rights.
Low personal and corporate income tax rates make Serbia attractive for people with an entrepreneurial spirit and foreign investors. Becoming a sole proprietor or registering as a freelancer in Serbia is an inviting opportunity indeed. Engaging in business on a larger scale in the country can also be highly beneficial.