SERBIA - Amendments to tax laws and entry into force of Multilateral Convention
Amendments to tax laws
We summarise below the most significant amendments of tax laws which have international significance.
Corporate Income Tax Law
Tax credit for paid capital gains tax in a foreign country
A taxpayer that paid capital gains tax in a foreign country may use such tax as a credit to reduce its corporate income liability in Serbia. The tax credit may be used from the tax period starting in 2019.
Incentives for research and development costs
Expenses that are directly associated with research and development performed by a taxpayer in the Republic of Serbia can be recognised in a double amount as a deductible expense in the tax balance sheet. ‘Research’ should mean an acquisition of new scientific or technical knowledge and understanding, whereas ‘development’ will include the application of the research results and outcomes. The incentive applies from the tax period starting in 2019.
Tax exemption on a portion of the income generated by a taxpayer as a copyright or related rights holder on the basis of the compensation for their usage
Qualified income generated by a copyright or related rights holder on the basis of the compensation for using copyrighted work in escrow or the subject matter of related rights, not including the compensation for the transfer of the copyright or related rights in whole, can be exempted from the tax base in the amount of 80% of the income generated in such a manner. This incentive will be applied to copyrighted works and the subject matter of related rights that will be deposited to the register from 1 January 2019.
Tax credit for equity investment in a newly incorporated company that performs an innovation activity
A tax credit will be introduced for those taxpayers that make an equity investment in a newly incorporated company performing an innovation activity. The tax credit will account for 30% of the indicated equity investment. Special terms and conditions have been established in terms of what is considered a newly incorporated company that performs an innovation activity and an entity whose investments may qualify for being entitled to a tax credit.
The largest tax credit that can be granted to a taxpayer amounts to RSD 100 million. The largest tax credit that can be used for the purpose of reducing taxable income in one year amounts to RSD 50 million.
Amendment to list of jurisdictions with a preferential tax system
The Rulebook on the list of jurisdictions with a preferential tax system has been amended - San Marino was removed from the list, having in mind that Serbia and San Marino concluded a Double Taxation Treaty which has come into force from 1 January 2019.
Personal Income Tax Law
Income generated by a non-resident in the Republic of Serbia
Apart from the income generated from work performed in the territory of the Republic of Serbia, income of a non-resident individual is also deemed to include any revenue from using or being in possession of any right in the territory of the Republic of Serbia. This amended definition of income realised by a non-resident applies from 1 January 2019.
Property Tax Law
A permanent establishment (branch) that keeps books of account must file tax returns, determine and pay the tax on immovable property of a non-resident in the
Republic of Serbia, for a real estate whose holder is the branch. This amendment applies for the calculation of property tax starting from 2019.
Value Added Tax Law
The procedure for VAT refunds to passengers who do not have a permanent or temporary residence in the Republic of Serbia has been amended.
Requests for VAT refunds and requests for the issue of certificates of tax exemption can be exclusively submitted electronically.
These amendments of rulebooks apply starting from 1 January 2019.
Entry into force of Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS
In June 2017, Serbia together with 68 other jurisdictions, signed the Multilateral Convention.
Adopting the Multilateral Convention will enable the modification of certain provisions contained in Double Taxation Treaties (DTT) concluded between Serbia and other jurisdictions in a simpler way.
One of the major changes made by the Multilateral Convention is the introduction of the so-called Principal Purpose Test (PPT), on the basis of which the benefits of the DTT would not be granted if, taking into account all relevant facts and circumstances, it can be reasonably concluded that acquiring benefits from the DTT was one of the main reasons for concluding that arrangement or transaction.
Serbia deposited an Instrument of Ratification in June 2018. Therefore, for Serbia the Multilateral Convention entered into force on 1 October 2018. In order to modify certain provisions of the DTTs which Serbia concluded with other jurisdiction, it is necessary for the Multilateral Convention to come into force for Serbia as well as for the other jurisdiction.