Explore the advantages of Serbia’s favorable tax system! With corporate and personal tax rates well below the European average, Serbia offers an enticing haven for businesses and individuals seeking financial growth.
Is your tax haven not working properly any longer? Is your profit margin shrinking? Would you like to pay less in taxes than you are paying now? If so, then welcome to Serbia!
The tax system in Serbia is highly beneficial for businesses as well as private individuals. The tax rates in the country are among the lowest in Europe. Both corporate and personal tax rates are well below the European average in Serbia.
Corporate tax rate in Serbia
- The corporate tax rate is 15% in Serbia. Besides, there is no official threshold for the profit-to-turnover ratio. Capital gains are taxed separately and the rate is also 15%.
This should be good news for those who would like to start a business venture in Europe. Consider the tax rates in some of Serbia’s competitor countries. In the Czech Republic, the corporate tax rate is 19% and in Hungary, it is the same. If you look at Western European countries, you will want to look away the minute you learn how much business companies have to pay in taxes there. The average corporate tax rate is 22.5% in Europe, which certainly puts Serbia among low-tax European jurisdictions. This group of countries contains other jurisdictions too such as Cyprus, for example, where the corporate tax rate is lower by 2.5% than the average but it is higher than in Serbia anyway.
The fiscal year is the calendar year in Serbia. In some cases, however, the fiscal year can be shorter. This can happen if the business activities start and end within one calendar year or if the status of the company changes during the year.
The taxable base is calculated on the basis of the amounts of profits and losses adjusted for taxation purposes. Taxable income includes both commercial profits and capital gains. The taxable base is equal to the difference between income and expenses.
Dividend tax rate in Serbia
- The dividend tax is 15% in Serbia and the taxable base is 85% of profit (profit after corporate tax). The tax on dividends can be reduced to 5% by using the agreements on double taxation avoidance (Serbia has signed dozens of such agreements).
Taxes on money transfers
Money transfers from a subsidiary to the parent company are not subject to dividend tax because the money travels between two divisions of one and the same legal entity. This makes this type of corporate structure ideal for reviving old or inactive companies. In addition to that, special legal agreements make it possible (under certain conditions) to receive payments and to send payment on behalf of the parent company without gaining income.
Asset protection in Serbia
Asset protection instruments in Serbia and Serbian holdings in particular are among the best in the world with the view of the fact that no corporate income tax is payable on the dividends paid by one resident Serbian company to another resident Serbian company. If a resident Serbian company owns at least 10% of a non-resident company and if the share has been in its possession for at least one year, the company is entitled for a tax credit for the foreign dividend tax that it has paid.
Every company has to calculate its profits and losses over the year and declares the taxable income on the basis of these calculations. The tax declaration and the tax balance sheet have to be submitted within 180 days after the end of the fiscal period for which the reports are made. Financial reports for the previous year are submitted between February and July of the current year.
VAT tax rate in Serbia
- The VAT tax rate is 20% in Serbia and the tax can be paid yearly or quarterly. The VAT is levied on goods and services sold in Serbia as well as on imported goods.
Accounting in Serbia
As far as accounting is concerned, Serbia conforms to the international accounting standards. In particular, small and medium-size companies shall comply with the International Financial Reporting Standards (IFRS) while large companies can decide whether they want to report in accordance with IFRS or not.
Serbia has signed more than 60 treaties on avoiding double taxation with different countries of the world
Personal taxes in Serbia
As far as personal taxes are concerned, they are payable in Serbia but the rates are much lower than in most other European states. The person pays taxes on his/ her income including the income obtained thanks to independent entrepreneurial activities, on royalties, on capital gains, on property, and other sources of income.
Non-resident have to pay taxes only on the income obtained within Serbia. You can become a tax resident of Serbia if you have residential accommodations there or a business company or if you live in Serbia more than 183 days per year. You can acquire a fiscal residence certificate (an official document certifying your privilege to pay taxes in Serbia) in 365 days after acquiring a temporary residence permit in the country.
- The personal income tax is progressive and it cannot exceed 15%, which puts the Serbian personal income tax among the lowest taxes not only in Europe but also in the whole world.
- The inheritance and gift tax is also charged at a progressive scale. The inheritance tax is 1.5% for taxpayers in the second order of inheritance and it is 2.5% for taxpayers in the third and subsequent orders of inheritance.
- Property transfer tax is 2.5%. It is applied when property rights of different kinds including intellectual property rights, for example, are transferred from one person to another.
- The property tax is charged at a progressive scale too. The rates are from 0.4% to 2%. These figures are from 2 to 15 times smaller than they are in other European countries!
There is no capital duty or payroll tax in Serbia and neither is there any wealth tax. Should we refer to Serbia as a tax haven?
Without doubt, if you are planning to launch a company in Serbia thus saving on taxes greatly, you should seek professional assistance in the matter. Tax rates change from time to time and you need somebody who knows where things stand at the current moment.
