Amendments to the Corporate Income Tax Law

Serbia/February 2013

On December 15 2012, the Serbian Parliament officially adopted the amendments to the Corporate Income Tax Law as a part of the fiscal consolidation measures which aim to decrease the budget deficit of Serbia.  Believing that the new changes might significantly influence the current business principles in Serbia, we outlined the most important changes below:

  • The Corporate Income Tax (CIT) rate is increased from 10%-15%.
  • The deadline for submission of annual tax return is extended to 180 days, as of the end of the tax year. If the legal entity has suffered statutory changes, bankruptcy and liquidation, that deadline is 30 days from the deadline for submission of the financial statements.
  • For the first time the category of “tax heaven” jurisdictions is introduced, and the list of the jurisdictions considered “tax heaven” will be issued by the Ministry of Finance.
  • The withholding tax on services is introduced, and the legal entities in Serbia will be obliged to withhold the general rate of 20% for services provided to the non-residents except when the recipient of income is the resident of “tax heaven”, where the withholding tax will be 25%.
  • The threshold for deductibility of marketing expenses is increased from 5% to 10% of the total revenue.
  • To qualify for “large tax credits” minimum investments in fixed assets is increased from RSD800 Million to RSD 1 Billion provided that minimum of 200 new (instead of previous 100) persons are employed for an indefinite period on full time base.
  • The shareholding participation in non-resident subsidiary, for qualifying the legal entity to apply for tax credit, is decreased from 25% to 10%.
  • To be considered as related party the percentage of participation in capital or voting rights is decreased from 50% to 25%.

The projection of the Ministry of Finance of Serbia is that the amendments of the VAT Law, followed by other measures relating to the rebalancing of the budget would decrease the budget deficit from current 7, 1% to 6,7% in the year end 2012, and by the end of 2013, the budget deficit is expected to be decreased to 4%.

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