Corporate profit tax law defines a wide circle of legal entities obliged to pay the corporate profit tax.

CORPORATE PROFIT TAX IN THE REPUBLIC OF SERBIA

TAXPAYERS

Taxpayers are divided in three groups:

  • Residents
  • Non-residents
  • Non-resident legal entity from jurisdiction with preferential tax system

Resident of the Republic of Serbia is considered to be any legal entity subject to taxation of corporate income tax generated in the territory of the Republic of Serbia or abroad. For the purpose of this law resident shall be considered legal entity founded or having its head office or actual control on the territory of the Republic of Serbia.

Non-residents are subject to taxation of corporate income generated through a permanent operating unit in the territory of the Republic of Serbia.

Non-resident legal entity from jurisdiction with preferential tax system is considered to be legal entity:

1) founded on the territory considered to be a jurisdiction with preferential tax system
2) having its registered office on the territory considered to be a jurisdiction with preferential tax system
3) having its head office on the territory considered to be a jurisdiction with preferential tax system
4) having actual control on the territory considered to be a jurisdiction with preferential tax system

Regulation on list of jurisdictions with preferential tax treatment published in the Official Gazette of the Republic of Serbia sets a list of these jurisdictions:

Andora, Anguilla, Antigva i Barbuda, Aruba, Bahamas, Bahrein, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Christmas Island Cook's Islands, Dominican Republic, Folkland Islands, Fixi, Gibraltar, Grenade, Guam, Guernsey, Guyana Hong Kong, Island Men, Xersi, Liberia, Liechtenstein, Macau, Maldives, Marshall Islands, Mauritius

TAX BASE

Taxable profit is considered to be corporate profit tax base.

Capital gain is being taxed separately, and is considered to be income generated by the taxpayer by selling or transferring with compensation the following: real estate, industrial property rights, shares and interests in the capital of legal entities etc. Capital gain is considered to be difference between the sale price and acquisition price determined in accordance with the provisions of the law.

TAX RATE

Corporate profit tax rate is proportional and uniform and is set to 15 %. Tax period is defined as the financial year.
If not differently stipulated in the international agreement on avoidance of double taxation tax rate of 20 % shallbe applied to the income generated by the non-resident legal entity from resident legal entity on the basis of:

1) dividends and interests in profit of legal entity including dividends defined in the article 35.
2) fees from rights of an author or fees from industrial property
3) interest
4) fees for leased or rented real estate or other property in the Republic of Serbia

On the income generated by the non-resident legal entity from the jurisdiction with preferential tax system based on author’s fees, interests, leased or rented property or fees for services provided in Serbia or abroad, withholding tax shall be paid at tax rate of 25 %.

Therefore it is essential to differ taxpayers as non-residents (profit generated through permanent operating unit) and non-residents from preferential tax systems (territories defined by the Ministry) It is important to state that some countries (Switzerland, Netherlands etc.) have better status through international agreements on avoiding double taxation, so entities from these countries (for the profit generated in Serbia as non-residents) pay the tax at 5% tax rate. The most important is to specify the incomes subject to tax for non residents and for non-residents from jurisdiction with preferential tax systems. For example, tax for services provided, is being paid only by the non-residents from jurisdictions with preferential tax systems.