Work, in addition to employment, includes the representation of a company on the basis of entry in the register of Serbian Business Register Agency, as well as the performance of management powers and management tasks in accordance with the law governing the status of companies. There many situations where contribution for legal representatives of Serbian company must be paid, and these are just few of them.

FOREIGN CITIZENS who are the Founders of a company

Foreign citizen – natural person – who is not a resident of the Republic of Serbia, can be a Founder and / or a Member of a company in Serbia. Which regulations will apply to the determination and payment of compulsory social security contributions for the Founder and / or a Member of a company depends on the circumstances of whether a contract has been concluded with the state of residence of Founder and/ or Member in the field of social security.

If a bilateral agreement is concluded, there is no obligation for that person to pay social security contributions under the regulations of the Republic of Serbia if two cumulative conditions are met:

1. If the natural person submits a certificate that s/he is a resident of the country with which the social security contract has been signed, certified by the competent authority of that state, and
2. If the natural person submits a certificate that s/he is compulsorily insured in the State of residence (Contracting State), certified by the competent authority of that State.

Failure to provide the above evidence, as well as in the case where no bilateral social security contract is concluded, the regulations of the Republic of Serbia in the field of compulsory social security shall apply.

Founders who do NOT work in their company and are NOT registered to represent the company but are in a working relationship in their company regarding jobs that are not representation

Founder or a Member of a company who is employed by his company is obligatory insured on the basis of employment as an employee. This person may perform any business activity in that company, as well as any other employee, except to represent the business of the company, due to the fact that for these jobs’ s/he is not registered in the Serbian Business Register Agency (it is understood that there is another person registered to represent the company).

Founders and / or Members of a company who have established an employment relationship in their company are entitled to earnings, reimbursement and other income based on the employment relationship in accordance with the law governing employment, a general act with the employer and a contract of employment. This person has all the rights and obligations on the basis of employment like any other employee.

Income Tax is calculated and paid at the rate of 10%.

Founders and / or Members of a company are entitled to a dividend or a share in the profits of the company in accordance with the general act of the company (which is taxed as capital income at the rate of 15%).

Founders who WORK in their company and are REGISTERED to represent the company but are NOT in employment with their company or with another employer

For individuals who are Founders or Members of a company, and are registered to represent that company in which they do not have an employment relationship (and are not employed by another employer), the contribution base is at least the lowest monthly contribution basis.
For these persons, as Founders or Members of a company, all three contributions are calculated and paid as follows:

1. For compulsory pension and disability insurance – 26%;
2. For compulsory health insurance – 10.3%;
3. For unemployment insurance – 1.5%.

The personal income tax is NOT calculated because the individual does not receive the contractual remuneration for his / her employment as a Founder or a Member of a company.

If you need trustworthy associates with experience and knowledge regarding contributions for legal representatives of Serbian Company contact Asst Office.

Corporate Tax in Serbia is defined by the Law on Corporate Tax. Corporate Tax rate is proportional and uniform, and it is rated at 15%.

Unless otherwise stipulated by the International Agreement on Avoidance of Double Taxation, the Corporate Deduction Tax rated at 20% will be calculated and paid on income derived by a non-resident legal entity from a resident legal entity on the basis of:

1. Dividends and profit share in a legal entity, including the dividend referred to in Article 35 of this Law on Corporate Tax;
2. Compensation for copyright and related rights and industrial property rights (hereinafter referred to as: royalties);
3. Interest;
4. Compensation from the lease and sub-lease of real estate and movable property in the territory of the Republic;
5. Compensation from market research, accounting and auditing services and other legal and business consulting services, regardless of the place of their provision or use, or the place where they will be provided or used.

The Deduction Tax will also be calculated and paid on the income of a non-resident legal entity on the basis of performing entertainment, artistic, sports or similar programs in the Republic of Serbia, which are not taxed as income of individuals (performers, musicians, athletes, etc.), in accordance with the regulations governing the taxation of personal income.

Are there any exceptions?

The exception from above stated, can be find regarding the revenues generated by a non-resident legal entity from a jurisdiction with a preferential tax system on the basis of royalties, interest, fees on the lease and sub-lease of real estate and movable property in the territory of the Republic of Serbia, as well as fees on the basis of services, regardless of the place of their provision or use, that is, the place where they will be provided or used, the Deduction Tax is calculated and at the rate of 25%.

Additionally, Deduction Tax will not be paid on the income generated by a non-resident legal entity, that is, a non-resident legal entity from a jurisdiction with preferential tax system, from interest on debt securities issued in accordance with the law by the Republic of Serbia, Autonomous Province, a Local Government or the National Bank of Serbia.

When does tax return must be filed?

The resident legal entity is obliged to, within 3 days from the day of payment of the income to file a tax return. Non-resident legal entity – recipient of income, is obliged to submit a tax return to the competent Tax Authority within 30 days from the day of income generation, through a tax representative determined in accordance with the Regulations Governing the Tax Procedure and Tax Administration, in the Municipality in whose territory the real estate is situated, where the seat of a Company in which the non-resident taxpayer holds a share or securities that are the subject of sale, that is, the seat or residence of the taxpayer of the lease or sub-lease of movable property, depending on the basis of which the competent Tax Authority makes a Decision.

For all questions regarding Corporate Tax, Value Added Tax (VAT) or any other taxation feel free to contact Asst Office at any time.

For many outsides of Europe, meaning of Value Added Tax (VAT) is unknown.

In general, VAT is a consumption tax levied and paid on the delivery of goods and services, at all stages of production and trade in goods and services, as well as on the import of goods. Additionally, Value Added Tax is a consumption tax that replaces the existing sales tax on products and services. It is important to understand that at each stage of the production-traffic cycle, a tax is calculated and paid on that part of the value, added at that stage.

Subjects of this taxation in the Republic of Serbia are delivery of goods and provision of services performed for a fee by the taxpayer in the Republic of Serbia within the scope of their business activity and imported goods (entry of goods into the customs territory of the Republic of Serbia).

Taxpayers are entities that perform sale of goods and services or imports goods within the scope of its business activity, as a permanent business activity, for the purpose of earning income, as well as Republic of Serbia and its bodies and special organizations, bodies of territorial autonomy and local self-government, as well as legal entities established for the purpose of carrying out activities within the scope of the state administration bodies are not obliged.

On the other side, tax debtor are taxpayers, a tax proxy appointed by a foreign individual or legal entity who has no headquarters or permanent establishment in the Republic of Serbia, but who carries on the supply of goods and services in the Republic of Serbia.

This type of taxation occurs on the day when traffic of good and/or services are completed, on the day when the payment is done, and on the day of the obligation of paying the customs debt.

In the Republic of Serbia VAT is rated at 20%, but some exemptions are known, and those are stipulated in the Law on Value Added Tax of Republic of Serbia in the Article 23.

Also, special taxation procedures are Stipulated in the previously mentioned Law, and they refer to small taxpayers – sole proprietor and companies whose total year turnover is less than 8.000.000,00 RSD (around 65.000,00 EUR), farmers, travel agencies. Used goods, works of art, collectibles and antiques also fall into the group for special taxation procedures.

If you have any question or doubt about VAT in Republic of Serbia or in other European countries like Slovakia, Hungary, Slovenia, etc. feel free to contact us, and let our team of accounting professionals and business consulting partners provide you with all necessary information.

Corporate income tax

The standard tax rate is 15 percent. Tax incentive is offered in the way of tax exemption from a corporate income tax for a period of time up to 10 years (proportionally to the level of investments) in the event that the company applying for tax exemption cumulatively secures the investment of app. 8,5 – 9 million € in its fixed assets, and, throughout the investment period, employment of minimum 100 employees for an indefinite term.

Withholding tax on dividends distribution

The standard tax rate for shareholders – legal persons is 20 percent, and for shareholders – individuals are 15 percent. Please note that Serbia disposes of a wide range of Double Tax Treaties (DTTs) including more than 50 countries – thus allowing more favorable tax treatment of dividend distribution, as well as avoidance of double taxation relevant to the various type of income.

Serbia has signed DTTs with the following countries:

1. Albania
2. Greece
3. Pakistan
4. Armenia
5. Hungary
6. Poland
7. Austria
8. India
9. Qatar
10. Azerbaijan
11. Iran
12. Romania
13. Belgium
14. Ireland
15. Russia
16. Belorussia
17. Italy
18. Republic of Korea
19. Bosnia and Herzegovina
20. Kazakhstan
21. Slovak Republic
22. Bulgaria
23. Kuwait
24. Slovenia
25. Canada
26. Latvia
27. Spain
28. China
29. Libya
30. Sri Lanka
31. Croatia
32. Lithuania
33. Sweden
34. Cyprus
35. Luxembourg
36. Switzerland
37. Czech Republic
38. Macedonia
39. Tunisia
40. Denmark
41. Malaysia
42. Turkey
43. Egypt
44. Malta
45. Ukraine
46. Estonia
47. Moldova
48. United Arab Emirates
49. Finland
50. Montenegro
51. United Kingdom
52. France
53. Netherlands
54. Vietnam
55. Georgia
56. North Korea
57. Germany
58. Norway

Withholding tax on royalties, interest, lease of real estates and other assets in the Republic of Serbia
The standard tax rate is 20 percent. More favorable tax regime may be applied based on DTT, if applicable. This also refers to services rendered in Serbia by non-resident to a Serbian resident.

Value Added Tax (VAT)

The standard tax rate is 20 percent, and it is applicable to trade of goods and services on the Serbian territory, as well as for importation of goods into Serbian territory. VAT registration threshold amounts to 8 million RSD (app. 65.000,00€) in a period of 12 months.

Personal Income Tax

The Personal Income Tax rate in Serbia is 10 percent. Additional contributions are shared between employee and employer, where contributions paid by an employee are rated at 19.90 percent: 14 percent state pension fund, 5.15 percent state health fund, 0.75 percent unemployment fund.

Additional contributions by the employer are rated at 17.90 percent: 12 percent state pension fund, 5,15 percent state health fund, 0.75 percent unemployment. This sets the total Social Security Rate at 37.80 percent.

Also, the tax burden for employers can be reduced through a variety of financial and tax incentives. The tax loss stated in the tax return can be carried forward and offset against future profits over a period of up to 5 years.

If a taxpayer already paid tax on the profit generated abroad, he is entitled to a Corporate Profit Tax/Personal Income Tax credit in Serbia to the already paid amount, and vice versa (provided there is a Double Taxation Treaty with the country of residence of the taxpayer).

Serbia and Turkey have Double Taxation Treaty assuring 5 – 10 percent tax rate for dividends distribution and other interesting advantages.

Annual Income Tax

Annual income tax for higher salaries is rated at 10 percent and is set for annual income above the threefold of the average annual salary in Serbia, while the rate of 15 percent is set for the annual income above the amount of 6 times average annual salary in Serbia.

In general, Serbia is rated 48 among 190 economies in the ease of doing business, according to the latest World bank annual ratings.