Although you will hardly find a person out there who is happy to pay taxes, they are a duty and a responsibility for every citizen. It is due to this money that countries grow and prosper. It funds roads, public transport, education, scientific research, culture and art, public works, well, the list may go on and on.
Tax types in Serbia
The complex tax system in Serbia includes various types of taxes levied on people, companies, and other entities. Here’s what the basics of taxes in Serbia are all about:
- Personal Income Tax: PIT applies to people residing in Serbia and is calculated based on their total income. The tax rates range from 10% to 20%, and the definition of the taxable base depends on your income type. Deductions and exemptions may apply to certain types of income. The four types of income subject to PIT in Serbia are income from employment (taxed at the rate of 10%), self-employment (the VAT rate makes 10%), property and property rights (15%), and other income (20%).
- Corporate Income Tax: Various legal entities and corporations conducting business activities in Serbia are subject to CIT, or corporate income tax. The standard Serbian 15% CIT rate is among the lowest in Europe. It is applied to the company’s profits, but there are also reduced rates for specific types of income and activities.
- Value Added Tax: VAT is a consumption tax applied to the sale of goods and services. In Serbia, there are different VAT rates, including the standard rate of 20% and reduced rates for certain categories of goods and services. Businesses registered for VAT are required to collect and remit the tax to the government.
- Other Taxes: Apart from the personal income tax, corporate income tax, and value-added tax, there are several other taxes applicable to both individuals and businesses in Serbia:
- Property Tax: This tax applies to the ownership or utilization of immovable property, encompassing land, buildings, and apartments situated in Serbia. Depending on the property’s type, value, and location, the applicable tax rate varies between 0.4% and 2%.
- Property Transfer Tax: Imposed on the transfer of ownership or rights related to immovable property, including land, buildings, and apartments in Serbia, this tax is paid at the rate of 2.5%, with the tax base calculated as the higher of the agreed price or the market value of the property.
- Inheritance and Gift Tax: Are you about to acquire property or rights through inheritance or gift in Serbia? Be prepared to pay inheritance or gift tax. The applicable tax rate varies from 1.5% to 2.5%. The exact percentage will depend on the degree of kinship between the parties involved.
- Excise Tax: As in the case of your own country, excise taxes in Serbia are imposed on the production, import, or sale of specific goods, including tobacco, alcohol, fuel, coffee, and electricity. The tax rates fluctuate based on the type and quantity of the goods, typically expressed in absolute terms per unit of measurement.
- Social Security Contributions: Both employers and employees are obliged to contribute to social security funds. These contributions fund various social benefits, including pensions, healthcare, and unemployment benefits. The rates may vary, and specific rules apply to different types of income.
Taxation of individuals
Individuals in Serbia are subject to personal income tax on their worldwide income. These are the key points regarding personal income tax for individuals:
- Tax Residency: Residents are taxed on their global income, while non-residents pay PIT on their Serbian-sourced income only.
- Tax Rates: In Serbia, PIT rates are flat, with different rates applied to various income brackets.Exemptions and deductions are available, reducing the taxable income.
- Taxable Income: Personal income tax applies to various types of income, including employment and business income, capital gains, and rental income. Remember that each type of income may have specific rules and exemptions.
Taxation of businesses
Businesses operating in Serbia are subject to corporate income tax on their profits. Take a look at what some essential aspects of corporate taxation in Serbia include:
- Corporate Income Tax Rate: In Serbia, the standard corporate income tax rate is applied to the taxable profit. However, there are reduced rates for certain activities, such as manufacturing and research and development.
- Taxable Income: Corporate income tax is calculated on the company’s profits, taking into account deductions and exemptions. It includes income from various sources, including, inter alia, sales, services, and capital gains.
- Withholding Tax: Serbia has withholding tax obligations on certain types of payments made to non-residents. The latter encompass dividends, interest, and royalties. The rates may vary based on tax treaties and domestic regulations.
- Value Added Tax (VAT): VAT is a significant component of the Serbian tax system, impacting both businesses and consumers. This is what you need to know about VAT in Serbia:
- VAT Rates: Serbia has a standard 20% VAT rate, and reduced rates are applied to specific categories of goods and services, such as essential food items, medicines, and books.
- Registration: Businesses meeting certain criteria are required to register for VAT. Once registered, they collect VAT on their sales and may also reclaim VAT paid on their purchases.
- Filing and Payment: VAT returns must be submitted regularly, and businesses are obliged to remit the collected VAT to the tax authorities. Non-compliance may result in penalties and fines.
Social security contributions
Social security contributions are mandatory for both employers and employees in Serbia. In general. the picture here looks as follows:
- Rates: The rates for social security contributions vary for employers and employees and depend on the type of income. Contributions fund various social benefits, including those related to pensions, healthcare, and unemployment.
- Reporting and Payment: Employers are responsible for calculating, reporting, and remitting social security contributions on behalf of their employees. Failure to comply with these obligations will most likely lead to penalties.
Undoubtedly, choosing the right jurisdiction significantly impacts your business’s profitability. For your business to stay afloat and grow, strategic tax planning is of major importance. In this context, Serbia provides lots of appealing opportunities.
Would you like to set up a company, open a bank account, or relocate to Serbia? Reach out to Serbia Wealth, and we’ll address all your concerns and questions!