A Balkan country with a population of about 7 million and a GDP of USD 51 billion, Serbia is a member of the United Nations, the Council of Europe, the OSCE, and the WTO. Besides, it is a candidate for EU membership.
With the appealing prospects booming on the horizon, no wonder many expats are planning to live, work, or do business in Serbia. If you are one of them, you need to be aware of the tax system and the tax rates that apply to different income types. International Wealth experts are happy to provide you with an overview of the tax rates in Serbia and some useful tips on how to comply with the local tax liabilities and optimize your tax position.
Personal Income tax
PIT is a tax that applies to individuals who earn income from various sources. These may be employment, self-employment, capital gains, dividends, interest, royalties, rents, pensions, and other income. The tax rates and the taxable base depend on the type of income and the residency status of the individual.
Residents are individuals who have their domicile or habitual abode in Serbia or who spend more than 183 days in a 12-month period there. They are taxable on their worldwide income, whereas non-residents pay taxes on the Serbian-sourced and worldwide income related to their work in or for Serbia exclusively.
The standard personal income tax rate is 10%. Exceptions and variations depend on the type and amount of your income:
Employment income is taxed at 10% on the gross salary plus mandatory social security contributions paid by the employer (14% for pension and disability insurance, 5.15% for health insurance, and 0.75% for unemployment insurance). The employer is obliged to withhold and pay the tax on behalf of the employee.
As for self-employment, you will pay 10% of the net income after deducting allowable expenses. Depending on their activity and status, self-employed individuals are required to pay social security contributions at rates ranging from 25.5% to 36%.
Capital gains tax makes 15% on the difference between the selling and acquisition price of capital assets, Capital gains may be offset with capital losses in the same period or carried forward for 5 years.
Dividend tax is currently 15%. It is paid on the gross amount received from domestic or foreign sources. The dividend payer shall withhold and pay the tax on behalf of the recipient.
As for your interest, be prepared for a tax rate of 15%. The same regulation applies to the payer and recipient of the income tax in Serbia as in the case of the dividend tax. With royalties, you will pay 20%.
In Serbia, taxes on rents and pensions make 20% and 10%, respectively.
In addition to these taxes, annual supplementary taxation applies to individuals who earn more than 3 times the average annual salary in Serbia. For more information about the above additional taxes, you are welcome to contact International Wealth consultants.
Corporate Income tax
Corporate income tax applies to legal entities that do business in Serbia or have a permanent establishment in the country. The tax rate is 15% on the net profit after deducting allowable expenses and losses.
Resident legal entities are those established or having their place of effective management and control in Serbia. They are taxable on the worldwide profit, whereas non-resident companies pay taxes on profit attributable to their permanent establishment in Serbia only. The latter is a fixed place of business through which a non-resident legal entity carries out its activities in Serbia.
Value-Added tax
Value-added tax (VAT) is paid on the supply of goods and services in Serbia or the import of goods into the jurisdiction. The standard VAT rate is 20%, but for certain goods and services, a reduced VAT rate of 10% applies. These include basic foodstuffs, medicines and medical devices, books and newspapers, hotel accommodations, public transportation, and utility services.
Below, some examples of VAT-exempt services and industries are listed:
- export of goods and related services
- international air transport
- financial and insurance services
- postal services
- education and health care services
- cultural and religious services.
In Serbia, the VAT system follows the destination principle. It means that the place of supply is determined by the location of the customer rather than the supplier. Therefore, if a Serbian supplier sells goods or services to a foreign customer, the supply is zero-rated or exempt from VAT in Serbia but may be subject to VAT in the customer’s country. Conversely, if a foreign supplier sells goods or services to a Serbian client, the supply is subject to VAT in Serbia but may be exempt from VAT in the supplier’s jurisdiction.
The VAT liability is generally borne by the supplier. In some cases though, the VAT liability is shifted to the customer, who has to account for the VAT under the reverse charge mechanism.
Other Taxes
You may also be subject to other taxes that apply in Serbia, including excise duties as well as property and local taxes.
Excise duties are taxes that apply to the production and import of certain goods, such as oil derivatives, tobacco products, alcoholic beverages, coffee, electricity, bioliquids, and biofuels. The excise duty rates vary depending on the type and quantity of goods.
You pay property taxes in Serbia if you own, transfer, or inherit real estate and movable property. The tax rates vary depending on the type and value of property and the taxpayer’s status.
Local taxes are levied by local governments on various activities or transactions within their jurisdiction. These include city tax on hotel accommodation, city surcharge on property tax, etc.
With its complex taxation system consisting of various taxes and rates that apply to different types of income and activities, Serbia may appear as a challenging place to pay taxes. If you envision Serbia as your new home, be prepared and learn everything you can about your tax obligations and opportunities in the state. It would be wise to seek professional advice in advance. International Wealth experts will gladly offer you free recommendations on how to optimize your tax position in Serbia while staying compliant.