Do You Make Use of Tax Incentives and Reliefs?

WTS assists taxpayers in identifying opportunities to benefit from incentives, analyzing the concrete effects, and preparing all relevant documentation, including maintaining the specific records required under applicable regulations.

Depending on their circumstances, the type and scope of investments, and the nature of their business activities, taxpayers may have access to the following opportunities:

Tax Credit for Investments in Fixed Assets and Employment (10-Year Period)

Under the Corporate Income Tax Law, a taxpayer who invests in its own fixed assets—or when another entity invests in its fixed assets—in an amount exceeding RSD 1 billion, uses such assets for its core activity, and employs at least 100 people on a permanent basis during the investment period, is entitled to a corporate income tax exemption for a period of 10 years, proportional to the amount of the investment.

Investment in fixed assets by another entity also includes contributions to share capital and increases in share capital in accordance with the law.

The tax exemption applies upon fulfillment of the above conditions and begins in the first year in which profit is generated.

Tax Incentives for Research and Development (R&D) Expenses

Expenses related to research and development may be recognized in the tax balance at double their actual amount, in accordance with Article 22g(1) of the Corporate Income Tax Law.

To qualify for this relief, it is necessary to conduct an analysis of the costs considered as R&D expenses, prepare complex supporting documentation, and maintain special records as prescribed by law.

A taxpayer claiming this benefit must submit the following documentation for each individual project along with the tax balance:

• a description (specification) of the project, highlighting its objectives, planned phases, and planned activities within each phase;

• a record of the time each employee spent working on the specific project;

• a summary showing the total amount of R&D expenses incurred.

Additionally, at the time of submitting the tax balance, the taxpayer must possess the following in paper form:

• a project budget approved by management, including projected performance outcomes;

• a procurement plan related to the specific project;

• expert opinions from those responsible for project implementation;

• invoices showing the value of goods or services acquired for R&D purposes;

• contracts with third parties engaged in the project.

The taxpayer must also maintain cost records in the manner prescribed by law.

Tax Incentives for Income from the Use of Intellectual Property

If a taxpayer generates income from deposited copyright works (software, films, books, databases, etc.), related rights, or from granting rights in relation to an invention, such income may be eligible for tax relief under certain conditions.

From the total income generated, it is necessary to determine the amount of qualified income, of which 80% is excluded from the tax base.

Qualified income is calculated by reducing the total income from the exploitation of the deposited copyright work, related right, or invention during the tax period by the amount of qualified expenses, and then multiplying by the ratio of qualified expenses to the total costs incurred in connection with that copyright work, related right, or invention.

Qualified expenses are the total historical or current tax-deductible expenses related to R&D activities that resulted in the creation of the deposited copyright work, related right, or invention.

• Current tax-deductible expenses are those incurred during the period in which the qualified income is generated.

• Historical tax-deductible expenses (incurred before 31 December 2018) are determined as follows:

  • First tax period: 60% of total income from the deposited work, related right, or invention;

  • Second tax period: 40% of total income;

  • Third tax period: 20% of total income.

The Rulebook prescribes detailed records and documentation that must be maintained and submitted to the Tax Administration in order to claim the exemption.

Tax Incentives for New Employment

Planning to hire new employees? Do you meet the requirements for exemptions from wage tax and social security contributions for new hires?

If a company employs individuals previously engaged as entrepreneurs or other persons who were not in an employment relationship during 2019, it may be eligible for partial exemption from wage tax and pension contributions. This incentive applies if such individuals establish an employment relationship with the employer between 1 January 2020 and 30 April 2020.

The law prescribes the following schedule for using the incentives:

• 2020: 70% exemption from wage tax and 100% exemption from pension contributions

• 2021: 65% exemption from wage tax and 95% exemption from pension contributions

• 2022: 60% exemption from wage tax and 85% exemption from pension contributions

If you have any questions, speak with one of WTS’s tax experts.