Changes to the Serbian Corporate Income Tax Law came into effect on January 1, 2019.
One of the incentives introduced is the abolishment of the 10% limit on the deductibility of advertising and promotional expenses recognized as expenses in the tax balance sheet.
Another significant incentive is that a double deduction of costs directly associated with research and development in Serbia is now allowed.
Furthermore, an 80% exemption from the tax base for income from royalties paid to the holder of intellectual property or similar right, or of rights linked to inventions, is now allowed.
Additionally, a taxpayer making cash investments in equity of a newly founded company involved in innovation activities is entitled to a tax credit of 30% of the investment made. The tax credit may be used 3 years after an investment was made.
Depreciation of fixed assets for tax purposes is calculated for each asset separately using the proportional method and a base consisting of the cost of the asset, applying the following rates:
- group I – 2.5%;
- group II – 10%;
- group III – 15%;
- group IV – 20%; and
- group V – 30%;
and if the amount of depreciation calculated according to tax rules is higher than depreciation for financial reporting purposes, depreciation for financial reporting purposes is deducted as depreciation expenses for tax purposes. In exceptional cases, investment properties measured at fair value (which are not depreciated for financial reporting purposes) are depreciated for tax purposes at the rate of 2.5%.
Serbian companies should carefully review their depreciation calculation approach to evaluate compliance. Additionally, R&D companies are advised to seek professional assistance in determining the benefits available to them from the new legislation.