Nestled in the heart of the Balkans, Serbia, with its population of approximately 7 million and a GDP of USD 51 billion, stands as a member of illustrious international organizations like the United Nations, the Council of Europe, the OSCE, and the WTO. Moreover, it proudly carries the torch of EU candidate status.
With the allure of Serbia’s promising future beckoning, it comes as no surprise that a growing number of expatriates are considering the prospect of residing, working, or conducting business within its borders. If you count yourself among them, a fundamental grasp of Serbia’s tax system and the corresponding tax rates is pivotal. International Wealth experts, ever committed to your financial well-being, are at your service to provide a comprehensive overview of Serbian tax rates and offer invaluable tips on navigating local tax obligations while optimizing your fiscal position.
Personal Income Tax – Deciphered
Personal Income Tax (PIT) is a levy targeting individuals with diverse income streams, encompassing employment, self-employment, capital gains, dividends, interest, royalties, rents, pensions, and other forms of earnings. The tax rates and taxable bases are intricately linked to the income type and the individual’s residence status.
Resident status is accorded to those individuals who either maintain their domicile or habitual abode in Serbia or spend a minimum of 183 days within its borders during a 12-month period. They are subject to taxation on their global income. Non-residents, on the other hand, grapple with taxation solely on income linked to their work in Serbia.
At its core, the standard personal income tax rate is fixed at a commendable 10%. However, exceptions and variations abound, contingent on the income type and amount:
- Employment Income: This is taxed at 10% of the gross salary, alongside obligatory social security contributions borne by the employer. These contributions comprise 14% for pension and disability insurance, 5.15% for health insurance, and 0.75% for unemployment insurance. The onus of withholding and remitting the tax lies with the employer.
- Self-Employment: For self-employed individuals, the tax amounts to 10% of net income post-allowable expense deductions. The obligation to pay social security contributions extends to self-employed persons, at rates spanning from 25.5% to 36%, contingent on their activity and status.
- Capital Gains Tax: Capital gains are subject to a 15% tax rate, calculated based on the difference between the sale and acquisition price of capital assets. Notably, capital losses can offset capital gains in the same period or be carried forward for up to 5 years.
- Dividend Tax: Currently fixed at 15%, this tax is levied on the gross amount received from domestic or foreign sources. The dividend payer assumes the responsibility of withholding and remitting the tax on behalf of the recipient.
- Interest Income: Expect a 15% tax rate on interest income, with regulations mirroring those of dividend tax.
- Royalties: In the realm of royalties, a 20% tax rate prevails.
Rents and pensions, too, bear their respective tax burdens in Serbia, with rates of 20% and 10%, respectively. Additionally, an annual supplementary tax targets individuals earning more than three times the average annual salary in Serbia. For comprehensive insights into these additional taxes, don’t hesitate to contact International Wealth consultants.
Corporate Income Tax
Corporate Income Tax unfurls its realm of influence across legal entities engaged in business activities in Serbia or equipped with a permanent establishment within the nation’s confines. The tax rate stands firm at 15% of the net profit, post-expense and loss deductions.
Dichotomies of residency status manifest themselves here as well. Resident legal entities comprise those established or wielding their effective management and control base in Serbia. Their tax obligation extends to profits originating from across the globe. On the flip side, non-resident companies are saddled with the responsibility of paying taxes on profits linked exclusively to their permanent establishment in Serbia. This establishment, defined as a fixed place of business, acts as a conduit for a non-resident entity to carry out its operations within Serbia.
Value-Added Tax (VAT) encompasses the taxation of goods and services in Serbia, in addition to the import of goods into the country. The standard VAT rate lodges at 20%, yet certain goods and services benefit from a reduced VAT rate of 10%. Among those enjoying this preferential rate are basic foodstuffs, medicines, medical devices, books, newspapers, hotel accommodations, public transportation, and utility services.
- The VAT system in Serbia follows the destination principle, dictating that the place of supply hinges on the customer’s location rather than the supplier’s. This signifies that Serbian suppliers conducting transactions with foreign customers render supplies subject to zero-rated or VAT-exempt status in Serbia. However, these transactions may fall under the purview of VAT in the customer’s country. On the flip side, foreign suppliers engaging Serbian clients will encounter VAT obligations in Serbia, potentially gaining exemption from VAT in their home nation.
- VAT liability predominantly rests with the supplier. In certain scenarios, the VAT obligation shifts to the customer, necessitating VAT accountability under the reverse charge mechanism.
Other Taxes: Exploring Additional Levies
Beyond the tax horizons described above, other taxes loom on the fiscal landscape in Serbia. These encompass excise duties, property taxes, and local taxes.
Excise Duties: This category of taxation is applicable to the production and import of specific goods, spanning oil derivatives, tobacco products, alcoholic beverages, coffee, electricity, bioliquids, and biofuels. The rate of excise duty fluctuates according to the nature and quantity of the goods.
Property Taxes: Individuals grapple with property taxes in Serbia if they either own, transfer, or inherit real estate and movable property. Tax rates oscillate in tandem with the property’s type, value, and the taxpayer’s status.
Local Taxes: Local governments wield the power to impose taxes on diverse activities and transactions within their territorial jurisdiction. These include city tax on hotel accommodations and city surcharges on property tax, among others.
Navigating the intricate Serbian taxation landscape, marked by a medley of taxes and rates targeting diverse income sources and economic activities, can be perceived as a formidable endeavor. For those envisioning Serbia as their new abode, prudent preparation and comprehensive tax education stand as fundamental imperatives. Seeking professional guidance in advance is sound advice, and the International Wealth experts are poised to furnish free recommendations on optimizing your tax position in Serbia while maintaining impeccable compliance.