serbia – business and taxation guide - praxity guides/tax guide - serbia.pdf · serbia operates...

1

1 Serbia – Business and Taxation Guide

Business and Taxation

Guide to

Serbia

2


Preface This guide was prepared by LeitnerLeitner Consulting d.o.o, Belgrade, Serbia in January 2012. LeitnerLeitner has offices in: Vienna Linz Salzburg Sarajevo Zagreb Budapest Bucharest Bratislava Belgrade Ljubljana.

The Serbian Praxity Participant firm is: LeitnerLeitner Consulting d.o.o, 23 Resavska Street, Belgrade, Serbia Tel: +381 11 655 51 05 Fax: +381 11 655 51 06 Email: [email protected] Website: www.leitnerleitner.com Developments in tax legislation are rapid. The information given in this guide reflects the tax legislation as of January 2012. Before taking specific decisions, it’s recommended that professional advice and guidance be sought. This guide provides a brief overview. More detailed information on matters discussed in this publication can be obtained from the persons responsible for the tax and advisory service areas within LeitnerLeitner in Serbia: Rene Schöb, Partner - [email protected] © Praxity 2011 This guide is intended as a general guide only and should not be acted upon without further advice.

mailto:[email protected]

http://www.leitnerleitner.com/

mailto:[email protected]

3


Contents Page 1. General information 4

1.1 Opportunities and possible obstacles for foreign investors 1.2 Area and population 1.3 Government and law 1.4 Key economic indicators 1.5 Securities Act 1.6 Antitrust considerations 1.7 Immigration Act 1.8 Currency

2. Regulation of foreign investment 8 3. Government incentives 9 4. Business organisations available to foreigners 10

4.1 Joint Stock Company 4.2 Limited Liability Company 4.3 Partnership 4.4 Sole proprietorship

5. Setting up and running business organisations 12 5.1 Process for establishing a business

5.2 Labour laws 5.3 Accounting and auditing principles

6. Corporate taxes and social charges 14 6.1 Incorporation 6.2 Corporate income tax

6.2.1 Taxable corporate entities 6.2.2 Foreign company not engaged in a trade or business in Serbia 6.2.2 Foreign company engaged in a trade or business in Serbia 6.2.4 Domestic corporation 6.3 Tax rates 6.3.1 Sale of capital assets 6.3.2 Depreciation or amortisation 6.3.3 Losses 6.3.4 Intercompany dividends 6.4 Tax payment and filing of returns 6.5 Group taxation

6.6 Tax credits 6.6.1 Foreign tax credit 6.6.2 Other credits

6.7 State and local taxes 6.8 Withholding tax 6.9 Corporate liquidations or distributions 6.10 Social security

7. Personal taxation 18

4


7.1 Residents and non-residents 7.2 Income

7.2.1 Annual personal income tax 7.3 Real estate and gift taxes 8. Double taxation agreements 20 8.1 Withholding tax rates 9. Sales and use taxes 21 10. Portfolio investment for foreigners 22

10.1 Cash investments 10.2 Real estate investments

10.3 Securities 11. Trusts 23 12. Practical information 24

12.1 Transport 12.2 Language 12.3 Time relative to Greenwich Mean Time (GMT) 12.4 Business hours 12.5 Public holidays

5


1. General information 1.1 Opportunities and possible obstacles for foreign investors Some of the key attractions for foreign investors in Serbia include: Access to a market of 7 million citizens Bordering the core European Union, and within a growing Eastern European market Investment incentives Skilled and competitive workforce Multilateral and bilateral conventions, significantly reducing or eliminating export/import

costs. The following aspects may require careful consideration by a foreign investor and may, in some circumstances, be regarded as investment drawbacks or possible obstacles: Certain political instability Strong bureaucracy in a number of business sectors Anti-trust regulations, which prevent dominance in a particular market Detailed monitoring of foreign exchange activities Lack of regulations in certain sectors, which sometimes completely block business activities.

1.2 Area and population Serbia lies in South-eastern Europe, surrounded by ex-Yugoslav countries of Croatia, Bosnia and Herzegovina, Montenegro, Macedonia, and the EU member states of Romania, Bulgaria and Hungary. Serbia has also mutual boundaries with Albania. The total land area of the country is 77,474 sq km. The country's climate is predominantly continental, whilst in southern parts the climate is more Mediterranean. Serbia’s population is approximately 7.5 million. The most densely inhabited cities are Belgrade, Novi Sad, Nis, Kragujevac. 1.3 Government and law Serbia operates within the framework of a parliamentary republic, with the Serbian Government exercising its powers through three independent branches. The Prime minister is the head of government. Executive power is exercised by the government. Legislative power is vested in the National Assembly of Serbia. The Judiciary is independent of the executive and the legislature. In addition, many federal agencies have regulatory powers over specific industries or activities. Businesses are also subject to local municipal laws. All state and agency laws and regulations are subject to judicial review, which is exercised if an individual or business entity to which the statute has been applied brings suit to contest its validity. The judicial courts are divided by territorial and case competence.

6


1.4 Key economic indicators

The average growth of Serbia's GDP in the last ten years has been 4.45% per year. Serbia's primary industries include processing of base metals, furniture, food processing, machinery, chemicals, sugar, tyres, clothes and pharmaceuticals. 1.5 Securities Act The principal Serbian statute regulating securities transactions is the 2011 Capital Markets Act. This Act regulates the issuing of securities and trading on the stock market. According to the Capital Markets Act, a domestic corporation that proposes to make a public offering of its own securities must usually register with the Securities Commission (SC). A prospectus containing detailed and complete disclosure of all data required by the law pertinent to the offer must be filed and must receive SC approval before the new stock issue can be marketed. In addition, periodic public reporting is generally required of every publicly held corporation.

1.6 Antitrust considerations The acquisition of an interest in the assets or stock of a Serbian company, whether publicly or privately held, and whether or not affected by merger with an existing or new corporation, must involve consideration of Serbian antitrust laws. The antitrust laws apply to persons engaged in the Serbian market, including acquisitions involving two wholly foreign parties where such transactions may affect the competition in Serbia. The statute applied is the Act on Protection of Competition. The regulatory body in Serbia is the Competition Commission. A notice of the acquisition, along with supporting documents, must be submitted prior to the transaction. If the antitrust standards are violated, no concentration, i.e. acquisition, will be allowed. 1.7 Immigration Act Serbian immigration laws make a distinction between aliens (foreign individuals) from abroad as either non-immigrants or immigrants. Non-immigrants are foreign persons who enter the country for a temporary purpose. Immigrants are for persons who have obtained permission to live and work in Serbia permanently. In principle, an immigrant enjoys the same rights, privileges and responsibilities as a Serbian citizen, except for the right to vote and hold certain government positions. Providing that local law or international conventions does not prohibit a foreign individual from entering Serbia, they may apply for one of the following visa types: C Visa – issued for shorter tourist, business and other visits. With a C visa, a foreign person

can stay up to 90 days during a period of six-months in Serbia. D Visa – issued for temporary residence when the foreign person intends to reside in Serbia

more than 90 days and in cases when temporary residence is required by Serbian legislation, for example employment in Serbia, education, family matters etc.

7


1.8 Currency The monetary unit used in Serbia is the Serbian Dinar, represented by RSD. One Dinar is divided into 100 paras.

8


2. Regulation of foreign investment Serbia does impose controls on foreign currency exchange and foreign currency operations. The control over operations concerning foreign currency relates to reporting obligations to the National Bank of Serbia. Nonetheless, a foreign investor or exporter is not restrained from repatriating the capital or profits generated from a Serbian business or investment, subject to any withholding tax required by Serbian law, modified as appropriate by a double taxation agreement. However, such transactions require reporting to the National Bank of Serbia in the first instance, as well as to the Ministry of Finance and the Customs Office. In accordance with the Serbian Foreign Exchange Operations Act and by-laws, anyone can physically transport monetary funds with a value of up to € 10,000 into or out of Serbia on a single occasion, without any reporting. Funds in excess of € 10,000 can be transferred abroad only by means of a bank transfer, with the supporting documentation providing evidence of the reason for the transaction. ’Monetary funds’ include coins or currency of any country, bank cheques, traveller’s cheques, or investment securities that exist in bearer form (material form). The Serbian Government restricts (but does not prohibit) foreign investments in certain sectors, such as broadcasting, defence, audit business etc. Despite these statutory controls, the Serbian policy towards foreign investment is basically open, as it has traditionally been in the past. In addition, many of the restrictions placed on the foreign investor can be prevented or eliminated through the creation of a Serbian entity incorporated under the laws of Serbia.

9


3. Government incentives In addition to Serbian tax incentives for business investment, enterprises may benefit from a limited number of government assistance programmes. Government employment programmes, loans, etc. are available to foreign as well as domestic investors. Eligibility conditions differ for each programme, so the responsibility rests with the investor to obtain detailed information about the desired programme and the individual conditions that apply. Further information can be obtained from www.siepa.gov.rs 11

http://www.siepa.gov.rs/

10


4. Business organisations available to foreigners

For foreign investors seeking to initiate commercial activities in Serbia, several legal forms of business entities are recognised, the main ones being: Joint Stock Company Limited Liability Company Partnership (general or limited) Sole proprietorship.

4.1 Joint Stock Company A Joint Stock Company is a legal entity separate from the shareholders who create it, in which registered capital is divided into shares. Because a corporation is an independent entity, its shareholders are not generally liable for corporate debts. In principle, ownership in the corporation (the shares) may be transferred only on the stock exchange. One or more directors, elected by the shareholders, oversee and govern the Joint Stock Company. 4.2 Limited Liability Company Limited liability companies (LLCs) are incorporated legal entities, in which shareholder liability for debts of the corporation is limited to the amount of the subscribed share capital. For example, the shareholders own a certain percentage of equity interest. The stake in an LLC is freely transferable, not requiring trade in the stock exchange. Like corporations, investors in an LLC are generally not personally liable for the debts of the LLC. Shareholders of a Serbian LLC are always listed in the company register. 4.3 Partnership A partnership is a legal entity held by two or more individuals or business entities. The partnership is not tax transparent. This means profits of the partnership are first taxed at the level of the entity, and then again at the level of the partners. General partners of the partnership are fully liable for the obligations of the partnerships. Limited partners only bare the risk of their investment into the partnership, not full liability for the partnership's operations. A limited partnership must have at least one general partner whose liability is unlimited and one limited partner whose liability is limited. In contrast to shares of a corporation, which are freely transferable unless limited by contract, a partner cannot transfer his or her partnership interest freely to a recipient and make them a member of the partnership. In order for such a transfer to take place, the partner needs the consent of all remaining partners.

11


4.4 Sole proprietorship A sole proprietorship is a basic form of business activity in Serbia and applies to an individual carrying out a business, usually small. This individual faces unlimited liability in relation to the firm's creditors. As a general rule, an individual sole proprietor must register his or her business. The income of the proprietorship qualifies as the individual’s personal income, meaning it’s not subject to a separate tax. The individual is responsible for reporting and paying tax on their personal income tax return.

Any individual, regardless of citizenship, who has the capacity to contract (not underage or suffering from a disability), may register as a sole proprietor. The business is terminated upon the death or disability of its owner or deregistration from the relevant registry.

12


5. Setting up and running business organisations

5.1 Process for establishing a business The structure, legal status and rights of all Serbian legal entities are similar. In accordance with Serbian legislation, joint stock companies, limited liability companies, limited and general partnerships have their own legal personalities and are regarded as legal entities. Serbia offers relatively flexible incorporation procedures. A company formed in Serbia is free to do business locally and abroad, unless the business requires a special government license or franchise, for example a bank or broadcasting company. A company is formed by filing Articles of Incorporation with the Business Registers Agency, along with other required documentation and the applicable filing fees. The Articles are prepared by or for the corporations’ founders. The Articles describe its business purpose, proposed capital structure, shareholder rights and other aspects stated in the Enterprise Act. A company generally exists for a perpetual duration until it is dissolved by governmental act or a majority vote by the shareholders. A legal representative is generally not required to be present in Serbia. There is no requirement the company maintains a business office, operations or employees. The rules which govern the manner by which corporate business is conducted are established by the shareholders in the corporate charter and by-laws. In Serbia, these rules are supplemented by state law, which contains both mandatory and elective provisions relating to shareholder rights. Mandatory statutes override any contrary provision in the corporate charter or bylaws (elective provisions very often will govern the categories or rights upon which the corporate charter is silent). Therefore, some degree of familiarity with the laws of Serbia is desirable for the prospective incorporator. The director or directors, elected by the shareholders, set corporate policies, manage the business and represent the company. Major alterations in corporate structure, such as mergers or liquidation of corporation assets, can only be undertaken with shareholder approval. 5.2 Labour laws The Serbian Labor Act, the primary source of labour and employment law policy, guarantees an employee the right to:

Form, join or assist labour organisations A salary Paid sick leave Paid holiday and Other benefits arising from an employment relationship.

13


The government establishes the minimum wage rate paid to employees. In addition, the Labor Act sets the normal work week at 40 hours. Employees working in excess of 40 hours per week must be financially compensated for their overtime. There is no exception to overtime work, which means the same rule that applies to workers also applies to executives. Establishment of the terms, conditions or privileges of employment, including the decision to hire and the setting of compensation, on the basis of ethnicity, colour, religion, gender, national origin, age, disability or genetic information, is prohibited by law. In addition, health and safety conditions in the workplace are governed by the Labor Act and by-laws. 5.3 Accounting and auditing The Serbian Accounting and Auditing Act forms the basic piece of legislation for this matter. Basic financial statements include balance sheets, statements of income (profit and loss), statements of cash flows and statistical annex (the official terms for addendum to the financial statements). The basic accounting principles used in the financial statements is IAS and IFRS. In general, significant departure from generally accepted accounting and reporting principles must be disclosed in the auditor’s report. The responsibility of preparing financial reports rests with the management of the enterprise. Large companies are required to have annual financial statements audited by independent auditors. In Serbia, an external auditor must be a certified auditor and a member of the Chamber of Auditors. Many other enterprises with shareholders (other than management), or requiring financing from financial institutions, have their financial statements audited annually by a certified auditor.

14


6. Corporate taxes and social charges

Income tax planning is an important part of the investment strategy for a foreign investor. 6.1 Incorporation No tax is levied on a company or its shareholders when capital contributions of cash or other property are made to a new company in exchange for company's capital stock. According to the wording of the Serbian law, no capital gain is recognised where appreciated property is transferred to a company against capital stock. However, according to the (unbinding) interpretation of the Ministry of Finance, gain is recognised if the value of the transferred asset at the moment of contribution is higher than its acquisition value. 6.2 Corporate Income Tax 6.2.1 Taxable corporate entities The Serbian tax system distinguishes between a domestic company, organised and established in Serbia, from a foreign company, organised and established abroad. A domestic company is taxed on its worldwide taxable income. A foreign company, however, is generally taxed only on its Serbian sourced income, either generated by its permanent establishment, or from passive investment (dividends, interest, royalties, income from real estate etc). A foreign corporate investor may operate in Serbia in one or more different ways, each of which carries individual tax implications: The acquisition of Serbian property without actively engaging in a Serbian based trade or

business The establishment of a Serbian branch office, which will conduct an active business The establishment of a subsidiary, organised and meeting the laws of Serbia.

6.2.2 Foreign Company not engaged in a trade or business in Serbia A foreign company not actively engaged in a trade or business in Serbia is subject to tax on its passive investment income derived from Serbian sources. This income is subject to a withholding tax at a rate of 20%, or a lower rate if a double taxation agreement applies. The payer of the income withholds the tax before payment is made to the foreign company, and this tax is remitted to the Serbian government. No income deductions are allowed and the entire amount is taxed at the applicable rate. Income subject to the 20% withholding tax includes interest, dividends, rents, royalties and capital gains. 6.2.3 Foreign Company engaged in a trade or business in Serbia A foreign company is taxed at the same rates as domestic companies on all taxable income which can be attributed to a Serbian branch of the foreign company.

15


Profits attributed to the branch, for example a permanent establishment in Serbia, will be subject to 10% Corporate Income Tax. No remittance tax is imposed on the withdrawal of income for the permanent establishment to the parent company abroad. 6.2.4 Domestic corporation Corporate gross income is determined as gross profits from sales or services, dividends, interest, rents and royalties and capital gains and losses. Taxable income is determined as gross income less all allowable deductions. 6.3 Tax rates Tax is calculated on the annual taxable income of a company at the rate of 10%. A controlled group of companies is subject to the same tax rate. 6.3.1 Sale of capital assets Sale of capital assets, such as shares, capital stock, other securities, real estate, industrial property rights and similar will potentially result in a taxable capital gain. The capital gain is defined as the difference between the sale price and the acquisition price of the asset. The difference is subject to 10% tax. The 10% tax on capital gain is always due, even if the company has operational losses in the respective year. Capital gains can only be offset against capital losses from the current year or any available losses from the previous year. The Serbian Corporate Income Tax Act allows capital loss carry forward for a maximum period of five years. No capital loss carry-back is allowed. 6.3.2 Depreciation or amortisation Fixed, depreciable assets are material goods, with a lifespan longer than a year and in which the acquisition value at the moment of purchase exceeds the average monthly salary in Serbia. Fixed assets also include intangible assets, with the exception of good-will. Depreciable goods are divided into five amortisation groups with appropriate depreciation rates:

I group - 2.5% II group - 10% III group - 15% IV group - 20% V group - 30%

Assets from the first group (real estate) are depreciated proportionally, whilst assets from other groups are depreciated by application of the declining method. If the acquisition or production cost of a single asset does not exceed the average monthly salary in Serbia, the total costs may be deducted in the year of acquisition or production. 6.3.3 Losses According to the CIT Act, which applies to entrepreneurs, a tax loss may be carried forward and offset against future profits by reducing the tax base in the following five years. Losses from the sale of immovable property and proprietary rights (capital losses) may be offset only against income of

16


the same kind (capital gains). If capital losses remain, they can be carried forward and offset with future capital gains, but for no longer than five years. 6.3.4 Intercompany dividends Intercompany dividends between two Serbian companies are tax exempt. Dividends paid by a Serbian company to its foreign parent company, are subject to 20% withholding tax, or a reduced tax rate, depending on whether a DTT can be applied. 6.4 Tax payment and filing of returns Every Serbian company is required to file an income tax return. Returns must be filed by 15 March for the previous tax year. A company is also required to make advanced tax payments, which may be based on the current year’s projected taxable income or on the previous year’s tax liability. This must be paid monthly. Interest is charged on any tax not paid by the due date. 6.5 Group taxation In general, each corporate entity is regarded as a separate entity for income tax purposes. Serbian companies may opt for group taxation. Foreign companies cannot participate in the tax group. A tax group, in terms of the Serbian CIT Act, exists for when there is a direct or indirect control of at least 75% shares or equity interest between the parent company and its subsidiaries. In Serbia, the benefits of group taxation assume that the losses of one or more group members from the respective tax period can be deducted from income of other group members from the same tax period. Group taxation, once granted by the tax authorities, must apply for the next five years. 6.6 Tax credits 6.6.1 Foreign tax credit A domestic company can utilise tax paid abroad to reduce its tax liability in Serbia. In summary, a Serbian resident company holding at least 25% of equity interest in a foreign subsidiary for a period of 1 year preceding the submission of the tax balance, can utilise the income tax paid by its subsidiary abroad and any potential withholding taxes to reduce its Serbian income tax. Any foreign paid tax not utilised can be carried forward and credited against calculated Serbian income tax in the next five years. No carry back is available. 6.6.2 Other credits In general, all taxpayers who invest in business assets can use 20% of the investment made during the year and offset it against up to 50% of calculated tax in this year. Tax payers regarded as small enterprises may utilise 40% of the investments and offset it against up to 70% of the calculated corporate income tax. Any excess tax credits can be carried forward and offset against future income for 10 years. No carry back is allowed. 6.7 State and local taxes

17


Apart from corporate income tax, VAT, personal income tax and potentially property taxes, a taxpayer has to pay local taxes, i.e. fees. The local fee due to the municipality where the taxpayer resides includes a company name display fee and a city construction land fee. 6.8 Withholding tax Payments made to a foreign investor as dividend, interest, royalties, capital gain, income from units in investment funds, income from entertaining, cultural, sport and similar activities and leasing of movable and immovable property are generally subject to a withholding tax of 20% on the gross amount of the payment. This may, however, be reduced by a double taxation agreement. 6.9 Corporate liquidations or distributions In general, appreciated property distributions by a corporation to its shareholders are subject to corporate income tax on any appreciation. This includes distributions as dividends and in liquidation. 6.10 Social security Employers are required to withhold Social Security Contributions from wages paid to employees and pay a ‘matching’ contribution from its own funds. The Social Security Contributions due by both employee and employer amount to 17.9%. The aggregate amount of 35.8% of Social Security Contributions is due on salaries, which amount to five times the average monthly salary in Serbia. Social Security Contributions are capped at this base rate for calculation, which means all salaries in excess of five times the average monthly salary in Serbia is not subject to any additional contribution.

18


7. Personal taxation 7.1 Residents and non-residents According to the Serbian Personal Income Tax Act, a resident is considered to be a person who: Has their habitual place of living or centre of vital and business interest in Serbia Resides in Serbia, with interruptions or continuously, more than 183 days during a 12 month

period, which starts or ends in a tax year in question. All persons not falling within this definition are regarded as non-residents. Residents pay income tax on their worldwide income, whilst non-residents pay Serbian personal income tax only on income sourced in Serbia (subject to applicable tax treaties). 7.2 Income The Serbian personal income tax system is cedular. This means that all income is taxed by a specific income tax rate by withholding. Personal income tax is assessed by the Tax Administration, in cases where the taxpayer is obliged to submit a tax return. In principle, Serbian tax law does not provide for deductions of actual expenses from the gross income. Instead, fixed expenses are prescribed by the Personal Income Tax Act for certain types of income. The following income is subject to taxation: Income from entrepreneurship Income from salaries Income from agriculture and forestry Income from intellectual property rights and copyrights Income from capital Income from real estate Income from capital gains Other income.

Both resident and non-resident individuals pay tax on the above types of income. If the annual income of a resident person exceeds a certain amount, the resident tax payer has to pay annual personal income tax. 7.2.1 Annual personal income tax In accordance with the Personal Income Tax Act, resident individuals who generate an annual taxable income in excess of three times the average annual salaries paid in Serbia pay annual personal income tax. The taxable base is calculated by deducting taxes and social contributions paid during the year from the gross annual income. In addition, a taxpayer has the right to claim the following deductions:

Personal deduction - 40% of the average annual salary paid in Serbia Deduction for supported family members - 15% of the average annual salary paid in Serbia.

19


The aggregate total of deductions cannot be higher than 50% of the taxable income. Annual personal income tax rates are progressive:

10% on the amount of up to 6 times the average annual salary paid in Serbia 15% on the amount above 6 times the average annual salary paid in Serbia.

7.3 Real estate and gift taxes Ownership of real estate triggers an annual property tax in Serbia. Every natural and legal person that owns real estate in Serbia, irrespective of residence, is liable to pay annual property tax. The taxable base is the market value of the real estate as of 31 December in the preceding year to the year in which the tax is being assessed. The tax rates are: Up to 0.4% for taxpayers maintaining business books Up to 2% for taxpayers that don’t have business books.

Transfer of goods without consideration is subject to gift tax, providing the same transfer is not subject to VAT. The taxable base is the market value of transferred goods, and the tax rates are 1.5% and 2.5%, depending on the relationship between the benefactor and beneficiary. The lower tax rate applies to the benefactors’ immediate family members.

20


8. Double taxation agreements Serbia has entered into various agreements with foreign governments to avoid double taxation on the same income. Benefits under an agreement can generally be obtained only if the person or entity is a qualified resident of one of the treaty countries. Most agreements offer a reduction in the normal 20% Serbian withholding rate for dividends, interest and royalties received by a person or an entity resident in the treaty country. State and local government taxes are usually not covered by the agreements. In general, Serbian tax treaties follow the Organisation for Economic Co-operation and Development model convention. 8.1 Withholding tax rates Withholding tax is generally applied at a rate of 20% (unless a lower rate is available by a DTT agreement). This is applied to Serbian sourced income paid to a non-resident person or foreign corporation from: dividends, interest, rents, industrial or copyright royalties income from entertainment, cultural and sports events held in Serbia lease of movable and immovable property.

The withholding tax is applied to gross income, without allowance for deductions. 32

21


9. Sales and use taxes The Serbian VAT Act imposes VAT on supply of goods and services in the territory of Serbia. The VAT is generally imposed on the buyer or ultimate user of tangible personal property. The seller is generally responsible for collecting and remitting the tax to the state. VAT is imposed on sales in Serbia and import to Serbia. Exports from Serbia are not subject to VAT

The standard VAT rate in Serbia is 18%.

A reduced VAT rate of 8% applies to:

Bread, milk, flour, sugar, edible sunflower, maize, rape, soybean and olive oil, edible animal and vegetable fats; fresh and frozen fruits and vegetables, meat, fish, and eggs

Medicines included in the list of medicines sold on prescription; orthotics and prosthetics, as well as medical products that are surgically implanted; dialysis materials

Fertilisers, pesticides, seed stock, nursery stock and complete fodder mixtures for animal feeding

Textbooks and teaching aids; daily newspapers; monographs and serial publications Firewood Accommodation in hotels, motels, resorts, recreation centres and camps Utility services Natural gas delivered to individual producers through the gas distribution network.

Any business with an annual turnover that exceeds 4 million Dinars in 12 months (or whose owner, at the beginning of their business estimates that the business turnover will exceed that amount) must register as a VAT taxpayer.

22


10. Portfolio investment for foreigners 10.1 Cash investments Foreign corporations and individuals can deposit monetary funds in Serbian banks and benefit from generally high interest rates for savings. The withholding tax on income from interest is 20% for corporations, subject to a potentially lower tax rate from an applicable tax treaty. A tax treaty can also eliminate the taxation of the interest by withholding. The withholding tax on income from interest is 10% for individuals, in situations when foreign currency is deposited to savings accounts. This tax rate may also be reduced or eliminated by an applicable tax treaty. Interest paid to individuals on deposits in the local currency is tax exempt under local tax legislation. 10.2 Real estate investments Foreign persons can invest in Serbian real estate under reciprocal arrangements. Since the acquisition of land is restricted for foreigners, the usual channel for foreign persons to acquire real estate is through a special vehicle, i.e. through a company incorporated in Serbia. Income from the lease of real estate is taxed as business income (corporations) or income from lease of real estate (individuals). Capital gains, which can be generated in Serbia, are also subject to local taxation. No tax treaty can reduce or eliminate tax liabilities from real estate income generated in Serbia. 10.3 Securities Foreign persons can invest in securities listed on the Serbian stock exchange. Income from securities is subject to tax in Serbia. However, a favourable tax treaty provision can eliminate the taxation of capital gains generated from the sale of Serbian securities.

23


11. Trusts The Anglo/American concept of trusts does not really exist in Serbia and Serbia does not recognise the concept of tax transparency.

24


12. Practical information 12.1 Transport Ground transport is the most important means of passenger transport between the main centres in Serbia. 12.2 Language Serbian is the official language in Serbia. Serbian is written in both Cyrillic and Latin alphabets. 12.3 Time relative to Greenwich Mean Time (GMT) Serbia is in the Central European Tome Zone, which means it is one hour ahead of GMT between the end of October and the end of March and two hours ahead between the end of March and the end of October. 12.4 Business hours Business in Serbia is normally conducted during an eight-hour day, with offices typically open between 9.00am and 5.00pm. Most business offices are closed on Saturday and Sunday. 12.5 Public holidays The holidays observed by most businesses and government offices are: New Year’s Day – 1-2 January Orthodox Christmas –7 January 7 Republic Day – 15 and 16 February Orthodox Good Friday – Friday as per church calendar Orthodox Easter – as per church calendar Orthodox Easter Monday– as per church calendar Labour Day– 1 and 2 May Armistice Day– November 11 and 12

serbia – business and taxation guide - praxity guides/tax guide - serbia.pdf · serbia operates...

Documents