Incentives and Reliefs
Incentives and Reliefs
Tax Reliefs
Apart from the fact that the corporate income tax rate of 10% is among the lowest in the region, the law anticipates a number of tax reliefs including tax exemptions, investment incentives, tax credits and accelerated amortisation.
- 1. Tax Exemption
For a 10 year period – Taxpayers are exempt from corporate income tax for a 10 year period if they, or another person, invest more than 600 million dinars (cca. 6 million euros) in fixed assets used in their business activity, providing that they hire not less than 100 permanent employees during the investment period. The right is achieved in proportion to the investment.
For a 5 year period - Taxpayers are exempt from corporate income tax for a 5 year period if they operate in an area of special interest to the Republic, providing that they, or another person, invest more than cca. 70 thousand euros in fixed assets, that they hire not less than 5 permanent employees during the investment period, that they use 80% of the fixed assets in a business activity in the area of special interest to the Republic and that not less than 80% of their permanent employees are domiciled in the area of special interest to the Republic and considered residents there. The exemption is granted in proportion to the investment.
- 2. Tax Credits
For investments in fixed assets – Taxpayers who invest in fixed assets for use in their business activity are eligible for a tax credit amounting to 20% of the investment. Such reduction can not exceed 50% of total annual tax liability for the tax year in which the investment was made.
Taxpayers – small enterprises are eligible for tax credits amounting to 40% of the investment, providing that such reduction can not exceed 70% of their total annual tax liability for the tax year in which the investment was made.
For hiring permanent employees – Taxpayers who hire new permanent employees are eligible for a corporate income tax reduction amounting to 100% gross salaries paid to the employees, increased by related payroll taxes and contributions paid from the employer’s funds. Unused part of a tax credit can be deferred to a future period corporate income tax account, but not longer than 10 years.
Eligibility for tax credits amounting to 80% of investment – Taxpayers who operate in one of the following sectors: agriculture, fishery, textile and clothing production, production, additional processing and colouring of fur and products thereof, production of basic metals, standard metal products, equipment and devices, office equipment and calculating devices, electrical equipment and apparatus, radio, TV and communication equipment, medical precision and optical instruments, motor vehicles, trailers and semi-trailers, other means of transportation, recycling, cinematography and video production are eligible for a tax credit amounting to 80% of investment in fixed assets for use in business activities, made in the tax year. This type of tax credit is approved without limitation in relation to tax liability for the tax year in which the investment was made, as well as for the following 10 years to which an unused tax credit can be deferred.
Two-year tax reduction – Taxpayers who achieve profit by a newly established business entity in insufficiently developed areas, are eligible for a two-year tax reduction proportionate to share of such profit in the total profit earned. A condition for obtaining such tax credit is separate accounting for such units.
- 3. Other Tax Reliefs
Eligibility for accelerated depreciation – Eligibility for accelerated depreciation with rates up to 25% higher than rates stipulated by the law, may be achieved for assets used for scientific research, employees’ education and training, energy saving, prevention of air, water and land pollution, use of secondary raw materials, as well as for IT equipment.
Fixed assets are divided into 5 categories, with different depreciation rates stipulated by the law:
• Category I – 2.5%
• Category II – 10%
• Category III – 15%
• Category IV – 20%
• Category V – 30%
Straight-line depreciation is stipulated for the first category, including immovable properties, while declining-balance method is used for the other categories.
Ten-year loss carry-forward – Loss from business can be carried forward for set off against income from business in the subsequent 10 years.
Concessional investment – Concessional investment income achieved by a concessionaire registered for running a concession business is exempt from corporate income tax for a period of 5 years after the day when such concessional investment is finalised. If a concession business, i.e. a concessionaire achieves profit before the concessional investment is finalised, he is exempt from income tax.
Tax-free payroll allowances – Payroll tax rate is 12%. Non-residents pay taxes only on income from sources in
• Reimbursement for transport expenses (between home and work), not higher than the cost of monthly ticket, and not exceeding RSD 2 000;
• Reimbursement for food expenses incurred when on business trips in the country, as well as per diem allowances for foreign destinations, in accordance with set rates;
• Reimbursement for accommodation expenses incurred during business trips, based on invoices;
• Reimbursement for transport expenses incurred during business trips, based on invoices, as well as reimbursement for use of private vehicles on official business, not exceeding RSD 3 500 a month;
• Solidarity allowances in case of illness, medical rehabilitation or physical impairment of employee or a member of his family, not exceeding RSD 20 000;
• New Year and Christmas gifts for employees’ children, not older than 15, in amount of RSD 5 000 per child;
• Employee bonus, max RSD 10 000 a year,
Non-taxable monthly personal income is RSD 5 000 (cca. 50€), for full time employee.
Payroll tax exemption for certain categories of employees – For hiring new permanent workers, the employer is exempt from payroll tax for a period of:
• 3 years: for interns aged under 30, registered with the National employment Agency, for people with disabilities;
• 2 years: for people under the age of 30, registered with the National employment Agency for at least 3 months, for people under the age of 45, registered with the National employment Agency for not less than 6 months or who receive social compensation.
Annual personal income tax reduction – Non-residents are exempt from personal income tax which is up to 5 times higher than the average annual income in
Annual basis for personal income tax is taxable income calculated as a difference between income and personal deductions in the amount of:
• for taxpayers - 40% of average annual income in the Republic, according to last officially published information
• for dependent family members -15% of average annual income in the Republic, according to last officially published
Avoidance of double taxation – When a taxpayer earns profit in another country, tax for which has already been paid in the other country, he is eligible for a corporate income tax credit in
Duty free import of equipment – The Foreign Investments Law (Official Gazette of the SRJ, 2002, articles 13 and 14), allows free import of equipment, other fixed assets and construction material for buildings which represent investment of a foreign person or an addition to their investment, in accordance with investment contract or memorandum of association.
Import of new equipment based on a foreign investment, except automobiles and slot machines, is exempt from import taxes and fees.
The right can be used in accordance with set investments timeline, until the end of construction works, i.e. until the business invested in goes into operation, and, if the investment is a case of reinvesting profits – during the term of the contract, i.e. decision.
Financial Incentives
- 1. Non-returnable Grants (
In accordance with a regulation passed in June 2007, by the Government of the
|
For investments in |
Total grants per newly created jobs |
Minimum investment |
Minimum number of new jobs |
|
Production |
2 000-5 000 € |
between 1-3 million €* |
50 |
|
Service industry |
2 000-10 000 € |
500 000 € |
10 |
|
Research and development |
5 000-10 000 € |
250 000 € |
10 |
* Depending on the unemployment rate in the municipality where the investment is being made
Grant timeline:
1. upon signing a sales contract or land rental agreement;
2. upon obtaining a building permit;
3. upon obtaining usage permit;
4. upon achieving full employment as planned by the investment project.
Investment project evaluation criteria:
1. Investor’s referrals,
2. Share of local suppliers and effect of the investment on productivity of other domestic companies in the same sector,
3. Sustainability / business durability,
4. Effects related to research and development,
5. Impact on human resources,
6. Environmental impact,
7. Volume of international trade,
8. Impact on local development, and
9. Local self-government support of the investment.
The applications are to be submitted to the Serbia Investment and Export Support Agency (SIEPA).
- 2. Subventions for Recruiting the Unemployed in AP Vojvodina
(Provincial Secretariat for Labour, Employment and Gender Equality)
The subventions for recruiting the unemployed are granted to employers – applicants who permanently hire full time employees registered with the National Employment Agency.
The subvention for new employees is granted in an amount of 100 000.00 dinars per employee.
Additional funds amounting to 30% of the subvention is granted to:
• employer who creates ten or more jobs;
• employer who creates jobs in undeveloped or underdeveloped municipalities in the APV;
• employer who recruits a person belonging to the disadvantaged groups in the labour market (under 30 years old, over 50, persons with disabilities, single parents, women from the villages, Roma, refugees and displaced persons and others as decreed by the Executive Council of APV);
• employer who recruits a person who used up their right to a financial compensation from the National employment Agency, and, in accordance with the Disability and Retirement Insurance regulations, is two years or less away from qualifying for age pension;
• employer who creates new jobs within enterprises registered in production and processing industry, service, craft or agriculture industry.
The subvention can not be granted to legal entities who are direct or indirect budget beneficiaries, nor to employees who have failed to fulfil a previous agreement with the National Employment Agency or with the Provincial Secretariat for Labour, Employment and Gender Equality.
The subvention can not be granted for hiring a person who has been previously employed by the same employer – the applicant or an affiliated entity, less than 6 months before the date of application.
Terms and conditions for applicants:
1. the employer must be headquartered in the AP Vojvodina;
2. the employer has not had a reduction in the employees count since 01 April 2009 and will not have any in the following two years, except in justified circumstances, in accordance with legislation;
3. the legal entity must be solvent;
4. the employer must not be undergoing bankruptcy or liquidation proceedings;
5. if the employer went through bankruptcy proceedings, a reorganisation plan has been adopted and fully implemented and he has successfully done business in the past 12 months or longer;
6. the employer who acquired a legal entity which has undergone bankruptcy or liquidation proceedings has run a successful business 12 months after the date of acquisition. Exceptionally, if the period is shorter, the employer must supply a bank guarantee.
7. if the employer is a newly established business entity in operation for less than 12 months, they must supply a bank guarantee;
8. the employer must have a clean record in paying social security contributions and other contributions and taxes;
9. the employer is hiring a person registered with the National Employment Agency;
10. the employer will select job candidates in cooperation with the National Employment Agency.
- 3. Financing Internships in AP Vojvodina
(Provincial Secretariat for Labour, Employment and Gender Equality)
The Provincial Secretariat stipulates funding employers recruiting interns with secondary, two-year post secondary and university education for a 12 month internship.
During the on-the-job training, the employer is eligible to receive a gross amount of 37 500.00 dinars for recruiting university graduates and a gross amount of 27 800.00 dinars for recruiting persons with secondary and two-year post secondary education. The amounts are the intern’s salary including taxes and contributions and they are payable to employers three months in advance, with appropriate guarantee, for a total of 10 months in course of a 12-month internship.
Eligibility:
1. Employers (entrepreneurs, legal entities and other organisations that are not direct nor indirect budget beneficiaries),
2. Employers who pay taxes and social security contributions regularly;
3. Solvent employers;
4. Employers who have fulfilled their previous contractual obligations with the Secretariat and National Employment Agency.
- 4. Subventions for Creating New Jobs (National Employment Agency)
The National Employment Agency (NEA) is granting subventions for creating 50 new jobs to recruit persons registered with the NEA. The amounts granted differ depending on municipalities where the jobs are created:
• 160 000.00 dinars in undeveloped municipalities,
• 130 000.00 dinars in underdeveloped municipalities,
• 80 000.00 dinars in other municipalities,
Priority in granting the aid is given to employers headquartered in undeveloped or underdeveloped municipalities, as well as to employers recruiting a person belonging to the disadvantaged groups in the labour market:
• people with disabilities
• Roma
• women over 45 years of age and men over 50
• long-term unemployed (listed in the NEA’s register for a period of not less than 12 months)
• refugees and displaced persons
• readmitted persons
• women
An employer can use the subvention only once a year.
Eligibility for the subvention:
1. the employees count has not been changed during the three month period preceding the month of application, with the exception of normal employee fluctuation;
2. a clean record in paying obligatory social security contributions for the preceding three month period;
3. applicant who has undergone bankruptcy proceedings has adopted and fully implemented a reorganisation plan and has successfully done business in the past 12 months or longer;
4. applicant who acquired a legal entity which has undergone bankruptcy or liquidation proceedings has run a successful business 12 months after the date of acquisition.
5. a person whose recruitment is the subject of application, who has previously been employed by the same employer – the applicant must have been listed as unemployed for a period of not less than 6 months.
- 5. Financing Retraining and Additional Training Programmes for Unemployed (National Employment Agency)
Apart from the subventions for creating new jobs, the NEA also finances retraining and additional training programmes for a certain number of unemployed persons, in accordance with employer’s requirements.
Retraining and additional training is tailored to employers’ needs in situations when none of the unemployed persons registered with the NEA have the professional competence and knowledge and skills required for the jobs offered by the employers.
Retraining/ additional training can be arranged:
• in accordance with employer’s internal programme
• combined, following both employer’s programme and educational institution’s programme
• in accordance with levels of education
Legal entities in the
- are registered with the Business Registers Agency,
- pay social security contributions regularly;
- have fulfilled their contractual obligations related to employer-tailored retraining and training programmes over the last three years (if the grants were used),
The NEA defrays on-the-job training costs (hourly cost of training is considered to equal employee’s salary per hour for the job for which the training is received), hiring external instructors/trainers and, depending on the programme, certificates, licences and similar. Maximum amount granted is 80 000 dinars per trainee.
- 6. Youth Recruitment Programme ‘First Chance 2010’ (National Employment Agency)
The programme entails a 3 month volunteer placement and a 12 month employment for on-the-job professional training.
By participating in the programme, the employer becomes eligible for:
- hiring required number of young people paid by the NEA in a monthly amount of 10 000 dinars on whose behalf the Agency also pays contributions for work related injuries and illnesses, in accordance with legislation;
- to arrange internship with a certain number of people who have completed volunteer internship;
- reimbursement for interns’ salaries, as follows: net salary in amount of 20 000 dinars for interns with university education, 18 000 dinars for interns with two-year post secondary or three-year university education, 16 000 for interns with secondary education, plus costs of obligatory social security contributions for all the categories.
Private-sector employers who are solvent, regular payers of social security contributions, have human and other recourses needed to perform professional training and unemployed persons, under 30 years of age, who are registered with the NEA, with secondary, two-year post secondary or university education, with no work experience, are eligible to apply for the programme.
NOTE: Programmes funded by the Provincial Secretariat for Labour, Employment and Gender Equality listed under 2. i 3. are not up-to-date.