DOO Taxes in Serbia: Profit, Dividends, VAT, Payroll

A Serbian company pays four groups of taxes: corporate profit tax, withholding tax on dividend payments, value added tax (PDV) and payroll taxes with contributions. The rates are on the whole below the European average, and for IT companies and developers of their own products there are reliefs that lower the effective burden further still. Below is what a DOO pays, how much and when, with guidance on deadlines.

Corporate profit tax: 15%

The corporate profit tax rate (porez na dobit pravnih lica) is 15%. The base is accounting profit adjusted under the rules of tax law: some expenses are not recognized (entertainment above the limit, fines, part of depreciation), and some income is exempt. The tax period coincides with the calendar year unless the company has chosen a different one.

The tax is paid in monthly advances, by the 15th, based on the previous year’s tax; for a new company the advances are calculated from the estimate in its first return. The annual PDP return is filed within 180 days of the end of the tax year — for a calendar year, that means the end of June. At the same time you pay the difference between the advances and the actual tax, or an overpayment arises.

Dividends and taking profit out

When dividends are paid to an individual — resident or non-resident — the company withholds 15% tax at source. The resulting burden if all profit is distributed: 15% at company level, then 15% on the remaining 85%, that is around 27.75% in total. Dividends between Serbian companies are not taxed; dividends paid to a foreign parent company are taxed at 20% unless a double taxation treaty provides for a lower rate.

Serbia has treaties with most European countries, as well as with Russia, Belarus, Ukraine, Kazakhstan, China and others. To apply a reduced rate, the recipient provides a certificate of tax residency. For an individual owner living in Serbia on a residence permit who has become a tax resident, double taxation is resolved by declaring worldwide income in Serbia with a credit for tax paid abroad.

VAT: 20% and 10%

The standard rate of VAT (porez na dodatu vrednost, PDV) is 20%, and the reduced rate is 10% (food, medicines, utilities, books, hotel services and a number of others). Registration as a payer becomes mandatory once revenue exceeds 8,000,000 dinars over the previous 12 months; below the threshold registration is voluntary.

Exported services to foreign companies are as a rule not subject to Serbian VAT — the place of supply is deemed to be the recipient’s country. So an IT company working exclusively for clients abroad, once registered for VAT, can recover input tax on rent, equipment and services without charging PDV on its own revenue. The flip side is monthly or quarterly PP PDV returns by the 15th, mandatory use of the electronic invoicing system (SEF) and electronic VAT records within it.

Payroll taxes and contributions

An employee’s salary is subject to 10% income tax withheld (after deducting the tax-free minimum, which is indexed annually) and contributions borne by the employee: 14% pension insurance, 5.15% health, 0.75% unemployment. On top of the gross amount the employer pays 10% pension and 5.15% health. In total the burden on a salary comes to around 60% of the net figure: for an employee to receive 1,000 euros in hand, the company spends roughly 1,600 euros.

Contributions are charged on a base no lower than the minimum and no higher than the maximum, both of which are revised annually. The calculation of taxes and contributions is filed electronically on form PPP-PD before the salary is paid, and payment is made at the same time as the salary. We have described how to take someone on and what else goes into an employer’s costs in our article on hiring into a Serbian company.

A director without a salary

The director of a DOO must have a formal basis for working: either an employment contract or an agreement on the rights and duties of the director without an employment relationship. In the second case there may be no salary, but the company still pays pension contributions on the remuneration, and where there is none, on the minimum base, unless the director is insured on other grounds (for example as an employee of another Serbian company). A complete absence of contributions for the director is treated by the tax authority as a breach, and by the Ministry of the Interior as a sign of an inactive company when a residence permit is renewed.

Reliefs worth knowing about

• IP Box: 80% of income from the use of your own intellectual property (software, patents) registered in Serbia is excluded from the base — the effective rate on such income is around 3%.
• R&D: research and development costs incurred in Serbia are recognized at double their amount.
• Startups: innovative companies granted startup status enjoy an exemption from part of the payroll taxes and contributions for their founders for a limited period.
• Investment in startups: a tax credit of 30% of a capital contribution into an innovative company.
• Newly attracted specialists: a reduced base for income tax and contributions for qualified foreigners and returning citizens taking up their first employment in Serbia.

Every relief comes with conditions and requires documentary support — an assessment of R&D costs, IP registration, status in the startup register. They are best applied with an accountant who puts everything in place before the year ends rather than while preparing the return. What such support covers is set out on our accounting for Serbian companies page.

Withholding taxes and transfer pricing

On payments to non-residents for royalties, interest and certain services the company withholds 20% tax at source, and 25% on payments into preferential tax jurisdictions. Double taxation treaties reduce the rate where a residency certificate is available. Transactions with related parties — for example services from the owner’s company in another country — fall under transfer pricing rules: a report is attached to the annual return, in short form for small amounts and in full for large ones.

Property tax and local charges

A company that owns real estate in Serbia pays an annual property tax at a rate set by the municipality within statutory limits; a return is filed when the property is acquired, after which the tax is assessed by decision and paid quarterly. A company renting an office does not pay this tax. The local signage charge (firmarina) is in most cities either not levied on micro and small companies or is nominal, but it is worth checking your own municipality’s decision — it is published annually.

The annual payment calendar

For a small company the Serbian tax system is straightforward: two rates of 15%, VAT following standard European logic and predictable payroll costs. The difficulty is not in the rates but in the discipline of deadlines and in claiming reliefs correctly. If you are planning a structure with several companies or payments abroad, the legal side is best worked out before the first payment — see legal services for founders.