Tax incentives - Tax on profit | Corporate Profit Tax Law | Corporate Lawyer Dragana Djordjevic, Belgrade, Serbia

Taxpayers shall be granted tax incentives for the purpose of achieving economic policy aims relating to the fostering of economic growth. The provisions of the Corporate Profit Tax Law alone shall determine the tax incentives relating to corporate profit tax.

Tax incentives in relation to the tax on profits of legal entities are only made by provisions of the Corporate Profit Tax Law and the conditions for their realization are prescribed for:

non-profit organisations
enterprises engaged in vocational training, professional rehabilitation and employment of disabled persons, and for
taxpayers who invest in fixed assets.

Tax on profit and Tax Exemptions

Non-profit organisation

Non-profit organization shall not be obliged to pay a tax on profit for the tax period in which the surplus of income over expenditure does not exceed 400,000 dinars, on the condition that:

does not distribute the thus generated surplus to its founders, members, executives, employees or persons associated with them
annual amount of personal income that is paid to employees, directors and persons associated with them is not greater than twice amount of the average annual salary per employee in Republic in the year for which shall be determinated the right to tax exemption, according to data of the republic authorities responsible for statistics
does not distribute assets in favour of its founders, members,executives, employees or persons associated with them
there is no monopolistic or dominating position on the market as determined by the law dealing with the protection of cpmetition.

Associated persons in terms of the aforementioned conditions under points from 1. to 3. shall be understood to mean the persons referred to in Article 59 of Corporate Profit Tax Law.

A non-profit organization shall be obliged to keep record of revenues and expenditures, to submit a tax statement and tax return.

Vocational training, professional rehabilitation and employment of disabled persons

Any enterprise engaged in vocational training, professional rehabilitation and employment of disabled persons shall be exempt from corporate profit tax, in proportion to the share of such persons in the total number of its employees shall not be obligated to pay profit tax.

Tax incentives on investments

Any taxpayer that invests one billion dinars in its fixed assets or such amount is invested in its fixed assets by another person and uses such funds in the conduct of its main line of business and lines of business entered in the taxpayer’s founding document or in some other taxpayer’s document identifying the lines of business conducted by the taxpayer and employs during the investment period at least additional 100 persons for an indefinite period of time, shall not be obliged to pay corporate profit tax for a period of ten years, in proportion to that investment.

The investing in fixed assets by another person shall also mean investing in fixed assets and increasing the equity in keeping with law and in that case fixed assets are evaluated according to market (fair) value.

Following the fulfilment of the mentioned legal requirements, the tax exemption period runs from the first year in which taxable profit is made.

Newly employed persons shall mean the persons who were given jobs by the taxpayer in the period of qualifying for tax exemption, so that at the moment of meeting the requirements for utilizing the mentioned tax facility, the taxpayer had at least 100 additional employee working for the taxpayer directly, in relation to the number of its employees in the period in which it began to qualify for not to pay tax on profit.

Newly employed persons shall not be understood to mean the ones who have been employed indirectly or directly by an associated person referred to in Article 59 of Corporate Profit Tax Law.

The taxpayer shall forfeit the right to tax exemption for the whole period of utilizing the tax exemption and it shall be obliged to calculate tax on profit in the tax return on the date of submission of the tax return for the next taxation period as well as pay the tax on profit it would have paid had it not utilised this facility, valorized from the date of submission of the tax return for the tax period in which it had acquired the right to tax exemption to the date of submission of the tax declaration for the next taxation period, the consumer price index as published by the republic authorities in charge of statistics, in the following cases:

If a taxpayer reduces the number of employees who are working directly for the taxpayer to less than the total number of permanent employees in relation to the number of employees it had in the taxation period in which it met the requirements for the tax exemption so that the average number of employees, determined on the last day of the period for which the tax return is submited less than the number of employees which the taxpayer had in the tax period in which it is fulfil conditions for a tax incentive, which refers to the lack of obligation to pay tax on profit. The average number of employees taxpayer shall determine by the number of employees at the end of each month of the tax period is added up and obtained summation is divided by the sum of the resulting number of months of the tax period.
If before expiration of the period of exemption from tax, a taxpayer goes out of business, stops using or transfers the assets, and in the same tax period does not invest in new fixed assets a sum that is equal to the market price of transferred assets, at least to the value which provides for the total amount of investment not to fall below the one billion dinnars.

The minister of finance shall determine in greater detail the keeping of books on the performance shown by the beneficiaries of tax incentives on investments and the competent organisational unit of the Tax Authority shall determine the fulfilment of requirements for the enjoyment of the tax incentives on investments Legal entities which obtain the equipment already used in the Republic are obliged to pay tax on profit and they shall not exercise the right on the tax incentives on investments.

The tax incentives may not be transferred to some other legal entity which has not acquired the right to utilize them pursuant to Corporate Profit Tax Law or if another legal entity is participating in the status change with a taxpayer which is utilizing the mentioned tax incentives.

Right on tax incentives on investments shall not be exercised for the fixed assets, and for: aircraft and watercraft not used for business purposes, passenger automobiles, other than automobiles intended for taxi service, rent-a-car service, driver schools and special automobiles with built-in appliances for the transport of patients; furniture, other than furniture intended for furnishing hotels, motels, restaurants and youth, children’s and workers’ holiday camps; carpeting; works of fine and applied arts and interior decoration items; mobile phones; air conditioning; equipment for video surveillance; advertising materials, as tools and inventory subject to calculated writing off.

Legal enteties which invest in mentioned assets shall be obliged to pay tax on profit.