The Serbian Parliament has recently enacted amendments to a set of tax laws by way of emergency procedure (Corporate Income Tax Law, Personal Income Tax Law, Law on Social Security Contributions and the Law on Tax Procedure and Tax Administration). Adopted amendments shall apply from 1 January 2016, with a few exceptions, the implementation of which begins on 1 March 2016, i.e. 1 January 2017.
Here are some of the most significant novelties introduced by the amendments to the Corporate Income and Personal Income Tax Laws:
- Application of withholding tax on service fees income is extended. Before the amendments, withholding tax (at the increased rate of 25%) applied only to the service income realized from a resident by a non-resident legal entity from jurisdictions with preferential tax system (in other words, the so-called “tax havens”), regardless of the place of supply or use of such services. After the last amendments, the withholding tax rate of 20% applies additionally to the service income that a nonresident realized from a resident, based on services which are provided or used, i.e. are to be provided or used in the territory of the Republic of Serbia. However, this is, as before, applicable only if a double tax treaty does not stipulate otherwise;
- If a nonresident does not collect income subject to withholding tax by voluntary payment of a resident, but on the basis of settlement of claim in enforcement, or in any other collection proceedings, such income is not taxed by deduction any more. This means that the non-resident recipient of so realized income is obliged to report such income, via its tax representative, to the competent tax authority that shall determine the applicable tax in its decision.
The above statutory provisions start to apply on 1 March 2016.
- Taxation of income from immovable property is particularly carved out and precisely regulated as a specific type of income, rather than being taxed as income from capital. Income from immovable property is income realized by leasing or subleasing real estate. These provisions will apply as of 1. January 2017;
- Tax exemption for employee’s per diems for business trip abroad is finally defined. This will significantly facilitate day-to-day business, bearing in mind the problems faced by companies due to the lack of clear regulations for employees in the private sector. It is now stipulated that the tax-exempted per diem for a business trip abroad is determined up to the amount prescribed by the competent public authority, but up to maximum of 50 EUR per day;
- Validity of incentives for hiring new employees is extended for additional six months, so that the incentives apply until 31 December 2017. Further to that the amendments introduce new incentives for employers, small and micro sized companies and entrepreneurs, provided that they hire at least two new employees. The employer is entitled to a refund of 75% of the salary tax for the newly employed, which is paid until 31 December 2017. Complementary amendments are also incorporated in the Law on Social Security Contributions.