Tax incentives for knowledge-based industries in Serbia

Event report

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Moderator Mr Svetislav Kostić, (Docent at the University of Belgrade Faculty of Law)  highlighted that the purpose of the workshop was to introduce the tax incentives that were adopted in 2018 and are applicable as of 2019 in the Serbian Corporate Income Tax Law.

The workshop centered around four topics:

1. Incentives for companies that develop intellectual property (IP) i.e., research and development (R&D) deduction
2. Incentives for companies that generate intellectual property (IP) revenues i.e., IP box regime
3. Incentives for investment in start-ups
4. Personal income tax law

According to (R&D) deduction, every euro spent on R&D by a company in Serbia is eligible for double deduction. Inspiration for these incentives were drawn from tax measures recently introduced in Poland, but also from Slovenia and Slovakia. Inputs on the regulation were also received from the private sector given that they are the most concerned stakeholder regarding such measures. Specific tax treatment is also accorded to those companies that generate IP revenues in Serbia. These types of deductions are non-selective, meaning that they are applicable to any sector or industry that invests in R&D. Only a limited number of countries worldwide allow companies to use both R&D deduction and IP box regime simultaneously, namely Switzerland, India, and Slovakia.

Incentive for investment in start-ups was inspired by measures taken in Italy, given than Italy has a similar administrative culture to Serbia. The incentive allows investors who have freely available cash to invest in an innovative start-up and receive 30% of tax credit from the amount invested. In order to be eligible for this kind of investment, two companies have to be unrelated. In other words one can only invest in a company where one has less than 25% of company shares.

Last but not least, the personal income tax law underwent change. A more beneficial regime for stock option plans has been developed, meaning that if an employee decides to get a stock option plan, they as well as the employer will not be subject to taxation. Taxation would only apply should the employee decide to sell their share.

Kostic noted that in order to benefit from all these incentives, companies need to change their business model, in other words, orient themselves towards innovation but also organise and document their expenses.

By Nataša Perućica