Amendments to the Corporate Income Tax Law

14. December 2018 | Reading Time: 3 Min

Amendments to the Corporate Income Tax (CIT) Law are published in the Official Gazette of the Republic of Serbia No. 95/2018 dated 8 December 2018. The most important changes are presented below.

  • It is prescribed that tax depreciation of fixed assets classified in tax depreciation groups II-V, except intangible assets, will be calculated by using straight-line method, whereby depreciation rate would be calculated on the base that represents purchase value of every fixed asset separately, instead of the currently valid degressive method. In case where fixed assets are acquired during the tax period, tax depreciation will be determined on pro rata basis, from time it is acquired until the end of tax period;
  • If the depreciation costs of fixed assets calculated in accordance with the accounting rules, are lower than the amount of depreciation costs calculated by using tax depreciation rates, accounting depreciation will be recognized as a tax-deductible cost in the tax period. However, depreciation of intangible assets will be always recognized in the amount of accounting depreciation costs. These changes will be applied as of 1 January 2019, i.e. the first day of tax period that starts in 2019;
  • Fixed assets classified into groups II-V, which were acquired until the beginning of the application of the new rules, will continue to be amortized according to current rules by applying the degressive method, ending in 2028;
  • Advertising expenses will be recognized without restriction in amounts recorded in the income statement, and not only in the amount of 10% of total revenue. Abolition of this limit will encourage demand for taxpayer’s goods and services;
  • Costs directly related to research and development (R&D) carried out by the taxpayer in Serbia may be deducted for CIT purposes in a doubled amount. These amendments will encourage R&D activities, which will have direct effect on competitiveness of domestic goods;
  • The effects of change in accounting policy arising from the first implementation of IAS, i.e. IFRS and IFRS for SME, which may cause the correction of the respective positions in the balance sheet, will be recognized as income, or expense in tax balance;
  • The qualified royalty income generated by the taxpayer, holder of a copyright or related right on the basis of compensation for the exploitation of the rights, may be excluded from tax base in the amount of 80%, under certain conditions;
  • The subject of capital gain tax has been extended to the intellectual property rights;
  • Only 20% of capital gains arising from the sale of the entire copyright and related rights, or rights related to the invention will be included in the taxable base;
  • Taxpayer who makes equity investment into newly established business entity, which performs innovative activities, will be granted tax credit in the amount of 30% of the investment made, under certain conditions;
  • If resident taxpayer realizes capital gains from a sale of assets in another country then it has a right to use a tax credit in the amount of tax paid in that country, but this amount cannot exceed the amount of tax that would be calculated by applying local rules;
  • The above amendments would apply for the purpose of calculating the CIT for the year 2019.

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