FOREWORD. Serbia. Services provided by member firms include:

Transcription

1 2016/17

2 FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2016/17 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 30 April 2016, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at PKF Worldwide Tax Guide 2016/17 1

3 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International Limited (PKFI) administers a family of legally independent firms. Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. PKF INTERNATIONAL LIMITED JUNE 2016 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION PKF Worldwide Tax Guide 2016/17 2

4 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE CORPORATE TAX BRANCH PROFITS TAX CAPITAL GAINS TAX VALUE ADDED TAX (VAT) CUSTOMS DUTIES EXCISE DUTIES REAL ESTATE TRANSFER TAX LOCAL TAXES PROPERTY TAX TRADE NAME TAX TAX ON THE USE OF PUBLIC LAND PAYROLL TAXES B. DETERMINATION OF TAXABLE INCOME OPERATIONAL EXPENSES FIXED ASSETS VALUATION OF INVENTORY RESERVES AND PROVISIONS DIVIDENDS INTEREST DEDUCTIONS LOSSES C. FOREIGN-SOURCED INCOME D. INCENTIVES E. FOREIGN TAX RELIEF F. CORPORATE GROUPS G. RELATED PARTY TRANSACTIONS TRANSFER PRICING RULES FOR INTRA-GROUP LOANS THIN CAPITALISATION H. WITHHOLDING TAX I. EXCHANGE CONTROL J. PERSONAL TAX INCOME TAX INCOME FROM WAGES ANNUAL INCOME TAX K. TREATY AND NON-TREATY WITHHOLDING TAX RATES PKF Worldwide Tax Guide 2016/17 3

5 MEMBER FIRM For further advice or information please contact: City Name Contact Information Beograd Petar Grubor BASIC FACTS Full name: Republic of Serbia Capital: Belgrade Main language: Serbian Population: 7.21 million (2014 estimate) Major religion: Christianity Monetary unit: Serbian Dinar (RSD) Internet domain:.rs Int. dialling code: +381 KEY TAX POINTS Corporate income tax is payable by a resident who is a legal entity established or has its place of effective management and control in the territory of the Republic of Serbia. Non-residents are taxed only on their income sourced through a permanent establishment in Serbia. The standard rate of Value Added Tax is 20%. A reduced rate of 10% applies to certain hospitality-related and other goods and services. A 20% withholding tax is applicable to various forms of payment to non-residents including to interest, dividends, royalties, rental fees, capital gains and certain service fees. Income tax is chargeable on all Serbian residents in respect of income generated in Serbia and other countries. A. TAXES PAYABLE CORPORATE TAX Corporate income tax is payable by the following: Resident is legal entity established or has its place of effective management and control in the territory of the Republic of Serbia. Residents are taxed on their income generated in the territory of the Republic, as well as on worldwide income. Non-residents are taxed only on their income sourced through a permanent establishment in Serbia. A permanent establishment is any permanent place of business through which a nonresident conducts his business. A taxable entity includes a company registered as a joint stock company, a limited liability company, a general partnership, limited partnership, a socially owned company or a public enterprise, co-operative, branch office or any other legal entity generating income from the sale of goods or rendering services to the market. The tax year is the same as the calendar year, although a different tax year may be used if approved by the tax authorities. A tax period may not exceed 12 months in length and may only be changed once every five years. Tax returns must be filed with the tax authorities within 180 days of the end of the tax year. A monthly instalment payment system applies based on the profits arising in the previous period. The tax rate on all profits and gains is 15%. BRANCH PROFITS TAX Branch profit are treated as ordinary income and taxed accordingly. PKF Worldwide Tax Guide 2016/17 4

6 CAPITAL GAINS TAX Gains from the sale of capital assets are included in a company's taxable income and taxed at the same rate as other profits. Capital losses may be set-off against capital gains in the year they arose. Capital losses may be carried forward for five years but may not be carried back. VALUE ADDED TAX (VAT) According to Law on VAT, taxpayer is an entity that independently trades in goods and services as a producer, trader or provider of services for the purpose of profit. The VAT rules also apply to the following: Tax representative of foreign entities; Recipients of goods and services if foreign entity do not assign tax representative; Entities that account for VAT in their invoices but are not obliged to pay the tax according to the Law on VAT; Entities that import goods; Recipient of construction services; Recipient of electrical energy and natural gas if they are purchased for resale; Recipient of secondary raw materials; Taxpayers whose total turnover did not exceed RSD 8,000,000 in the preceding calendar year are not obliged to register as VAT. The taxable amount tor domestic goods and services is the sales price, including excise and duty costs and all secondary expenses charged to the recipient of the goods and services. The standard rate is 20%. A reduced rate of 10% applies to certain hospitality-related and other goods and services. CUSTOMS DUTIES Goods imported into Serbia are subject to customs duty rates provided in the Law on Customs Tariff. These rates are ad valorem (the only exception is related to the importation of other cigarettes containing tobacco, where a combined ad valorem and specific customs duty rate is prescribed) and applies to goods originating in countries that have a most favoured nation (MFN) status in trading with Serbia. Goods originating in other countries are subject to MFN duty rates increased by 70%. At the moment, the only trading partner with Serbia that does not have MFN status is Taiwan. Customs duty rates in Serbia range from 0% to 57.6%, with most being under 30%. At the moment, the 57.6% rate only applies to cigarettes containing tobacco. EXCISE DUTIES Special excise duties apply to the following: Mineral oils; Alcohol; Tobacco products and Coffee. Excise duty in Serbia is specific (for oil derivatives, alcoholic beverages, cigars, cigarillos, and coffee), ad valorem (for pipe tobacco), and combined (specific + ad valorem on retail price for cigarettes). Excise duties stated in Serbian currency are adjusted on a half-year basis according to variations of the consumer price index (CPI) declared by relevant government bodies in charge of statistics. For oil derivatives, the government can modify the specific excise duty amounts during the year according to changes in prices of crude oil on the market. REAL ESTATE TRANSFER TAX This is payable by the person or entity acquiring the real estate. The tax rate is 2.5%. The tax base is the contact value unless is lower than market value on the date of acquisition. PKF Worldwide Tax Guide 2016/17 5

7 LOCAL TAXES There are no local taxes on income in Serbia. PROPERTY TAX Property tax is payable in Serbia by all legal entities and individuals who own or have rights over real estate located in the Republic of Serbia such as: Rights to usufruct; Right to use and inhabit; Tenancy right of one year or for indefinite period of time; and, Urban usage right (municipal, public and other state-owned land) exceeding 1,000 square meters in area. If the legal owner of the real estate is not known or cannot be determined, the property tax is levied on the person with beneficial ownership of the property (eg. a tenant). Where the taxpayer keeps books, the property tax on real estate is levied at a flat rate of 0.40%. Where the taxpayers do not keep books, the property tax on land is maximum to 0.30%. If the taxpayer is an individual or entrepreneur who is taxed on the so-called lump-sum income basis, the rates of property tax on real estate are progressive, as shown in the following table: Number Tax Base Tax Liability 1. To RSD 10,000,000 Until 0.40% From RSD 10,000,000 to RSD 25, From RSD 25,000,000 to RSD 50, Over RSD 50,000,000 Tax from point 1 plus 0.6% on amount over RSD 10,000,000 Tax from point 2 plus 1.0% on amount over RSD 25,000,000 Tax from point 3 plus 2.0% on amount over RSD 50,000,000 A taxpayer does not pay property tax relating to the ownership of real estate with a total value not exceeding RSD 400,000. Property tax is assessed on the basis of the facts reported in the tax return in the first taxable year applicable to that property. In subsequent years, the tax return should only be submitted if the facts relevant to the liability have changed. Property tax is paid quarterly within 45 days from the beginning of the three month period. TRADE NAME TAX This is payable by individuals and legal entities which are liable to pay corporate income tax or personal income tax and are registered for the performance of a business activity. TAX ON THE USE OF PUBLIC LAND This is payable by individuals and legal entities that make use of public land. The amount of the tax is prescribed by the individual commune or city. PAYROLL TAXES The employer is liable to withhold personal income tax (PIT) and social security contributions on payment of salaries to employees, at the following rates: 10% PIT. 19.9% social security contributions payable by the employee. 17.9% social security contributions payable by the employer. PKF Worldwide Tax Guide 2016/17 6

8 The tax and contributions base is gross salary. The social security contributions base is limited to five average monthly salaries in Serbia. B. DETERMINATION OF TAXABLE INCOME Taxable profits are those calculated under the accounting regulations, adjusted in accordance with the provisions of the Corporate Income Tax Law. OPERATIONAL EXPENSES Significant adjustments include: Expenses which are not recognised as expenses for corporate income tax purposes include: Expenses which cannot be documented; Bad debt provisions for receivables to entities that are also creditors, to the liability amount; Gift and contributions to political organizations; Gifts if the recipient is a related entity; Interest payable for untimely payment of interests between related parties; Expenses incurred other than for the purpose of conducting business activities; Calculated and unpaid redundancy remuneration due to employees; Interest payable for untimely payment of taxes, contributions and other public charges; Cost of forced collection of tax and other debts and cost of tax offence proceedings and other proceedings conducted by competent authorities; Fines levied by competent authorities, penalty clauses and penalties. Expenditure recognised for corporate income tax purposes up to certain amounts including: Depreciation computed in accordance with tax depreciation rules; Bad debt provisions, write-off of receivables and general provisions; Expenses for health care, scientific, educational, humanitarian, religious, ecological and sportrelated purposes are tax-deductible up to 5% of total revenue; Expenses for cultural purposes are tax-deductible up to 5% of total revenue; Membership fees paid to chambers of commerce and other associations (except political parties) are deductible up to 0.1% of gross revenue; Advertising and promotional expenses are tax deductible up to 10% of total revenue; Business entertainment expenses are tax deductible up to 0.5% of total revenue. FIXED ASSETS According to the Corporate Income Tax Law, fixed assets are tangible and intangible assets of which the service life is longer than a year and recognised in the records as fixed assets except natural resources and goodwill. Fixed assets are divided into five groups with depreciation rates prescribed for each as follows: Depreciation Group Depreciation Rate I 2.5% II 10.0% III 15.0% IV 20.0% V 30.0% A straight-line depreciation method is prescribed for the first group. A declining balance method is prescribed for assets in other groups. Detailed regulation of the division of fixed assets into groups, and the method of determining depreciation, is prescribed under special by-laws issued by the Ministry of Finance. PKF Worldwide Tax Guide 2016/17 7

9 VALUATION OF INVENTORY Cost of materials and the purchase value of merchandise are tax deductible up to the amount calculated by applying the average weighted cost method or FIFO method. If another method is used, an adjustment for tax purposes should be made. RESERVES AND PROVISIONS Provisions for bad and doubtful debts are tax deductible if at least 60 days have expired from the due date. A provision has to be made individually for each debt. A write-off of an individual debt, (except for those from debtors which are also creditors) is recognised as an expense under the following conditions: The debt has been written off as uncollectible; The taxpayer has initiated a court procedure to collect debt or duly reported the receivables in case of liquidation or bankruptcy procedure over the debtor. Long-term provisions are recognised for tax purposes if they are made for the renewal of natural resources, warranty period costs and retained caution money and deposits. DIVIDENDS Dividends and other income that constitutes a share in the profit of resident companies is not included in the tax base if received from resident companies. INTEREST DEDUCTIONS Interest payable is generally tax deductible except for interest payable on taxes, contributions and other public charges, fines and penalties. However, rules restrict deductions for interest on any loan owed to related parties if the loan is more than four times the net asset value of the company. LOSSES Ordinary losses may be carried forward for five years but may not be carried back. C. FOREIGN-SOURCED INCOME Companies resident in Serbia are taxed on their worldwide income. When profit generated in another country is taxed in the foreign country, a company has the right to decrease its tax liability by claiming a tax credit from the tax authorities in Serbia. There are no provisions that provide for the possibility that taxation of income earned abroad may be deferred. D. INCENTIVES A taxpayer who invests at least RSD 1,000,000,000 in fixed assets and additionally employs at least 100 employees is entitled to tax relief for the next ten years in respect of the invested asset. Every non-profit organisation with excess income up to RSD 400,000 is tax exempt if it fulfils several conditions. E. FOREIGN TAX RELIEF Double tax relief is available under the provisions of various double tax agreements with other territories. Unilateral relief is available in other cases by means of a credit for overseas taxes against the Serbian tax payable on the same income. PKF Worldwide Tax Guide 2016/17 8

10 F. CORPORATE GROUPS Parent and subsidiary companies are recognised as a group for tax consolidation purposes if the parent has direct or indirect control at least 75% of the subsidiary's share capital. All members of the group must be resident companies. Once approved, tax consolidation must be applied for the next five years. G. RELATED PARTY TRANSACTIONS A transfer price is the price of transactions between related parties. Related parties exist if there is a possibility of control or influence over business decisions between them. Ownership of 25% or more, or a majority of shares, is considered as potential control. Influence over business decisions exists when an associated party holds 25% or more, or individually holds the greatest portion, of votes in the taxpayer s management bodies. If the same persons participate in management or control of both companies, a connection between them will be deemed to exist. Close family members are also regarded as related parties. Non-resident entities from tax havens are considered as related parties of resident entities. The Serbian Ministry of Finance prescribed the list of countries that are to be considered as tax havens for the application of relevant CIT Law provisions. A company should disclose transactions with related parties separately at transfer prices and at arm s-length prices in its CIT calculation. Positive difference between these prices (adjustments of expenses) and negative difference (adjustments of revenues) is included in taxable profit. Serbian CIT Law recognises the following methods for determining arm s-length prices: Comparable uncontrolled price (CUP). Cost plus. Resale minus. Transactional net margin (TNMM). Profit split. Any other method that allows determination of arm s-length prices if none of the above methods can be applied. It is mandatory to prepare and submit transfer pricing documentation together with the CIT return for periods starting from 1 January TRANSFER PRICING RULES FOR INTRA-GROUP LOANS Any interest incurred on related party loans exceeding the arm s-length interest rate is not tax deductible. Arm s-length interest is deemed to be the: Weighted average key policy rate for the tax period, for loans denominated in dinars, and Weighted average interest rate at which domestic banks borrowed from foreign lenders in related tax period, for foreign currency loans. These indicators are determined by the National Bank of Serbia and published by the Ministry of Finance. However, taxpayers are entitled to determine market interest rates by using all general methods for determining arm s-length interest rates. In case the taxpayer decides to determine interest rates by applying general methods, it will be obligated to apply such interest rates for assessment of all related party loans. Transfer pricing rules in this respect are applied up to the amount of tax deductible interest determined in accordance with the thin capitalisation threshold. THIN CAPITALISATION The interest and related costs will be fully deductible if the loans from related parties do not exceed four times the taxpayer s net equity (ten times for banks and leasing companies). The amount of a taxpayer s net equity for this purpose is calculated as the average of the total assets less total liabilities at the beginning and the end of the year, while the amount of loan from related parties is calculated as a daily average for the year. In cases where the loans from related parties exceed the prescribed threshold, the amount of non-deductible interest will be calculated as proportional to the amount of loans exceeding the 4:1 (10:1) threshold. PKF Worldwide Tax Guide 2016/17 9

11 H. WITHHOLDING TAX A 20% withholding tax is applicable to various forms of payment to non-residents including: Interest; Dividends; Royalties; Rental fee; Capital gains; and, Certain service fees. Special withholding tax rules apply in case of non-resident entities from tax havens. Withholding tax is payable at the rate of 25% on royalties, interest, income from lease of immovable property and other assets, and service fees paid to non-resident entities from tax havens. Dividend payments to nonresidents from tax havens are subject to withholding tax at 20%. Serbian Ministry of Finance publishes a list of jurisdictions that are regarded as tax havens. Withholding tax rates envisaged by applicable DTTs are provided in the following table. I. EXCHANGE CONTROL There are no exchange controls in Serbia. J. PERSONAL TAX INCOME TAX Income tax is chargeable on all Serbian residents in respect of income generated in Serbia and other countries. A Resident of the Republic of Serbia (hereinafter referred as "resident') is each person who: Has a personal residence or his centre of interests in Serbia; Resides in Serbia for at least 183 days, whether or not consecutively, within a period of 12 months beginning or ending in the respective taxation year. Serbian residents are taxed on their worldwide income including: Income from wages (tax rate -10%); Income from agricultural activity and forestry (tax rate - 20%); Income from independent personal activities (tax rate - 10%); Income from royalties etc. (tax rate - 20%); Income from capital (tax rate - 15%); Income from property and property rights (tax rate - 15% and 20% on rental fees); Capital gains (tax rate - 15%); and, Other income (tax rate - 20%). Annual personal tax is paid under a withholding tax system. Tax credits are available for overseas taxes up to the amount of tax suffered in Serbia on the income concerned. INCOME FROM WAGES Income from wages represents earnings based on the full-and part-time employment based on contracts concluded with the employer, or with the Youth Cooperative, until the age of 26. Income from wages is tax chargeable either earned in cash or cash equivalents, shares (except the shares assigned in process of privatization) and similar. The taxable person is the employee, but the employer is responsible for calculating and withholding personal income tax on behalf of its employees. The tax rate is currently 10%. Specified types of income, up to the prescribed amounts, are tax exempt. They include public transportation cost for home to office travel and daily allowances for business trips. In certain cases, non-residents working for diplomatic and consular missions or international organizations in Serbia are not taxable. PKF Worldwide Tax Guide 2016/17 10

12 ANNUAL INCOME TAX Annual income tax is also payable on any amount exceeding three times the annual average wage. It is payable based on the following rates: Any amount up to six times the average annual salary - 10%; Any amount higher than six times the average annual salary - 10% of six times the average annual salary + 15% on the amount paid which exceeds six times the average annual salary. K. TREATY AND NON-TREATY WITHHOLDING TAX RATES Dividends¹ (%) Interest (%) Royalties (%) Domestic rates: Corporations Individuals Treaty countries: Azerbaijan Albania 5/ Austria 5/ ,10 Belgium 10/ Belorussia 5/ Bosnia-Herzegovina 5/ Bulgaria 5/ Great Britain and Northern Ireland 5/ Vietnam 10/ Georgia 5/ Greece 5/ Denmark 5/ DNK Korea Egypt 5/ Estonia 5/ ,10 India 5/ Iran Ireland 5/10/ ,10 Italy Canada 5/ Qatar 5/ China Cyprus Kuwait 5/ Latvia 5/ ,10 Libya 5/ PKF Worldwide Tax Guide 2016/17 11

13 Dividends¹ (%) Interest (%) Royalties (%) Lithuania 5/ Hungary 5/ Former Republic of Macedonia 5/ Malaysia 10/ Malta 5/ ,10 Maroco Moldavia 5/ Germany Norway Pakistan Poland 5/ Romania Russian Federation 5/ Slovakia 5/ Slovenia 5/ ,10 Tunis Turkey 5/ UAE 5/ Ukraine 5/ Finland 5/ France 5/ Netherland 5/ Croatia 5/ Montenegro ,10 Czech Republic ,10 Switzerland 5/ Sweden 5/ Spain 5/ Sri Lanka NOTE: 1 If receiver of dividend has at least 25% of share capital, a lower rate of two presented is applied. PKF Worldwide Tax Guide 2016/17 12

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