Corporate income tax is the cornerstone of tax compliance for any company operating in Serbia. At 15%, Serbia's rate is among the most competitive in Europe — but taking full advantage requires understanding the rules around deductible expenses, capital gains treatment, and filing obligations.

This guide covers what foreign-owned companies need to know about Serbian corporate tax in 2025: how taxable profit is calculated, which expenses are deductible, key deadlines, and available incentives.

The 15% Corporate Tax Rate

Serbia applies a flat 15% corporate income tax rate on taxable profits. This rate applies to both domestic companies and Serbian branches of foreign entities.

The tax is self-assessed, meaning companies calculate their own liability and file returns — the Tax Administration doesn't issue assessments for regular corporate tax (though they do for certain capital gains situations involving non-residents).

How Taxable Profit Is Calculated

Taxable profit starts with your accounting profit prepared under International Financial Reporting Standards (IFRS), then adjusts for items that Serbian tax law treats differently.

Revenue includes all business income, financial income, other income, and revaluation gains recorded in your financial statements. Transfer pricing adjustments that increase revenue are also included.

Expenses must be properly documented, incurred for business purposes, and — for related party transactions — consistent with arm's length principles. Serbian law categorizes expenses into three groups:

- Fully deductible expenses that meet documentation and business purpose requirements.

- Partially deductible expenses subject to limits — entertainment expenses and donations fall into this category.

- Non-deductible expenses including late payment penalties on taxes, political donations, undocumented costs, and expenses without business purpose.

Special rules apply to depreciation, long-term provisions, asset impairments, and interest on related-party loans.

Foreign exchange gains and losses are recognized for tax purposes when recorded in financial statements — no timing adjustments required.

Capital Gains and Losses

Capital gains receive separate treatment under Serbian tax law. They arise from selling or transferring:

- Real estate used as fixed assets in business operations

- Intellectual property rights

- Shares, ownership interests, and securities held as long-term investments

- Investment fund units

- Digital assets (with exceptions for licensed crypto service providers)

Capital gains equal the positive difference between sale price and acquisition cost (using tax law rules for determining cost basis). If you sell to a related party below market value, market price applies instead.

For resident companies, capital gains are taxed at 15%.

For non-resident companies, capital gains from Serbian sources face 20% withholding — unless a tax treaty provides otherwise. Non-residents must appoint a tax representative in Serbia to file on their behalf.

Important: Capital losses cannot offset operating profits, and operating losses cannot offset capital gains. Each category is tracked separately, with losses carried forward within their own category for up to five years.

Tax Depreciation

Fixed assets are classified into five groups for tax depreciation purposes, with rates ranging from 2.5% to 30% depending on asset type. Serbia requires the straight-line method for tax purposes.

Tax depreciation may differ from accounting depreciation, creating timing differences that require tracking.

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Transfer Pricing Impact on Corporate Tax

Related party transactions directly affect your corporate tax calculation. Any difference between transfer prices and arm's length prices increases your taxable profit.

Related parties include entities where 25% or more ownership exists (direct or indirect), entities under common control, and individuals with significant influence over business decisions — including directors who independently represent the company.

All commercial and financial transactions with related parties require transfer pricing analysis and documentation, submitted with your annual corporate tax return.

Intercompany Loan Interest: Thin Capitalization and Arm's Length Rates

Interest expenses on loans from related parties face two tests:

- Thin capitalization rule: Interest is only deductible on loan principal up to four times the company's equity. Any interest on amounts exceeding this 4:1 debt-to-equity ratio is permanently non-deductible.

- Arm's length test: Interest on the deductible portion must be compared to market rates. You can either use rates published annually by the Ministry of Finance or conduct your own benchmark analysis.

For 2025, the Ministry of Finance published these arm's length interest rates:

- Short-term RSD loans: 8.01%

- Long-term RSD loans: 8.24%

- Short-term EUR loans (or RSD indexed to EUR): 6.41%

- Long-term EUR loans (or RSD indexed to EUR): 6.79%

- Long-term CHF loans (or RSD indexed to CHF): 7.50%

- Short-term USD loans (or RSD indexed to USD): 8.31%

- Long-term USD loans (or RSD indexed to USD): 3.40%

If your intercompany loan carries a higher rate than these benchmarks, the excess interest is non-deductible unless you can demonstrate arm's length pricing through independent analysis.

Practical tip: If a parent company loans funds to its Serbian subsidiary, the interest rate should not exceed these published rates. Rates are updated annually, so ongoing loans should be reviewed each year.

Tax Losses

Operating losses can be carried forward for five years to offset future taxable profits.

Capital losses can similarly be carried forward for five years, but only to offset future capital gains.

Loss carryback is not permitted. Cross-category offsetting (operating losses against capital gains or vice versa) is also prohibited.

Filing Deadlines and Payment

The tax year follows the calendar year (January 1 to December 31), though companies can request a different 12-month period with Tax Administration approval.

Key deadline: Corporate tax returns must be filed within 180 days after the tax year ends. For calendar-year companies, this means June 30.

Special situations like mergers, liquidation, or bankruptcy have shorter deadlines — 15 days from the date financial statements are due.

Monthly advance payments are required by the 15th of each month, calculated based on the prior year's return. Final settlement occurs when filing the annual return — any difference between advances paid and actual liability must be paid immediately, or excess payments can be credited forward or refunded.

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First-Year Companies: Estimating Advance Payments

Newly established companies must file an initial tax return estimating revenue, expenses, and taxable profit from incorporation through year-end. Monthly advances are based on this estimate.

At year-end, actual liability is calculated and reconciled against advances paid. Differences are settled through additional payment or credit/refund.

This estimation process requires reasonable projections — overly optimistic estimates that result in large underpayments may attract scrutiny.

Tax Incentives

Serbia offers significant incentives for qualifying investments:

10-Year Tax Holiday

Companies investing at least RSD 1 billion (approximately EUR 8.5 million) in fixed assets used for business operations and employing at least 100 new permanent employees during the investment period qualify for a 10-year corporate tax exemption.

Qualifying fixed assets generally include property, plant, and equipment recognized under IFRS. R&D expenditures qualify only if capitalized as fixed assets. Equipment must be new (if purchased domestically) or new/used (if imported). Assets must be paid for to qualify.

Certain assets don't qualify: passenger vehicles, furniture, decorative items, mobile phones, air conditioning, video surveillance equipment, and fully depreciated tools.

New employees must not have been previously employed by a related party of the taxpayer.

The exemption is calculated as a percentage of tax liability based on the ratio of qualifying investment to total assets. The 10-year period begins in the first profitable year after qualifying conditions are met.

R&D Incentives

Companies conducting research and development activities can claim enhanced deductions — effectively a double deduction of qualifying R&D expenses. This incentive suits technology and innovation-focused businesses.

IP Box Regime

Companies holding registered intellectual property rights may qualify for reduced effective tax rates on income derived from that IP. This benefits businesses with patents, software copyrights, and similar assets.

Capital Gains for Non-Residents

When non-resident companies realize capital gains from Serbian sources (such as selling shares in a Serbian company), they face 20% withholding tax unless a tax treaty provides relief.

The non-resident must appoint a Serbian tax representative to file returns and handle compliance. Tax is paid upon receiving the Tax Administration's assessment, not through self-assessment.

Many tax treaties reduce or eliminate this withholding, making treaty analysis essential before structuring exits or share transfers.

How Tax Advisor Serbia Can Help

Corporate tax compliance involves more than filing an annual return. Effective management requires year-round attention to expense documentation, transfer pricing, advance payments, and strategic planning.

At Tax Advisor Serbia, we support foreign-owned companies with:

- Annual corporate tax return preparation and filing

- Monthly advance payment calculations and tracking

- Transfer pricing documentation coordinated with your CIT return

- Deductibility analysis for complex expenses

- Tax incentive assessment and application

- Capital gains planning for exits and restructuring

- Coordination with your group tax team and auditors

Our senior-level team brings Big Four experience to every engagement, ensuring your Serbian tax position is both compliant and optimized.

Need help with Serbian corporate tax? Book a consultation to discuss your company's situation.

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