Transfer pricing compliance is one of the most critical tax obligations for foreign-owned companies operating in Serbia. If your Serbian subsidiary transacts with its parent company or other group entities, you must prepare and submit transfer pricing documentation annually — no exceptions.

This guide covers everything you need to know about Serbian transfer pricing rules in 2025: who qualifies as a related party, documentation requirements, acceptable methods, deadlines, and penalties for non-compliance.

A Brief History of Transfer Pricing in Serbia

Serbia introduced transfer pricing rules in 2001, making it one of the earlier adopters in the region. The regulatory framework was significantly strengthened in July 2013 when the Ministry of Finance issued detailed regulations on applying these rules.

Today, transfer pricing is governed by two key pieces of legislation: the Corporate Income Tax Law (CIT Law) and the Rulebook on Transfer Pricing, which specifies methods for determining arm's length prices in related-party transactions.

Who Qualifies as a Related Party?

Understanding related party definitions is essential because any transaction with a related party triggers documentation requirements. Serbian law defines related parties broadly:

- Ownership threshold: An entity holding at least 25% of shares — whether through direct or indirect ownership — is considered a related party. This captures most parent-subsidiary relationships commonly seen with foreign investors.

- Control or significant influence: Beyond ownership percentages, any entity capable of controlling or significantly influencing business decisions qualifies as a related party.

- Family members: Immediate family relationships between company owners or decision-makers create related party status.

- Tax haven jurisdictions: Any company resident in a jurisdiction with a preferential tax system is automatically deemed a related party, regardless of actual ownership. The Ministry of Finance maintains a list of 51 such jurisdictions.

This broad definition means that virtually every foreign-owned Serbian subsidiary will have related party transactions requiring documentation.

Documentation Requirements

Serbian transfer pricing documentation combines elements of what international guidelines call "master file" and "local file" into a single comprehensive document. The format is unique to Serbia and must be prepared in Serbian language only.

Required content includes:

- Group and taxpayer analysis providing context about your corporate structure, the Serbian entity's role, and relevant business activities.

- Industry analysis examining market conditions, competitive dynamics, and factors affecting pricing in your sector.

- Functional analysis detailing which entity performs what functions, bears which risks, and owns which assets relevant to the controlled transactions.

- Selection of transfer pricing method with justification for why your chosen approach best reflects arm's length pricing.

- Conclusions documenting the arm's length range and where your actual transaction prices fall within that range.

- Supporting appendices including contracts, financial data, and benchmark studies.

Filing Deadline

Transfer pricing documentation must be submitted together with your annual corporate income tax return. For companies following a calendar fiscal year, this means the standard deadline is June 30 following the tax year.

If you need additional time, you can request an extension of up to 90 days. However, this requires a formal application — extensions are not automatic.

Country-by-Country Reporting

Large multinational groups face additional reporting requirements. Serbia implemented Country-by-Country Reporting (CbCR) regulations effective for fiscal years starting January 1, 2020.

CbCR applies when:

- The Serbian entity is the ultimate parent of an international group

- The group's consolidated revenues exceed EUR 750 million

If your Serbian subsidiary is part of a group meeting this threshold but the ultimate parent is located elsewhere, the CbCR filing obligation typically rests with the parent company in its home jurisdiction.

Alignment with OECD Guidelines

Serbian transfer pricing rules largely align with OECD Transfer Pricing Guidelines, providing familiar territory for multinational groups accustomed to international standards.

One notable exception: interest rates on intercompany loans have specific Serbian rules that may differ from pure OECD-based approaches. The Ministry of Finance publishes annual safe harbor interest rates that taxpayers can apply, or companies can conduct their own benchmark analysis to support different rates.

It's worth noting that Serbia is not an OECD member country, so while the guidelines inform Serbian practice, they don't automatically apply.

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Acceptable Transfer Pricing Methods

Serbia applies the "best method" approach — there is no hierarchy among methods. Your choice should depend on the nature of the transaction, availability of reliable comparable data, and degree of comparability between controlled and uncontrolled transactions.

Acceptable methods include:

- Comparable Uncontrolled Price (CUP) compares prices charged in controlled transactions to prices in comparable uncontrolled transactions. This method works best when reliable comparable transactions exist.

- Resale Price Method starts with the resale price to independent parties and subtracts an appropriate gross margin. It suits distribution arrangements where the reseller adds limited value.

- Cost Plus Method adds an appropriate markup to costs incurred by the supplier. It works well for manufacturing or service arrangements where costs are reliably measurable.

- Transactional Net Margin Method (TNMM) examines net profit margins relative to an appropriate base such as costs, sales, or assets. This method is commonly used when transaction-level comparables are unavailable.

- Profit Split Method divides combined profits between related parties based on their relative contributions. It applies to highly integrated operations where parties make unique and valuable contributions.

Combinations of methods can be applied where appropriate. The key is selecting and documenting whichever approach best demonstrates arm's length pricing for your specific transactions.

Conducting Economic Analysis

The Serbian Tax Administration has preferences that should guide your benchmark approach:

- Internal comparables preferred: Where available, comparisons to the company's own transactions with unrelated parties carry more weight than external database searches.

- Local comparables emphasized: Serbian comparable companies are ideal. If unavailable, the Tax Administration generally accepts comparables from the Balkan region, Eastern Europe, or broader regional sets.

- Local market conditions matter: Your analysis must account for specific factors affecting pricing or margins in the Serbian market. Generic global benchmarks without local adjustments face greater scrutiny.

- Annual updates expected: Arm's length analysis should be updated yearly. The Tax Administration expects reasonable consistency in your comparable company set and interquartile ranges from year to year — significant unexplained swings raise red flags.

Common Audit Risk Factors

Certain patterns attract Tax Administration attention:

- Significant profit fluctuations: Major year-over-year changes in profitability require clear explanation. Unexplained volatility suggests potential pricing manipulation.

- Persistent losses in low-risk entities: If your Serbian subsidiary performs limited functions and bears minimal risk, it should generally earn stable, positive returns. Ongoing losses in such structures invite challenge.

- Management fees and service charges: Intercompany services remain among the most scrutinized transaction types. Ensure robust documentation of services actually rendered and their value to the Serbian entity.

- Aggressive pricing positions: Transactions priced at the extreme edges of arm's length ranges face greater challenge than those near the median.

Advance Pricing Agreements

Unlike many jurisdictions, Serbia does not currently offer Advance Pricing Agreements (APAs). Taxpayers cannot obtain binding advance rulings on transfer pricing methodologies.

This means you must rely on robust contemporaneous documentation to defend your positions if challenged. There is no mechanism to achieve certainty in advance through agreement with the Tax Administration.

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Simplified Documentation for Small Transactions

Not all related party transactions require full documentation. Serbia provides a materiality threshold offering relief for smaller dealings.

Simplified documentation applies when:

- A one-off transaction amounts to less than RSD 8 million (approximately EUR 68,000), OR

- Total annual transactions with a single related party fall below RSD 8 million

Important exception: Intercompany loans and other financial transactions cannot use simplified documentation regardless of amount. Full transfer pricing analysis is always required for financing arrangements.

The simplified report need only include:

- Description of the transaction

- Transaction value

- Identification of the related party involved

Even with simplified documentation, you must still file — the threshold reduces documentation burden, not the filing obligation itself.

Intercompany Loan Interest Rates

Financing transactions receive special treatment in Serbian transfer pricing. The Ministry of Finance publishes an annual Rulebook specifying interest rates deemed to comply with arm's length standards.

You have two options:

- Apply safe harbor rates: Use the Ministry-prescribed rates without further analysis. This approach offers simplicity and certainty but may not reflect your group's actual borrowing capacity.

- Conduct independent analysis: Perform your own benchmark study to support different interest rates. This requires more documentation effort but allows rates tailored to your specific circumstances, potentially reducing tax costs.

Most taxpayers with significant intercompany financing find independent analysis worthwhile, particularly if their group's credit profile supports rates below the safe harbor.

Statute of Limitations

Transfer pricing assessments follow Serbia's general statute of limitations:

- Standard period: Five years from the day the limitation period commenced

- Absolute limit: Ten years maximum

This means the Tax Administration can challenge transfer pricing positions for tax years within the past five years. Maintaining complete documentation for this period is essential.

Penalties for Non-Compliance

Serbian penalties for transfer pricing failures can be substantial:

- Documentation failures: Failure to prepare or submit required documentation carries penalties ranging from RSD 100,000 to RSD 2,000,000 (approximately EUR 800 to EUR 16,500).

- Tax adjustments: If the Tax Administration determines that transfer prices understated taxable income, additional penalties of up to 25% of the understated tax liability apply. These penalties cannot be less than RSD 500,000 (approximately EUR 4,000).

No penalty relief program exists. However, taxpayers may request the 90-day extension to complete documentation requirements, which can help avoid penalties for late submission.

Getting Transfer Pricing Right

For foreign-owned Serbian subsidiaries, transfer pricing compliance is not optional — it's a core tax obligation with real financial consequences for failure.

Key takeaways:

- Document everything annually: Every related party transaction requires documentation, submitted with your June tax return.

- Choose methods carefully: Select approaches supported by reliable data and appropriate to your transaction types.

- Use local comparables: The Tax Administration favors Serbian and regional benchmarks over generic global data.

- Pay special attention to services and loans: These transaction types face the highest scrutiny.

- Maintain records for five years minimum: The statute of limitations means old positions remain open to challenge.

At Tax Advisor Serbia, transfer pricing is a core specialty. We prepare compliant documentation for foreign subsidiaries across all industries, handling everything from straightforward distribution arrangements to complex service and financing structures.

Need help with your Serbian transfer pricing obligations? Book a consultation to discuss your specific situation.

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