In the Serbian corporate tax environment, capital gains are not merely "extra profit." They are a strictly regulated category of income that can significantly alter a company’s tax liability. For the 2026 tax period, the rules remain consistent with previous years, but the margin for error in calculation- especially regarding tax-adjusted purchase prices and related-party transactions - remains high.

At Tax Advisor Serbia, I specialize in bridging the gap between accounting reality and tax compliance. This guide provides the technical "meat" behind Articles 27 through 31 of the Corporate Income Tax (CIT) Law.

1. Defining the Scope: What Constitutes a Taxable Capital Asset?

Under Article 27, a capital gain or loss is realized only through the sale or transfer (for a fee) of specific assets. It is a common misconception that selling any fixed asset triggers a capital gain.

Assets Subject to Capital Gains Tax:

• Real Estate: Land and buildings used as fixed assets for business operations, including property under construction.
• Intellectual Property (IP): The transfer of industrial property rights or copyrights in their entirety.
• Long-Term Financial Placements: Shares in legal entities, stocks, and other securities (typically recorded in Group 04).
• Investment Units: Units in investment funds.
• Digital Assets: Cryptocurrencies and tokens (unless the taxpayer is a licensed dealer holding them for inventory).

The "Equipment" Distinction: Selling machinery, tools, or vehicles is not a capital gain event. These are treated as regular business income/expenses and recognized directly in the tax balance sheet based on their book value.

2. Calculating the Gain: The Article 28 & 29 Formula

The formula seems simple: Sale Price - Purchase Price. However, for tax purposes, both variables are subject to specific adjustments.

A. The Sale Price (Article 28)

For transactions with independent parties, the contract price is accepted. However, for Related-Party Transactions (Article 59):

• If the contract price is lower than the market price, the market price must be used as the tax basis.
• Note: While you must use the market price, Article 60(6) specifies that you are not required to submit full transfer pricing documentation or use specific "Arms-Length" methods for these specific assets, though the market value must still be defensible.

B. The Tax-Adjusted Purchase Price (Article 29)

The purchase price is the cost of acquisition minus the recognized tax depreciation.

• The Depreciation Trap: You must use tax depreciation (recognized in the tax balance sheet), not the accounting depreciation shown in your financial statements.
• Fair Value & Revaluation: If you carry investment property at "Fair Value" and the changes are booked through the P&L as income, that fair value becomes your tax cost. However, if the increase was booked as Revaluation Reserves (Account 330), it is ignored; your tax cost remains the original acquisition cost minus tax depreciation.
• Subsequent Investments: Costs incurred for the improvement or expansion of a property (Capex) are added to the purchase price, provided they were capitalized in accordance with IAS/IFRS.

3. High-Value Incentives and Exemptions

Serbia provides several strategic incentives that can reduce the effective tax rate on capital gains to near zero.

The 80% Intellectual Property Exemption (Article 30)

If your company transfers the rights to a registered (deponovan) copyrighted work or a patent, only 20% of the gain is included in the taxable base. This effectively reduces the tax rate on these gains from 15% to 3%.

• Condition: The IP must be deposited with the competent authority (e.g., the Intellectual Property Office).
• Loss Treatment: If you realize a loss on such a transfer, only 20% of that loss can be used to offset other capital gains.

Digital Assets & Reinvestment (Article 30b)

Gains from the sale of digital assets are 100% exempt if the proceeds are reinvested into the share capital of a Serbian resident company or a domestic investment fund within the same tax period.

Status Changes and M&A (Article 31)

Mergers, acquisitions, and spin-offs performed in accordance with the Company Law allow for the deferral of capital gains tax. The tax liability is "inherited" by the successor company and only triggered when the asset is eventually sold to a third party.

• The 10% Cash Limit: To qualify for deferral, the owners of the transferring company must receive shares in the new entity. Any cash payment involved cannot exceed 10% of the nominal value of the shares received.

4. Offsetting, Carry-Forwards, and Reporting

Capital gains and losses are isolated from your regular operating profit.

• Offsetting: A capital loss from selling shares can be used to offset a capital gain from selling a building, but only within the same year.
• 5-Year Carry-Forward: If your total capital losses exceed your gains in 2026, you can carry that loss forward for 5 years to offset future capital gains.
• Reporting (Form PB1): There is no separate "Capital Gains Tax Return." All calculations are reported within the annual tax balance sheet. Accounting gains/losses are excluded on lines 4 and 5, while tax-calculated gains/losses are included on lines 63 and 64.

5. Special Reporting for Non-Resident Companies: Form PP KDZN

If a foreign legal entity (non-resident) realizes a capital gain from the sale of assets located in Serbia - most commonly real estate or shares in a Serbian LLC (DOO) - the reporting process is entirely different from that of resident companies.

The 30-Day Deadline

Unlike resident companies that report gains once a year in their annual tax balance sheet, non-residents must file Form PP KDZN.

• Timeline: The tax return must be submitted within 30 days from the date the gain was realized (usually the date of the sale contract or the transfer of rights).
• The Tax Proxy Requirement: To file this form, the foreign entity must appoint a tax proxy in Serbia who has a local tax identification number (PIB).

Impact of Double Tax Treaties (DTT)

The statutory tax rate for capital gains in Serbia is 15%. However, many non-residents can significantly reduce or eliminate this tax liability by invoking a Double Taxation Treaty.

• Requirement: To apply the treaty rate (or exemption), the non-resident must provide a Certificate of Tax Residence from their home country before the tax becomes due.

6. Expert Insight: Why "Accounting Profit" Isn't Enough

I often see cases where a company shows an accounting loss on a sale due to high revaluation, but still owes significant Capital Gains Tax because the tax-adjusted cost is much lower.

For example, a building purchased for €1M and revalued to €1.5M might be sold for €1.4M. The books show a €100k loss, but the tax balance sheet (after adjusting for depreciation) might show a €500k gain.

7. Secure Your Exit Strategy

Whether you are reorganizing your group through an LLC (DOO) or exiting a long-term investment, the tax implications are too significant to ignore. At Tax Advisor Serbia, I provide senior-only execution to ensure your capital gains are calculated with Big Four precision.

Ready to review your 2026 tax projections? Contact me today for a consultation.