Serbia
Corporate income tax
Corporate Income Tax (CIT) is levied at the standard rate of 10% on the profits of Serbian resident companies and non-resident entities operating in Serbia through a permanent establishment.
Serbian based companies deriving income through a newly established branch in an underdeveloped area are granted a tax credit for the proportion of the tax relating to branch income (versus total income). This relief is available for the first 2 years in which such income is derived.
Companies investing in fixed assets used for a registered business activity are entitled to a tax credit of 20% of the cost of such investments made in the year. The tax credit is limited to 50% of any CIT due. For small companies, tax credit is given of up to 40% of investments made in the year and is limited to 70% of the total CIT due. A tax credit equivalent to 80% of such investments (not limited in relation to the CIT due) is allowed for particular industries, such as agriculture, for any size of company. Any excess tax credit can be carried forward for up to ten years.
CIT on a proportion of company profits can be deferred for up to 10 years, starting from the first year in which taxable income is realised if the following conditions are met:
i. The level of investment by the company exceeds CSD 600m; and
ii. The company employs at least 100 employees for an indefinite period.
The proportion of tax which can be deferred is the same as the proportion of investment in fixed assets invested in during the year versus total fixed assets held at the end of the year.
Rental income payments made to non-Serbian residents in relation to Serbian real estate are subject to withholding tax at the standard rate of 20%.
Capital gains
Capital gains realised by Serbian resident companies on the disposal of Serbian real estate are subject to CIT at the standard rate of 10%. Such gains realised by non-resident entities are subject to 20% withholding tax, subject to the provisions of any relevant double tax treaty.
Property tax
An annual tax of 0.4% is levied on the book value of Serbian real estate owned by the company or on the book value of municipal construction land of over 1,000 square meters over which usage rights are held as at 31 December of the preceding year. This tax is payable in quarterly instalments.
Property transfer tax
Property transfer tax is charged at 5% of the disposal value of Serbian land and buildings (including the transfer of permanent right to use municipal construction land). The transfer of real estate is exempt from property transfer tax if the real estate is contributed as equity on the initial incorporation or increase in capital of a company or is transferred as part of a merger, corporate acquisition, or division of an existing company.
Transfer tax is chargeable on the disposal of shares in a real estate owning company at the rate of 0.3%.
Both the vendor and the purchaser are jointly and severally liable for the transfer tax. In practice, this tax is generally paid by the purchaser.
VAT
Taxpayers with a turnover of over CSD 2 million must register for VAT. VAT returns must be filed monthly by the 10th day of the subsequent month.
The acquisition of a new building (i.e. the first transfer of title) that is used for commercial purposes is subject to VAT at 18%. The acquisition of a new building that is used for residential purposes is subject to VAT at 8%. The lease of residential real estate is not subject to VAT. However, VAT is charged at 18% on the lease of commercial property.
Any other transfer of real estate (including land) is subject to property transfer tax (see above).
Montenegro
Corporate income tax
Corporate Income Tax (CIT) is levied at the standard rate of 9% on the profits of Montenegro resident companies and non-resident entities operating through a permanent establishment in Montenegro. Companies deriving income through a newly established branch in an underdeveloped area are granted a tax credit for the proportion of the tax relating to the branch income (versus total income). This relief is available for the first 3 years in which such income is derived.
Companies that employ new permanent employees for a minimum of two years are entitled to deduct an amount equivalent to the salaries of the new employees and the amount of social security contributions due by the employer from taxable income. This tax incentive can be used for a period of one year from the day when the new employee is hired.
Rental income derived by non resident entities in relation to real estate located in Montenegro is subject to withholding tax at the standard rate of 15%, subject to the provisions of any relevant double taxation treaties.
Capital gains
Capital gains realised by companies resident in Montenegro on the disposal of real estate located in Montenegro are subject to CIT at the standard rate of 9%. Such gains realised by non-residents are subject to 15% withholding tax (subject to the provisions of any relevant double taxation treaties).
Property tax
An annual property tax of between 0.08% and 0.8% is levied on the book value (as at 31 December of the preceding year) of real estate located in Montenegro. In most cases, the tax rate on buildings is 0.2%. This tax is payable in two instalments during the year.
Property transfer tax
Property transfer tax at 2% is payable by the purchaser on the acquisition of real estate located in Montenegro, except on the transfer of newly built property (see below). The transfer of real estate is exempt from property transfer tax if the real estate is contributed as equity on the initial incorporation or increase in capital of a company or is transferred as part of a merger, corporate acquisition, or division of an existing company.
VAT
Transfer of newly built property located in Montenegro is subject to VAT at the rate of 17%. The lease of residential real estate is not subject to VAT. Any other transfer of real estate is subject to property transfer tax (see above).
The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.