Depreciation and amortisation
According to the CIT Law, assets qualifying for tax depreciation are tangible assets with useful life over one year, which are recognised as non-current assets under IFRS, excluding renewable natural resources, and intangibles. Goodwill cannot be depreciated for tax purposes.
Tax depreciable assets, except intangible assets, are divided into five groups, with the tax depreciation rates ranging from 2.5% to 30%.
Tax depreciation of fixed assets classified in tax depreciation groups II through V is calculated by using the straight-line depreciation method. In case amortisation costs calculated in accordance with the accounting rules are determined in the lower amount comparing to the amount of depreciation costs assessed by using tax depreciation rates, accounting depreciation is recognised as tax deductible cost.
Tax depreciation of intangible assets is equal to their accounting depreciation.
Assets classified into groups II through V and which were acquired before 31 December 2018 are depreciated for tax purposes by applying the declining-balance method.
Goodwill is not subject to tax amortisation.
Generally, start-up expenses are tax deductible for CIT purposes.
Interest on related-party loans exceeding thin capitalisation and transfer pricing thresholds are not deductible (see the Group taxation section).
Bad debt provisions are generally tax deductible if they are at least 60 days overdue. Provisions have to be made individually for each receivable.
Write-off of individual debts, except for those from debtors who are at the same time creditors, is recognised as an expense under the following conditions:
- They were written off as uncollectable.
- 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.
Taxable income should be increased for receivables that are written-off and do not meet the above requirements and for which tax-deductible provisions were previously made.
Expenses for health care, scientific, educational, humanitarian, religious, ecological, cultural, and sport related purposes, as well as humanitarian aid given to the Republic of Serbia, its autonomous provinces, and the local government for sanitation of consequences that emerged during emergency situations, are deductible, at up to 5% of total revenues.
Research and development (R&D) expenses
See Research and development (R&D) double deduction in the Tax credits and incentives section.
Fines and penalties
Fines and penalties (both commercial and those charged by the authorities) are not deductible.
All taxes, duties, and contributions that do not depend on the profitability of the company are deductible in the tax period that the liability in this respect was settled.
Other significant items
The following other expenses are not recognised for CIT purposes:
- Non-documented expenses.
- Provisions for receivables from entities that are creditors at the same time, up to the amount of the liability due to that entity.
- Presents provided to political organisations.
- Presents provided to related parties.
- Penalty interest for late payment of taxes, contributions, and other charges.
- Expenses related to forced collection of taxes and other liabilities.
- Non-business related expense.
- Share in the profit paid to employees or other individuals.
- Calculated but unpaid redundancy payments (deductible when paid).
- Expenses related to employment costs, apart from salaries (deductible when paid).
- Impairment of assets (deductible in tax period in which asset is disposed of or used).
- Direct write-off of receivables (under certain conditions).
- Long-term provisions (deductible when paid).
The following other expenses are recognised for CIT purposes only up to a certain limit:
- Business entertainment expenses, up to 0.5% of total revenues.
- Membership fees paid to chambers of commerce and other associations (except political parties), up to 0.1% of gross revenue.
Net operating losses
The taxpayer has the right to carry forward and utilise tax losses incurred over the following five years.
Carryback rules do not exist in Serbia.
Payments to foreign affiliates
Generally, there are no restrictions on the deductibility of royalties and service fees paid to foreign affiliates, provided they are at arm's length, appropriately documented (by agreements, contracts, calculation sheets, etc.), and incurred for business purposes only.
Payment of interest to foreign affiliates is restricted and regulated by thin capitalisation rules and transfer pricing rules (see the Group taxation section).