SERBIA: Tax incentives for research and development (R&D)
Companies operating in the territory of the Republic of Serbia that conduct research and development activities may, subject to statutory conditions, benefit from significant tax incentives. These measures are aimed at encouraging investments in innovation, the development of new products and technologies, as well as the engagement of highly qualified personnel in roles with a strong development component.
The current tax framework primarily provides for two types of benefits:
- The employer’s right to a tax exemption on salaries of employees directly engaged in research and development activities; and
- The recognition of certain expenses directly related to research and development in the tax balance sheet at double their amount.
However, eligibility for these incentives does not depend solely on whether a company formally designates a project as an R&D project. It is necessary that: (i) the activities genuinely constitute research or development within the meaning of the relevant regulations, (ii) the project is carried out in the Republic of Serbia, and (iii) the company performs the R&D for its own account while retaining the rights to the results of such activities.
Special attention should be paid to the proper qualification of employees and costs falling within the incentive regime. Regulations clearly distinguish between direct R&D engagement and activities of an administrative, organizational, or auxiliary nature, as well as between costs that are directly related to the project and those that are not. Therefore, careful legal and tax analysis is required in each individual case.
It is equally important that the taxpayer maintains proper and complete documentation. In practice, the ability to benefit from these incentives depends not only on the nature of the project itself, but also on the company’s ability to demonstrate compliance with all prescribed conditions through appropriate records, internal acts, reports, and supporting documentation.
In addition to R&D incentives, there is also a specific tax incentive commonly known as the IP Box regime. The IP Box is intended for companies generating income from their own intellectual property, such as software, copyrighted works, or certain patentable solutions. If the legal conditions are met, a portion of such income may benefit from preferential tax treatment, significantly reducing the effective corporate income tax burden, thereby making the development and commercialization of innovations in Serbia more legally and tax efficient.
For more information on this topic, please feel free to contact us via email at: jelena.todorovic@tsg.rs or office@tsg.rs
