Based on the Law on Personal Income Tax and the Law on Compulsory Social Insurance Contributions, which prescribe a tax exemption for employers (legal entities) performing research and development within their activities on the territory of the Republic of Serbia, the Ministry of Finance has issued a Rulebook on conditions and manner of exercising the right to tax exemption based on the salaries of employees who work on research and development projects. The Rulebook entered into force on April 16, 2022.
The Rulebook regulates in more detail the conditions and manner of exercising the right to tax exemption based on the salary of employees directly engaged in research and development activities performed by the employer who performs research and development in Serbia.
The employer is entitled to the exemption from the obligation to pay 70% of the calculated and suspended tax on salaries of employees in research and development, in proportion to the time that employees spend directly working on research and development in relation to full-time work.
The Rulebook prescribes:
1. What is considered to be a research and development project
A research and development project is considered to be a project in which at least 90% of employees engaged in research and development work perform their activities on the territory of the Republic of Serbia.
2. Who are employees who work on research and development
An employee who works on research and development is considered to be a person who is directly involved in identifying and solving relevant problems related to a specific project. Employees engaged in the activities of direct or indirect project supervision and support in connection related to the implementation of the project are not considered persons employed in research and development activities within the meaning of this Rulebook.
3. Which legal entities cannot use this tax exemption
This tax exemption cannot be used by the employer if the research and development work is performed on behalf of other persons, as well as if the employer is a legal entity established abroad or is a branch or representative office of a foreign legal entity in the Republic of Serbia.
The Rulebook also regulates the formula for determining the tax exemptions, as well as the necessary employee records and documentation prescribed for each project that the employer must have from the moment of using the tax exemption, ie filing the tax returns.
