Tax credit for startup investments in Serbia
A company that invests funds in the capital of a newly founded company in Serbia that performs innovative activities can exercise the right to a tax credit that is used to reduce the calculated profit tax. Tax credit based on investment in the capital of a newly founded company engaged in innovation activity represents 30% of the investment made.
Innovative activity includes activities undertaken to create new products, technologies, processes, and services or to make significant changes to existing ones. Thus, innovation can refer to the improvement or creation of a new product, service, or process, as well as the application of a new or significantly improved method of production or delivery, organization, and marketing innovation.
Requirements for a company to be entitled to a tax credit include:
- not an innovation startup;
- before the investment, independently or together with all related parties*, did not own more than 25% of shares, i.e., votes in the startup’s management bodies (if the investor, the company alone, or its subsidiary company at no time before the investment did not own more than 25% share);
- has fully paid the monetary contributions;
- did not reduce its investment continuously for a period of three years from the date of investment.
An investor company can use a tax credit in the first subsequent tax period following the period in which the condition of non-reduction of contributions is fulfilled, which means that it is entitled to a tax credit after three years from the date of investment (calculation of the period begins on the last day of the tax period in which investment was made). If the investor makes the entire investment in 2023, he will have the right to use a tax credit for the profit tax determined for 2027.
Requirements that an innovative startup should meet:
It is a company:
- from the establishment of which no more than 3 years have passed;
- mainly performs innovative activities (activities undertaken to create new products, technologies, processes, and services or significant changes to existing ones based on the needs of the market).
- According to the latest financial reports, the annual income does not exceed 500,000,000 dinars.
- which has not distributed dividends, i.e., profit shares, since its foundation, i.e., that they will not be distributed within a period of 3 years from the date of investment;
- whose center of business activities is located in the territory of Serbia.
- which did not result from a change in status;
- which, from the second year of establishment until the payment of the investment by the investor, must fulfill one of the following three conditions:
- R&D costs make up at least 15% of total expenses, or
- Highly qualified employees make up more than 80% of all employees, or
- that the startup is the owner, that is, the user of the deposited author’s work or patent that is directly related to the innovative activity it performs.