Tax incentives for research and development

A large number of IT companies, as well as other companies conducting research and development projects, are still unfamiliar with the tax regulations concerning the recognition of research and development costs and what impact this has on the corporate income tax base.

Namely, Article 22g of the Serbian Law on Corporate Income Tax prescribes that expenses that are directly related to research and development performed by a taxpayer in Serbia may be recognized as an expense in the taxpayer’s balance sheet, in twice the amount. This means that these legal entities have the opportunity to recognize in the tax balance double the amount of expenses incurred in connection with research and development activities.

Research is considered original or planned research undertaken in order to acquire new scientific or technical knowledge and understanding, which means that it is necessary to work systematically on research, while accidental discovery or knowledge could not qualify as research in terms of this tax incentive. On the other hand, development is the application of research results or the application of other scientific achievements or designs for the production of new significantly improved materials, devices, products, processes, systems or services before entering commercial production or use. The condition for acquiring this right is that the research and development project is carried out in Serbia. A project is considered carried out in Serbia if at least 90% of all employees engaged in research and development work in Serbia.