The draft amendments to the Corporate Income Tax Law introduce the alignment of Serbia’s domestic legislation with European Union rules, particularly in the area of taxation of cross-border business transactions between companies in Serbia and EU Member States. One of the most significant changes is that dividends and profit distributions paid between Serbian resident taxpayers and companies from EU Member States will no longer be included in the tax base, thereby preventing the double taxation of such income.
The proposed legislation also removes certain existing provisions relating to the tax treatment of specific international transactions and introduces an entirely new chapter regulating in detail the tax treatment of cross-border corporate restructuring transactions between companies from different EU Member States.
The new provisions define mergers, divisions, partial divisions, transfers of assets, share exchanges, and transfers of the registered office of European companies and cooperatives between EU Member States. The objective is to enable tax-neutral corporate restructuring, meaning that certain capital gains will not be taxed at the time the transaction is carried out.
Under the proposed rules, capital gains arising from the transfer of a business undertaking through an asset transfer will not be included in taxable profits, while capital losses resulting from such transfers will not be recognised as deductible tax expenses.
The proposal also introduces special rules for cases where Serbian companies transfer business operations to companies in the EU, or vice versa. Tax relief will only be available if the business continues to operate through a permanent establishment in Serbia. Furthermore, if the transferred business undertaking is disposed of within five years, tax on the realised capital gain will subsequently become payable.
In this way, Serbia is aligning its system for the taxation of corporate restructuring transactions with EU Directive 2009/133/EC, which should facilitate cross-border mergers, divisions and corporate reorganisations following accession to the European Union.
The proposed amendments to the Corporate Income Tax Law provide that, in the case of mergers, divisions and partial divisions, capital gains and losses arising from the transfer of assets and liabilities will not be immediately included in the tax base. At the same time, companies will be required to record hidden reserves, although these reserves will not be taxed at the time of the restructuring transaction.
The acquiring company will be entitled to take over provisions and tax losses of the transferring company under the same conditions that would have applied had the transfer not taken place. In addition, gains arising from the cancellation of shareholdings in the capital of the transferred company will not be taxed, nor will gains or losses realised by shareholders through share exchanges in the course of a merger, division or partial division, except in certain circumstances where cash consideration is paid.
The proposal further stipulates that capital gains or losses arising from the allocation of shares or ownership interests in the acquiring company to members of the transferred company will not be regarded as taxable. These tax benefits may be used by companies from Serbia and EU Member States, provided that the transferred assets, liabilities, reserves and losses remain connected to business activities in Serbia through a permanent establishment where required by law.
Special rules are also introduced for the transfer of permanent establishments between EU Member States. In such cases, gains or losses arising from the transfer will generally not be subject to taxation, while companies will retain the right to utilise certain tax losses carried forward from previous periods.
Furthermore, capital gains and losses will not be recognised in relation to the transfer of shares or equity interests held by an owner for at least ten years, nor in relation to certain corporate restructuring transactions and share exchanges carried out without significant cash payments.
The draft law also provides that these tax benefits will not apply where the principal purpose of the transaction is tax avoidance or tax evasion. Companies will be required to report corporate restructuring transactions to the Tax Administration in order to qualify for the proposed reliefs.
A significant innovation concerns interest payments and royalties between related companies in different EU Member States. Such payments will be exempt from withholding tax in Serbia, provided that the prescribed conditions regarding corporate affiliation, tax status and the submission of appropriate certification from the tax authorities are met.
Two important tax rules introduced
First, a limitation on the deductibility of interest expenses is introduced. Companies will be permitted to deduct borrowing costs only up to 30 per cent of EBITDA or up to €3 million per year, whichever is more favourable. Any excess borrowing costs will increase the tax base but may be carried forward for the following three years. This rule will not apply to standalone business entities that are not members of groups of related parties, nor to financial institutions.
Second, the proposal introduces Controlled Foreign Company (CFC) rules. Where a Serbian company controls a foreign entity operating in a jurisdiction with substantially lower taxation, part of that entity’s undistributed profits must be included in the Serbian company’s tax base. The rule primarily applies to income from interest, royalties, dividends, financial services and other similar passive income streams, with the aim of preventing the shifting of profits to low-tax jurisdictions.
An exception is provided for companies that carry out genuine economic activities and maintain real business operations, employees and assets in the relevant jurisdiction.
(Biznis.rs, 04.06.2026)
https://biznis.rs/novac/banke/bez-oporezivanja-dividendi-izmedju-povezanih-drustava-iz-srbije-i-eu/