There are three relevant tax provisions:
- the Law on the Profits of Legal Entities (RS OG No. 25/2001 amended 80/2002, 43/2003 and 84/2004) entitles them to deduct 1.5% of their income in one fiscal year for donations made to culture; After Profit Tax was amended in 2010 – the amount of deduction increased to 3% of their income in one fiscal year for donations made to culture, and finally to 5% in the year 2014.
- the Income Tax Law permits deductions on personal income tax for cultural activities. Artists are allowed a tax deduction of between 40-65% on their earnings for expenses related to their work (without documentation); and
- gifts to museums, libraries and other cultural institutions are exempt from taxes.
The tax rate on the net income resulting from intellectual property rights is 20%. The Income Tax Law (RS OG No. 24/2001) provides a breakdown of the % share of income derived from intellectual property rights that is tax deductible:
- 65% – sculpture, tapestry, art ceramics, mosaic and stained glass;
- 55% – art photography, fresco painting and similar arts, clothes design and textile design;
- 50% – painting, graphic design, industrial design, visual communications, landscaping, restorations, translations;
- 45% – music performance, movie-making; and
- 10% – programmes and performances of folk music; and all other activities.
After the Income Tax Law was amended in 2002, 2004, 2006 and 2009 (RS OG No. 80/2002, 135/2004, 62/2006, 65/2006, 31/2009 and 44/2009) the % share of tax deductible income derived from intellectual property changed as follows:
- 50% – sculpture, tapestry, art ceramics, ceroplastics, mosaic and stained glass, art photography, wall painting and other painting in the space with various techniques, costume design, fashion design and artistic processing of textile;
- 43% – paintings, graphics, industrial design with the development of models, small works from plastic, visual communication works, interior design works and facade architecture, scenography designs, scientific, technical, literary and fiction works, translations, restoration and conservation work, performances of artistic work (playing of instruments and singing, theatre and film acting, recitation), shooting movies and conceptual sketches for the tapestry and costume design.
- 34% – for the programmes and performances of popular and folk music, production of phonograms, production of videograms, production of TV shows, database production, and all other author and related rights which are not listed.
The third type of the tax deductible income (34% share of tax deductible income) was a result of the lobbying of large concert organisers and folk and popular music producers. They were quite successful in their lobbying – previous rate for the folk artists was constantly 10%, while the rates for the first two groups were higher (60% and 50% after the changes in 2006).
The Income Tax Law does not permit individuals to deduct for contributions to charity. This restrictive tax treatment came into effect in 2001 as a part of general tax system reform. The new Law on Personal Income Tax repealed a system of non-standard tax deductions, which could be up to 15% taxable income. Except for donations for cultural purposes, this tax-benefited treatment had been dedicated also for investments in objects with special cultural, historical and scientific value.
Deductions offered, in the Law on the Profits of Legal Entities, on donations to culture are not really considered as an incentive in practice. In addition, the character of cultural donations and types of organisations that may receive tax-benefit contributions were regulated by direction. The donations can be made for: production, prevention and research of cultural values and heritage; improvement of conditions for the development of cultural activities; international cultural cooperation; education and research in the field of culture and stimulation of creative work. The types of organisations that may receive tax-benefit contribution are in the field of: heritage, museums and galleries; artistic, literary and other creative work; film industry and video production; archive, library, botanical and zoological gardens and the publishing of books, publications and booklets.
The Law on the Profit of Legal Entities also regulates tax exemption for non-profit organisations. According to Article 44, non-profit organisations are granted tax exemption under the following conditions:
- the income is up to 300 000 CSD (around 2 900 EUR in the year 2011) higher than its expenditure in the year of which the right to tax exemption is granted;
- the non-profit organisation in question does not distribute the income thus generated to its founders, members, executives, employees or persons associated with them;
- the salaries paid to employees, executives or persons associated with them are not higher than twice the average salary paid in the business area to which the non-profit organisation in question belongs; and
- the non-profit organisation in question does not distribute its assets in favour of its founders, members, executives, employees or persons associated with them.
Incentives introduced during the former regime have disappeared, such as the matching fund “corporation-state / dinar na dinar”. New incentives have not yet been created. At present, all donations (except those given through the government) have a 5% gift tax, even if the donation is made in kind. This represents a huge obstacle, even to large donors of equipment. The institution / recipient usually have to find another donor to cover the taxes to be paid to the state.
VAT was introduced in Serbia at the beginning of 2005.The general rate is 20%. A reduced rate of VAT for books, tickets for music manifestations and cinema tickets is 8%.
In 2011, the Ministry of Trade made a decision to grant tax benefit (tax credits) to foreign companies that are producing films in Serbia. The tax credits were temporary based (only for 2011) and are considered to be part of initiatives in the framework of the Programme of Branding Serbia). In 2015, the tax incentive programme became part of a regulatory framework to attract investment. A new regulation on investiture incentive for the production of audio-visual works in Serbia was adopted in 2015. It allows film companies to rebate the part of taxes paid in Serbia for production. Eligible costs includes: fees and earning as well taxes paid to members of the film production who are tax resident of Serbia; cost of rental, hotel accommodation, per diems up to 100 EUR per day; copyright fee;, cost of goods purchased in Serbia and used for film production; film insurance premiums; overhead expenses and operating costs. Criteria for applying those incentives depends on the minimum budget of the production: 300.000 EUR minimum for films and TV films, 150.000 EUR minimum for animated films, 100.000 EUR minimum for special purpose films and TV commercials and 50.000 for documentary films. Tax incentives raised from 20% to 25% in 2018. Applications for the tax incentive programme are submitted to Film Centre Serbia and granted after a decision by the tax incentive commission. In 2018, the budget for the tax incentive programme is approximately 6,7 million EUR.