Serbia’s Corporate Tax Reform Preserves Investment Incentives Through 2037

Serbia’s proposed corporate tax overhaul would remove its flagship investment incentive while introducing broader rules aimed at limiting multinational profit shifting, but the transition between the two systems is set to extend well into the next decade. The legislation would eliminate Article 50a of the Corporate Income Tax Law from January 1, 2028, rather than 2027. Companies that satisfy the existing eligibility requirements by the end of 2027 would retain their tax benefits for the remainder of their existing ten-year entitlement. In some cases, that means the current incentive could remain available until 2037.

At the same time, several new provisions covering interest deductions, controlled foreign companies, exit taxation and hybrid mismatches would not take effect until Serbia becomes a member of the European Union. The resulting framework creates a prolonged overlap between Serbia’s existing investment-support model and a future corporate tax regime increasingly aligned with EU rules.

Article 50a Remains Available During the Transition

Serbia currently applies a headline corporate income tax rate of 15%. Under Article 50a, companies investing more than RSD1 billion in fixed assets and employing at least 100 additional permanent workers can receive a corporate tax exemption for up to 10 years, with the benefit calculated in proportion to the qualifying investment. The incentive does not automatically reduce the corporate tax liability of every qualifying investor to zero, but it can substantially lower the effective tax burden on large capital-intensive projects.

The measure has formed part of Serbia’s investment-attraction strategy for more than a decade, particularly in manufacturing, mining, automotive components, electronics and other export-oriented industries. The country has combined tax incentives with employment subsidies, infrastructure support, industrial land arrangements and other state-aid measures. The proposed legislation would delete Article 50a, with the change applying from January 1, 2028. Companies meeting the qualifying conditions by December 31, 2027, or by the end of a tax period beginning during 2027 where applicable, would retain their existing entitlement until it expires. The transitional provisions therefore allow qualifying investors to continue receiving the incentive for years after the legal provision itself has been removed.

Corporate Tax Accounts for a Limited Share of Budget Revenue

The fiscal significance of the investment incentives needs to be viewed against Serbia’s wider revenue structure. The 2026 republican budget projects approximately RSD2.415 trillion in total revenue and receipts. Corporate income tax is expected to generate RSD275 billion, compared with RSD1.084 trillion from VAT and approximately RSD453.3 billion from excise duties. Corporate income tax therefore represents approximately 11.4% of planned republican budget revenue. VAT and excise duties together account for almost 64%.

The figures highlight the importance of consumption-based taxation to Serbia’s public finances while also placing greater emphasis on the effective tax burden of profitable companies benefiting from investment-related relief.

Serbia’s dependence on foreign capital adds another consideration. The National Bank of Serbia reported inward FDI stock of €63.4 billion at the end of the first quarter of 2026, equivalent to almost 59% of the country’s total foreign liabilities. FDI inflows in 2025 were 33.5% below the record €5.23 billion recorded in 2024. The central bank expects 2026 inflows to amount to approximately 4–4.5% of GDP if economic uncertainty continues to ease.

EU Accession Shapes the New Tax Framework

The reform is closely linked to Serbia’s EU integration process. The country has opened 22 of the 35 EU negotiating chapters and provisionally closed two, while negotiations continue without a predetermined accession date.Taxation remains part of the accession process, including work associated with Chapter 16. Alignment of state-aid rules is also part of the broader EU accession framework. The corporate tax bill explicitly connects the removal of several incentives with state-aid requirements and commitments under Serbia’s EU Reform Agenda.

The legislation consequently represents a broader shift away from a system relying heavily on selective investment advantages and toward a framework increasingly shaped by EU rules governing competition, subsidies and multinational taxation. The EU already accounts for 58.7% of Serbia’s total goods trade in the first half of 2026, reinforcing the importance of European market integration to the country’s investment and tax policy.

New Profit-Shifting Restrictions Await EU Membership

Among the most significant provisions in the proposed legislation are new restrictions on the ability of multinational groups to reduce taxable profits through financing and cross-border structures. Under the proposed interest-limitation rule, net borrowing costs would generally be deductible up to 30% of EBITDA or the dinar equivalent of €3 million, whichever is higher.

The bill would also introduce provisions concerning controlled foreign companies, exit taxation and hybrid mismatches. Serbia already applies transfer-pricing rules, withholding taxes and thin-capitalisation provisions. The new measures would add a broader EU-style framework targeting excessive debt financing, controlled foreign subsidiaries, hybrid instruments and cross-border asset transfers. The new anti-avoidance rules are scheduled to apply from the date Serbia becomes an EU member. Because Serbia does not currently have a fixed accession date, the timing of the new rules remains linked to the progress of the membership process rather than a predetermined calendar date.

EU Dividend Rules Also Have Deferred Application

The proposed legislation also contains provisions concerning dividends and profit distributions received from companies resident in EU member states. Certain qualifying dividends would be excluded from the Serbian corporate tax base, but this provision is not among the measures scheduled for early application in 2027 or 2028. Under the transitional framework, it would become effective with Serbia’s EU accession.

The structure therefore postpones significant elements of both Serbia’s EU tax integration and its stronger anti-avoidance framework until membership, while allowing existing investment incentives to continue for companies that qualify before the transition closes. This creates an extended period during which the legacy investment regime and the future EU-aligned corporate tax architecture will operate as part of the same broader transition.

Mining Shows the Fiscal Value of Investment Relief

The mining sector illustrates the financial scale of the existing incentive system. Financial statements reported from Serbia’s Business Registers Agency show that Serbia Zijin Mining generated approximately RSD213.8 billion of operating revenue in 2025, including around RSD210.9 billion from sales of copper and gold concentrate to related parties abroad.

The company recorded net profit of approximately RSD133.2 billion. Serbia Zijin Mining calculated corporate income tax of approximately RSD24.33 billion, while its Article 50a investment incentive reduced the amount by around RSD2.64 billion, equivalent to 10.85% of the calculated tax. The company consequently recorded approximately RSD21.7 billion in corporate income tax payable and approximately RSD10.64 billion in mineral-resource exploitation fees.

The figures demonstrate the measurable fiscal value of the investment incentive while also highlighting the importance of transfer-pricing supervision for large companies conducting substantial related-party transactions. Related-party sales are not in themselves evidence of profit shifting, but the scale of such transactions makes arm’s-length pricing, documentation and tax-administration capacity financially significant for Serbia.

Global Minimum Tax Adds Another Layer of Reform

Serbia is also pursuing a separate legislative process concerning the international global minimum corporate tax framework. The Ministry of Finance conducted a public consultation in June 2026 on draft legislation concerning a global minimum tax on corporate profits. As of August, the measure remains a legislative initiative rather than an enacted replacement for Serbia’s existing corporate income tax system. The process forms part of a wider change in the country’s corporate tax policy, particularly for large multinational groups affected by international minimum-tax rules.

Investment Policy Faces a Longer Transition

The proposed timetable prioritizes continuity for investors that have already committed to qualifying projects while gradually removing the legacy tax incentive. Companies that secure eligibility by the end of 2027 can preserve their existing Article 50a benefits for the remainder of the statutory entitlement. At the same time, the stronger EU-inspired restrictions on profit shifting, interest deductions, controlled foreign companies, exit taxation and hybrid mismatches will remain dormant until EU membership.

For Serbia, the reform therefore combines a gradual withdrawal of its most prominent large-investor tax incentive with a future expansion of the rules governing multinational taxation. The transition is taking place while foreign investment remains an important component of the Serbian economy. Inward FDI stock stood at €63.4 billion at the end of the first quarter of 2026, while the EU accounted for 58.7% of total goods trade during the first half of the year.

The proposed changes will consequently alter Serbia’s corporate tax framework over an extended period rather than through a single break with the existing system. The Article 50a regime begins its formal phase-out in 2028, while qualifying companies can continue using existing entitlements potentially through 2037, and the principal EU-aligned anti-avoidance measures remain tied to the eventual date of EU accession.