🧾 Tax Incentives for Employers in Serbia Engaged in Research and Development
Are you a company in Serbia looking to grow your team and invest in innovation?
You may now benefit from generous tax incentives designed for employers engaged in research and development (R&D). These incentives offer substantial savings on employee-related taxes for businesses that invest in innovation and employ R&D professionals.
💡I. What Are R&D Tax Incentives?
R&D tax incentives in Serbia allow companies to reduce the cost of salaries for employees working directly on research and development projects.
✅ Available to companies conducting R&D in Serbia
📅 In effect since March 1, 2022
🕒 No expiration — these are ongoing incentives
These measures support startups, tech companies, and other innovative businesses by reducing taxes on researchers’ salaries — helping firms invest more in innovation while lowering operational costs.
🧪 1. Who Can Use R&D Tax Incentives?
To qualify for these incentives, companies must meet the following conditions:
- 🔹 Be a legal entity operating in Serbia
- 🔹 Carry out research and development as part of their core business
- 🔹 Run R&D projects where at least 90% of involved employees perform work within Serbia
💸 2. What Tax Benefits Are Included?
Employers can benefit from significant payroll tax exemptions, including:
📉 70% reduction in calculated and withheld income tax from employee salaries
🧾 100% exemption from pension and disability insurance contributions (PIO)
Both the employee and employer’s share is exempted
These savings apply only to salaries of employees directly engaged in R&D activities.
📌 3. Additional Requirements
To take advantage of these benefits, companies must also:
Conduct R&D projects for their own account
Retain or acquire ownership of any resulting intellectual property, such as:
Patents
Software
Technical designs
Other intangible assets
🚀 Why This Matters
These R&D tax incentives are especially valuable for:
🔧 Tech firms and startups looking to scale
🔬 Science and innovation-focused companies
📈 Businesses aiming to reduce hiring costs while driving innovation
By hiring researchers and developing new products or technologies in-house, your company can unlock long-term tax savings and a competitive edge in the market.
🏢 II. Who Is Eligible to Use R&D Tax Incentives in Serbia?
Not all businesses are eligible to use the R&D salary tax exemptions. These tax incentives are strictly limited to legal entities (companies) that are registered and operating in the Republic of Serbia.
✅ Eligible:
Only legal entities (registered companies with legal personality) whose core business activities are conducted in Serbia.
❌ Not Eligible:
The following types of businesses cannot claim R&D tax incentives:
🚫 Sole proprietors (entrepreneurs)
🚫 Branch offices
🚫 Representative offices of foreign legal entities in Serbia
🚫 Legal entities established outside Serbia
📌 Important: Ownership of Intellectual Property Is Required
To qualify, companies must conduct R&D for their own benefit and must become or remain owners of the resulting intangible assets — such as patents, software, or industrial designs — that may be developed during the R&D process.
If the R&D activities are carried out on behalf of a third party (such as outsourcing), and the company does not retain ownership of any resulting intellectual property, it cannot claim the tax incentive.
⚠️ Industry Limitation: Extractive Industries
There is a specific restriction regarding natural resource exploration:
Companies cannot use R&D tax relief for employees working on research related to the discovery or development of oil, gas, or mineral reserves in the extractive industries.
🧾 Summary of Eligibility Rules
| Criteria | Eligible? |
|---|---|
| Legal entity operating in Serbia | ✅ Yes |
| Sole proprietorship (entrepreneur) | ❌ No |
| Branch office or foreign rep office | ❌ No |
| Conducting R&D for third parties | ❌ No |
| Working on oil/gas/mineral exploration | ❌ No |
| Own or retain IP from R&D | ✅ Yes |
👩🔬 III. Conditions for Employees Involved in Research and Development
To claim the R&D tax relief, the employer must meet specific conditions related to the employees engaged in R&D. These rules are defined by the Regulation on the Conditions and Manner of Exercising the Right to Tax Exemption Based on the Salaries of Employees in Research and Development.
🧠 Who Qualifies as an R&D Employee?
According to the regulation, an R&D employee is defined as:
“An employee working on the implementation of a project in a way that they are directly involved in identifying and solving relevant scientific, process-related, or technical problems or tasks associated with the specific project.”
👥 Types of Eligible Employees
The tax relief applies to all employees directly engaged in R&D, regardless of when they were hired:
✅ Includes:
New employees hired specifically for R&D roles
Existing employees reassigned to or involved in R&D tasks
Both categories must have a valid employment contract, which may be:
For a fixed-term or permanent position
For full-time or part-time work
⏱️ Working Time and Proportional Benefit
The amount of tax relief is proportional to the time the employee spends working on R&D activities.
Full-Time Employment:
Defined as 40 hours per week
Part-Time Employment:
Any schedule shorter than 40 hours per week
🕒 Example: If an employee spends 50% of their working hours on R&D tasks, the company receives tax relief on 50% of their salary — not the full amount.
📄 How Is This Tracked?
The exact time spent on R&D tasks must be determined and documented by the employer’s internal act or HR policy. This ensures:
Accurate calculation of the incentive
Compliance with legal requirements
📌 Quick Recap: Employee Eligibility Checklist
| Criteria | Eligible? |
|---|---|
| Direct involvement in R&D (problem-solving, experimentation) | ✅ Yes |
| New hire or existing employee | ✅ Yes |
| Full-time or part-time employment | ✅ Yes |
| Administrative or support roles | ❌ No |
| No employment contract | ❌ No |
🔍 IV. What Counts as Research and Development?
Not every technical task or improvement qualifies as research and development under Serbian tax law. To benefit from R&D tax incentives, the activities must meet specific definitions of research and development.
🔬 What Is Considered “Research”?
Research is defined as:
Original and planned investigation undertaken to gain new scientific or technical knowledge and understanding.
✅ To qualify as research:
The activity must be systematic and goal-oriented
It must aim to generate entirely new knowledge or capabilities, not just refine existing ones
It must be innovative and exploratory — not routine work
Examples may include:
Fundamental scientific studies
Experimental investigations
Exploratory work in unknown fields
📌 Note: Research must be conducted with the goal of innovation, not just incremental improvement.
⚙️ What Is Considered “Development”?
Development refers to:
The application of research results or existing scientific knowledge/designs to create new or significantly improved products, processes, systems, or services — before they enter commercial use.
✅ To qualify as development:
The company must apply knowledge to develop something new or substantially better
The work must be done prior to commercial production or market use
Development must be based on the company’s own research or licensed innovation
Examples may include:
Prototyping new technologies
Building test systems
Developing a new software platform
Creating an improved manufacturing process
🚫 Not considered R&D:
Routine quality control
Market research
Commercial production
Software bug fixing (unless part of innovation)
📌 Key Takeaway
To qualify for R&D tax incentives, your company must:
Conduct original research that leads to new knowledge
Apply that knowledge to develop something new or significantly improved
Complete these activities before commercial release
Document and justify both research and development steps clearly
🚫 V. Activities That Do Not Qualify as Direct R&D Engagement
To benefit from R&D tax incentives, it’s important to clearly distinguish between employees directly involved in research and development and those performing support or supervisory roles.
📌 The following activities are not considered direct R&D work:
🔧 Supervisory or managerial tasks, such as:
Attending technical meetings about project goals, alternatives, or outcomes
Participating in discussions on concepts or potential solutions
Meeting with staff to coordinate project plans
Evaluating proposed solutions or overseeing progress
🛠️ Support functions, including:
Setting up and using equipment needed for research
Providing technical feedback on product specifications
Preparing reports or documentation
Cleaning, maintenance, or other tasks related to the research environment
➡️ Key Point:
Salaries paid to employees performing these types of tasks do not qualify for the R&D salary tax exemption.
🕒 R&D Tax Relief Does Not Apply During Absences
Even for employees who are directly involved in R&D, tax relief cannot be claimed for periods of absence, such as:
🚫 Paid time off:
Annual leave
Public holidays
Paid leave of absence (e.g., personal days, family emergencies)
🚫 Other absences:
Military training or government-mandated obligations
Sick leave or temporary incapacity
Downtime caused by employer decisions or reduced workload not due to employee fault
📌 In all these cases, the employer cannot apply the tax exemption to the portion of salary paid during the absence.
📊 VI. Time Tracking Records for R&D Employees
To claim R&D tax relief, employers are required to maintain accurate records of working hours for each employee engaged in research and development activities.
These records must allow for clear monitoring of eligibility for the R&D tax exemption.
📋 What Must Be Included?
For each employee involved in R&D, the employer must keep a time-tracking record that includes:
🕒 Working hours dedicated to research and development activities
💰 Details of salary, salary compensation, and other payments received for R&D work
🔍 Why This Matters
This documentation is crucial for:
✅ Proving when an employee was directly engaged in eligible R&D tasks
❌ Distinguishing non-qualifying periods, such as time spent on supervisory or support activities (which do not qualify for tax relief)
📌 Without clear records, the employer cannot justify the tax exemption and may face compliance issues during audits.
📂 VII. Required Documentation for Individual R&D Projects
Employers who claim R&D tax relief must maintain project-specific documentation for each individual research and development project.
This documentation provides the necessary evidence that the activities meet legal requirements and that the employees involved are eligible for tax exemptions.
📌 Mandatory Documentation Includes:
📄 Project Description (Specification)
Clearly stated project goals
Planned phases and activities
Expert assessments or opinions supporting the project’s R&D nature
💰 Project Budget
Annual budget
Total project budget
🧾 Annual Deviation Report
A report explaining any deviations from the original budget
👤 Employee R&D Report
A monthly breakdown of:
Total working hours
Hours spent directly on R&D tasks
📊 Project Status and Results Report
Summary of progress, current outcomes, and any milestones achieved
✍️ Signed Declaration by the Employer’s Legal Representative
Confirms that all data from internal records is complete and accurate
Confirms that at least 90% of all R&D employees perform their work in Serbia
✍️ Signed Declaration by Each R&D Employee
Confirms that the reported working hours are accurate and complete
🔍 Why This Is Important
This documentation serves as proof of compliance with Serbian tax regulations. Without it, the employer may lose the right to the tax benefit or be penalized in case of inspection.
⏳ VIII. Duration and Application of R&D Salary Tax Incentives
The tax exemption on salaries of employees engaged in research and development came into effect on March 1, 2022.
📅 No Expiration Date
There is no legal time limit for how long a company can use this incentive. The relief is ongoing and can be applied as long as the R&D project is active.
🧪 Project Duration Matters
The only time restriction relates to the duration of the R&D project. The tax exemption applies only during the time an employee is working on an active R&D project.
📌 Quick Recap: Incentive Timeline
| Criteria | Applicable? |
|---|---|
| R&D tax relief available since March 2022 | ✅ Yes |
| Has a government-imposed end date | ❌ No |
| Ends when R&D project is completed | ✅ Yes |
Although employers are exempt from paying PIO (pension and disability) contributions, these contributions are still considered paid.
📌 How It Works:
The contributions are covered by the Serbian state budget
They are counted as paid on time (on the due date of the net salary payment)
This ensures that employees’ pension and disability insurance rights are fully preserved
🛡️ Employee Benefits Are Not Affected
Employees working on R&D projects retain full rights under the pension and disability system, despite the employer’s exemption from direct payment.
📌 Quick Recap: PIO Coverage
| Criteria | Result |
|---|---|
| PIO contributions paid by the employer | ❌ No |
| PIO contributions paid from the state budget | ✅ Yes |
| Employee pension rights affected | ❌ No |
🚫 X. When Employers Cannot Use the R&D Tax Incentive
An employer cannot use the salary tax exemption if the employee in question is already subject to another form of state incentive (e.g., wage subsidies, tax credits).
⚠️ No Double Incentives
The same employee cannot be used for multiple tax or employment incentives at the same time. Only one exemption per employee may be applied at any moment.
✅ However, there is one exception:
Employers can still use the R&D salary tax exemption together with the double deduction for R&D costs (an expense-based incentive).
📌 Quick Recap: Incentive Usage Rules
| Scenario | Can Use R&D Salary Incentive? |
|---|---|
| Employee already covered by another wage subsidy | ❌ No |
| Using multiple tax incentives for same employee | ❌ No |
| Only using R&D salary incentive | ✅ Yes |
| Combining with R&D double expense deduction | ✅ Yes |
🛑 XI. When Does the Right to R&D Tax Relief End?
There are no specific conditions that automatically terminate the employer’s right to use R&D salary tax incentives. However, certain rules clarify when the relief does or does not apply.
👥 Employee Count and Type
There is no required minimum or maximum number of R&D employees per project.
Employers may engage existing employees or new hires without restrictions.
After the R&D project ends, the company is not obligated to retain the R&D employee under a permanent contract.
🔁 Reusing the Incentive
If a new employee was hired for an R&D role:
Once the project ends, the employer may still qualify for other employment-related tax reliefs for that person (e.g., incentives for hiring new staff).
There are no legal restrictions against using the R&D incentive for employees who were previously part of other incentive programs.
📌 Quick Recap: Termination of R&D Relief
| Scenario | Affects Eligibility? |
|---|---|
| No minimum or maximum R&D employee count | ❌ No |
| Employee worked on previous incentive-based projects | ❌ No |
| R&D project completed, employee remains onboard | ✅ May be eligible for new incentive |
| Employee does not have to remain after project ends | ✅ Correct |
📞 Need Help Claiming R&D Tax Relief in Serbia?
Understanding and applying Serbia’s R&D tax incentives can lead to major payroll savings and boost your innovation strategy — but compliance is key.
👨⚖️ Stojković Attorneys (AK STATT) is here to help.
We provide tailored legal and tax support for companies looking to:
Reduce R&D payroll costs
Structure compliant R&D projects
Maximize available incentives without risk
📍 Contact Us:
STATT – Stojković Attorneys
Cara Dušana 55/3, 11000 Belgrade, Serbia
📧 Email: [email protected]
📞 Phone: +381 11 328 1914
🌐 Website: www.statt.rs
📘 Download our full TAX CARD 2024 for Serbia for more tax insights.