Transfer pricing in Serbia

You can often hear from your accountant and tax consultant, not to make a business transfer to your wife, your uncle, or a company that you already own or your wife owns. The situation where you need money in one business and you are transferring to another so some made-up services, mostly consulting, or you give the loan with no specific reason.

Transfer between related parties aka connected companies if is the ownership 25% or more.

Many times businesses present a profit-shifting idea in front of accountants and think that is the way to downsize the Corporate Income Tax (CIT), like Tax heavens for example. Small business owners heard that from the media and how big Corporations doing that but in real life you will be always taxed additional.

The Founder is a company from abroad, and a Serbian entity issuing invoices directly to the “mother” founder company, acting like a “cost center” company. You are obligated to do this Study. They are paying employees in Serbia and that’s it, 90% of expenses go on salaries.

In all these kinds of situations, you are obligated to have a Transfer Pricing (TP) Study as an annual report which in most cases will raise your tax basis even up to 10%. Sometimes, you have a case where you need to pay CIT even if your annual result was negative, your business is at a loss.

Preparation and submission of the TP Study need to be done before submitting the Annual Tax Report which deadline every year is the end of June.

In this short explanation about TP, it is good to know some tips and tricks on how to avoid it. First of all, transfers between companies that are Father and Son owners are not obligated by TP. If you give your company loan as an individual (natural person) also not obligated. If you have profit margins the same as the GDP rise of Serbia sometimes you are not paying additional taxes.