Tax incentives for Intellectual Property Owners – Using the IP Box to Your Advantage

October 12, 2020

Tax incentives for Intellectual Property Owners – Using the IP Box to Your Advantage

October 12, 2020

Milan Samardžić

Milan Samardžić

Partner

Dragan Martin

Dragan Martin

Junior Associate

Realizing the potential of the industries that heavily rely on research and development activities and intellectual property rights, the Serbian Government has sought to implement various incentives that would spur its economy through investments in said industries. One such incentive was introduced as of last year and has yet to show its results in practice.

Namely, as of 2019, Serbia amended its tax legislation in order to introduce certain incentives for the creation of intellectual property on its territory (so-called “IP box”). The Act on Corporate Profit Tax prescribes that an owner of intellectual property rights can deduct up to 80% of its qualified income from the taxation base.

The qualified income is defined as total historical or current tax-deductible expenses related to research and development activities which led to the creation of IP in question. The percentage of income that could be deemed as qualified is determined in line with the ratio of qualified expenses to total expenses related to the IP.

Furthermore, in order to be eligible for the IP box incentive, the owner of intellectual property rights must deposit the subject of intellectual property to the Intellectual Property Office of the Republic of Serbia, which can be done electronically.

The taxpayer is obligated to specifically state respective income in the tax balance, as well as to prepare and submit documentation in a manner and in the form prescribed by the Rulebook on conditions and manner of deducting qualified income from the corporate profit tax base.

By using the IP box incentive, intellectual property owners can reduce the effective tax rate from 15% down to 3% on the use of deposited intellectual property rights.

First such incentives were introduced in Ireland and present a key to attracting international IT companies to its shores. IP box is also widely in use in Cyprus, Hungary, France, Netherlands, Belgium, and the United Kingdom, among others. Previous incentives enacted on the territory of Serbia have been general and have yielded mixed results. This was the first incentive that focused more on the needs of sectors such as film industry, gaming, IT, music etc.

However, with the introduction of the IP box in Serbia, it could be expected that the mentioned industries will soon catch on and utilize it to its fullest extent.

 

 

 

 

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Milan Samardžić, Partner
milan.samardzic@sog.rs

Dragan Martin, Junior Associate
dragan.martin@sog.rs

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