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Reviving Serbia’s economy: Advocating for tax credits to boost investments

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Despite an increase in the number of new entrepreneurs and businesses in Serbia this year, many struggle to sustain themselves, particularly during the critical initial three-year period, mainly due to financial constraints.

One proposed solution to bolster the economy is the introduction of tax credits for investments in fixed assets.

Recommendations outlined in the latest Gray Book by NALED suggest reinstating tax credits to incentivize investment in business expansion, alongside expanding non-cash payment options.

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The Gray Book analysts emphasize the need to amend the Law on Profit Tax of Legal Entities to reintroduce tax credits for fixed asset investments.

The proposal entails providing a tax credit equivalent to 100% of investments in fixed assets for all legal entities and entrepreneurs, without limitations tied to tax liability.

Additionally, taxpayers would have the flexibility to utilize tax credits based on past fixed asset investments without a time limit, or within the next five years, aligning with standard practice in comparative law.

Before changes in 2013, the Law on Corporate Income Tax allowed for tax liability reduction based on fixed asset investments, providing incentives for business growth. However, subsequent amendments abolished these benefits, leaving existing companies at a disadvantage.

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According to Srđan Drobnjaković, Director of the Union of Employers of Serbia (UPS), reinstating tax benefits for the economy is crucial. While advocating for a revised approach that aligns with state and economic interests, Drobnjaković emphasizes the need for tailored incentives for sectors facing greater challenges.

The revival of tax credits could stimulate increased investments, job creation, and modernization of work processes, ultimately fostering economic growth and competitiveness.

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