Serbian companies are pressing for the return of tax credits for investment in machinery and buildings as rising costs, technological gaps and weaker financing conditions constrain private capital expenditure.
The previous fixed-asset tax credit was abolished in 2014. Business representatives now argue that it should be restored through amendments to the Corporate Income Tax Law. Support is particularly strong among manufacturers, exporters and service companies that need to modernise equipment.
The proposal comes at a time when the average capacity-utilisation rate among surveyed companies is only 72%. Microenterprises operate at approximately 66%, while large companies reach 79%. Lower resource costs were identified by 63% of respondents as the most important condition for improving performance, followed by stronger domestic demand at 55% and better availability of resources at 46%.
Only 26% identified state-of-the-art technology as a key condition. That comparatively low response should not be read as evidence that technology is unimportant. Companies under immediate cost and demand pressure naturally prioritise short-term operating constraints over long-term productivity investment.
A fixed-asset credit could alter that calculation by reducing the after-tax cost of machinery, automation, energy-efficiency equipment and industrial buildings. The design would determine whether the measure creates new investment or merely subsidises expenditure that companies would have undertaken anyway.
A broad, unrestricted credit would carry fiscal risk. Serbia’s corporate-income-tax rate is already 15%, below levels in many EU markets. Business proposals to reduce it further to 10% could weaken revenue without guaranteeing higher CAPEX. A lower headline rate rewards profitable companies regardless of whether they invest, export or increase productivity.
A targeted incremental credit would be more closely aligned with industrial-policy objectives. Eligibility could depend on verified investment above a historical baseline, commissioning of equipment, retention of jobs and compliance with tax obligations. Additional support could be attached to energy efficiency, emissions reduction, digitalisation, export capacity and domestic supplier development.
Serbia’s investment cycle remains heavily influenced by foreign direct investment and government infrastructure. Gross FDI reached approximately €893m during January-May 2026, with manufacturing accounting for about 63.9% of Q1 inflows. Domestic private investment remains more constrained, particularly among smaller firms without access to parent-company finance or state-supported incentive packages.
Bank lending is growing, but corporate standards tightened slightly in Q1. Investment loans increased by 14.5% year on year in May, although demand for capital-investment finance weakened earlier in the year. A tax credit could improve project economics but would not solve collateral, tenor and working-capital constraints.
The strongest structure would connect tax relief with financing. Banks could lend against eligible equipment and confirmed tax benefits, while guarantee schemes could reduce collateral requirements for SMEs. Accelerated depreciation could complement the credit for technology with shorter economic lives.
Carbon-intensive companies present a separate opportunity. Steel, cement, aluminium, fertilisers and electricity producers face domestic carbon taxation and EU CBAM exposure. Investment incentives tied to verified reductions in emissions intensity would help convert fiscal support into lower future carbon liabilities.
Serbia does not lack investment projects. It lacks an equally accessible financial architecture across large companies, foreign investors and locally owned SMEs. A carefully designed fixed-asset credit could narrow that gap, while an unconditional corporate-tax reduction would leave the structural imbalance largely intact.
