R&D and Innovation Incentives in Serbia

Turning ideas into tax-efficient innovation

If there’s one thing that Serbia quietly does better than most of Europe, it’s rewarding innovation.Over the past few years, the country has built a surprisingly sophisticated framework to encourage research and development (R&D) — not only for big tech firms, but also for smaller startups, software studios, and entrepreneurs who build intellectual property on their own.

I’ve seen it firsthand: a small team of developers in Novi Sad turns a simple SaaS tool into a global product — and thanks to R&D incentives, their effective tax rate drops below 8%. It’s one of those rare cases where the law truly supports creativity and entrepreneurship.

It doesn’t stop at corporate tax relief — it goes a step further to make hiring your R&D team easier.

Double deduction: rewarding every euro you invest in innovation

Let’s start with the crown jewel — the double deduction.

If your company invests in R&D carried out in Serbia, the government lets you deduct twice the amount of those expenses from your taxable base. So, if you spend €10,000 on developing new software, you can treat it as €20,000 when calculating your corporate tax.

That alone can bring your effective corporate tax down to nearly 7.5%, making Serbia one of the most R&D-friendly countries in Europe.

Of course, there are a few logical conditions:

• The research must be conducted primarily in Serbia (at least 90% of your team should be based here).

• You must own the results — the code, patent, or IP.

• It must be genuine research or innovation — not just routine maintenance or testing.

It’s designed for companies that are actually creating new value — not just outsourcing it.

Payroll reliefs for your innovators

Serbia doesn’t stop at corporate tax relief — it goes a step further to make hiring your R&D team easier.

If you employ developers, scientists, engineers, or designers who are directly engaged in R&D, you can qualify for:

• 70% reduction in personal income tax (PIT), and

• 100% exemption from pension and disability insurance contributions — for both employer and employee.

In practice, that means you can attract highly skilled people at competitive net salaries while keeping your total employment costs lower than almost anywhere else in Europe.

For startups building something new, this is a game-changer.

IP income exemption — the “IP Box” advantage

When your innovation finally pays off — say, through software licensing, royalties, or a patent — Serbia has another incentive waiting for you: the IP income exemption.

If the intellectual property was developed through R&D in Serbia, you can exclude up to 80% of that income from your taxable base.That translates into an effective tax rate of just 3% on qualified IP revenue.

It’s a smart way of saying: “Keep your innovation here — we’ll make it worth your while.”

Beyond taxes: innovation support that actually works

Besides tax incentives, Serbia also offers innovation grants and co-financing programs through its Innovation Fund, targeting startups, early-stage R&D, and tech commercialization.

Many foreign founders are surprised at how accessible these programs are — you don’t have to be a local citizen to participate if your company is registered in Serbia.

Northbridge has helped clients combine R&D incentives with these grants to lower their total cost of development by up to 40–50%.

Book your strategy call now

Final thoughts

The truth is, Serbia’s R&D incentives are more than just numbers on paper — they’re part of a growing ecosystem that values people who build and create. Whether you’re developing software, a fintech solution, or a new e-commerce platform, this is one of the few European jurisdictions where innovation, tax efficiency, and simplicity actually coexist.

For many of our clients, that’s exactly what makes Serbia not just a place to register a company — but a place to build a future.