On July 17, 2019, the National Assembly of the Republic of Srpska adopted amendments to the Corporate Income Tax Lax.
The most significant changes relate to the different regulation of the tax deduction for investments in manufacturing. The main objective of the new regulation is to increase investments in production activities. Consequently, a taxpayer that invests in equipment for production activities will be entitled to decrease the tax base for the value of the investment made. The Minister of Finance will determine a list of industries eligible for taking advantage of these incentives based on the Regulation on the classification of activities.
As of January 1, 2020, the taxpayers will be able to decrease the tax base for the total amount of investment in a production plant and equipment.
The previous solution was less beneficial as taxpayers could reduce the amount of tax liability by 30% under the condition that they made an investment in an amount exceeding 50% of the profit of the current tax period.
However, in comparison with the previous method, the tax base can now only be reduced the amount of investment in plants and equipment with no possibility of such deduction for amounts invested in real estate.
The tax base decrease is performed in the tax year during which the plant/equipment have been put into operation. Further conditions and requirements for the use of the new incentive are applicable. We advise interested clients who are considering investments in facilities and equipment to seek detailed advice and professional assistance in determining the best course of action.
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