Serbia has succeeded in growing its reputation as a premier investment jurisdiction in Eastern Europe. It boasts strategic location, superior infrastructure, and a promising human resource potential. Through the years, it has succeeded in establishing a growing economy with low inflation rates to boot. Today, Serbia is considered a prime investment hub in Central and Eastern Europe, attraction billions of foreign direct investments through the years. 

Why Do Business in Serbia?

• Its reputation as an ideal investment location is evidenced by the many companies that have established their presence in Serbia, with the likes of Telenor, Stada, Coca-Cola, Microsoft, Fiat, Siemens, Gazprom, He Steel, Intesa Sanpaolo, and many more. 
• The rapid growth rate for 2018 and 2019 respectively is 4.4% and 4.2$, numbers which are higher than the EU average at 2%. 
• Serbia has a stable national currency and inflation rate, giving its a strong macroeconomic stability. 
• Its strategic location means it’s an excellent gateway between Southeast, Western, and Central Europe. 
• It is known for its well-developed transportation network.
• The huge market potential of Serbia comes from its promising benefits, such as duty-free exports for various products to leading markets across the European Union, Russia, Southeast Europe, and the US. 
• Serbia is home to highly-educated individuals who are known for their adaptability and reception to new technologies, such as IT. Additionally, its workforce is proficient in many foreign languages, including Russian and English. 
• In the Central Europe and Eastern Europe regions, Serbia is known to have the most favorable tax regime. The corporate tax is set at 14%. It offers reduced tax benefits for small to medium-scale enterprises, state subsidies for companies that generate new jobs, and 10-year tax holiday for investments more than EUR 10 million, as well as the creation of 100 jobs, and other incentives. 

Business Vehicle Types in Serbia

The main business vehicles that can be formed and incorporated in Serbia by non-residents include the following:

Partnership

• A General Partnership, where all major decisions are made equally across all partners. Personal assets of its members are not protected in the case of liquidation.
• In a Limited Partnership, there are certain members or general partners who can enjoy unlimited rights and liabilities. At least one member will have limited rights and liabilities, and are therefore decided by their respective contribution to the share capital. 
• There is no set minimum share capital for partnership formation in Serbia. 

Sole Trader

• A sole trader company is the simplest form of business vehicle that can be formed and incorporated in Serbia. 
• It allows foreign investors to engage in business activities without the creation of a limited liability company or other business structures.
• Simple set up and formation means a sole trader can engage in financial and business activities immediately. 

Limited Liability Company 

• A legal form in which one or more members can have shares in the share capital. 
• Members are not liability with their property for the obligations or debts of the company, except in case of abuse of its limited liability provisions. 
• Minimum share capital set at RSD 100. 
• Initiators must submit a registration application to the Business Registers Agency. 
• Maximum number of shareholders is limited to 50. 
• Initiators must enclose a photocopy of their identity card or passport, or an excerpt from the register in which a legal entity is registered. The latter will serve as evidence of the identity of its founder. 
• A limited liability company is formed by a decision on establishment if there is only one founding member, or by a founding agreement if there are two or more founders. 
• Minimum obligatory content of founding act includes, identification of the founders, members, business name, seat activity, share capital amount or value, individual deposits. It should also include the time and manner of payment of cash deposits, as well as the description and valuation of non-cash share deposits. All signatures of founders on the founding act must be duly certified prior to submission. 
• Non-cash and cash investments upon foundation must be paid or entered within a specified period in the founding act. The term must not be more than five years. 
• In a limited liability company structure, all members will be liable up to the amount of their shares.
• A limited liability company is highly flexible in its management. The owners can form the management structure of the company, which means founders can participate in its management. Management may also be entrusted to an individual, a board, or a majority of owners. 
• Forming a limited liability company is expensive. Any changes made, such as change of address or nature of business is expensive. Transfer of ownership shares is also limited by the pre-emption of the company and its members. 

Joint Stock Company 

• A joint stock company in Serbia can be formed and incorporated by one or more natural persons, legal entities, or shareholders. 
• Share capital of a joint stock company is divided into stocks. 
• All shareholders are not liable for a company’s obligations, losses, and debts, except in the case of abuse of limited liability provisions. 
• A joint stock company in Serbia is liable for its obligations with all its assets. 
• A joint stock company can be public or non-public (private). 
• Shareholders who establish a joint stock company will sign the founding act and the first statute of the company.
• Shareholders’ shares can be in cash, things, rights, all valuated in Serbian dinar. 
• A shareholder’s role cannot be in provision of services of a joint stock company. 
• The minimum share capital for the establishment of a shareholder company is set at RSD 3 million, unless a specified amount is provided by law. The nominal value of one share cannot be lower than RSD 100. 
• Before registration, shareholders are required to pay the deposit that is at least 25% of share capital, with the amount paid in cash or partially, but cannot be lower than the amount of set minimum share capital. 
• Cash and non-cash investments upon founding a joint stock company or capital increases must be entered within the specified deadline in the founding act. 
• The decision on capital increases, and that deadline for the public shareholder must not be longer than two years. 
• Fast incorporation process. 
• Fewer corporate governance requirements relating to obligatory corporate procedures, general acts reports to public authorities, and disclosure requirements. 

Serbia Registration Requirements

Company registration in Serbia starts with the submission of a filled-out registration form together with the required supporting documents, such as:

• Founder’s certificate of incorporation and identification copy such as ID or passport for natural persons. 
• Document that reflects the decision of founding a company in Serbia, with designation of the persons authorized to sign the memorandum of association before the Serbian court. 
• Memorandum of association with notarized signatures of founders or representatives before the Serbian court or notary. 
• Document reflecting the appointment of a company’s legal representative, if not appointed in the memorandum of association. 
• Duly notarized form signature certification form to authorize a representative’s signature. 
• Copy of bank certificate on payment of the monetary share capital contribution, or the agreement of non-cash contributions. 
• Proof of payment of prescribed fees. 

All documents coming from overseas must be fully notarized, with an apostile, depending on the founder’s country of incorporation. Documents must be translated into Serbian by a sworn-in interpreter. 

Company registration takes up to five working days from the submission of all required documents. 

Registration of a company is facilitated by the Business Registers Agency, and all information on registration will be made available on the public business registry.

Serbia Reporting Requirements

• All legal entities and business owners must submit regular financial statements by 30 June of the following year, or in the course of six months of the financial year differs from calendar year. 
• All legal entities and business owners must file reports for statistical purposes by the end of February of the following year. 
• Company registration cost amounts between RSD 500 and RSD 9,000 depending on the size and type of legal entity, manner of registration, and timeline of filing. 

Serbia Company Formation Share Capital

• The minimum share capital for a limited liability company is RSD 100 and RSD 3 million for joint stock companies. 
• Under the Company Law of 2011, there is no maximum share capital. 
• Share capital threshold can be set higher if prescribed by specific regulations. 

Serbia Company Formation Non-Cash Contributions

• Shares can be issued for non-cash considerations. 
• Non-cash contributions can be in the form of property and rights, with their values expressed in Serbian dinar. 
• Value of non-cash contributions will be determined consensual by all members or through an evaluation in accordance to Company Law 2011. There is an exception however in the case of joint stock companies, where the value of non-cash capital can only be determined through an evaluation. 

Rights Attached to Company Shares

• All shares of the same asset class grant equal rights among its shareholders. 
• Ordinary shares provide rights equivalent to the shares in the basic capital of a company. 
• Preferential shares do not provide voting rights during general meeting, except when the general meeting is voting on issues specified in Company Law 2011. 
• Some rights prescribed by the Company Law 2011 are limited for company shareholders whose shares are over the prescribed threshold. 
• Shareholders are guaranteed the following rights as attached to their shares:

1. Rights to participate and vote in the general meeting. 
2. Right to access legal and other pertinent documents pertaining to and in possession of the company. 
3. Right to receive dividends. 
4. Right to participate in the liquidation residue. 
5. Pre-emptive rights. 

Serbia Company Key Liabilities and Management Structure

• Management can be organized as a one-tier or two-tier structure, and depending on the legal form of a company.
• In a limited liability company structure, management bodies include the general meeting of one or two managers (one-tier), or the general meeting or one or more managers and a supervisory board (two-tier).
• In a joint stock company structure, management bodies include the general meeting of one or more managers, In case a joint stock company has three managers or more, they will form the management board that is a pre-requisite in the formation of a public joint stock company. 

Management Limitations

• There are no set restrictions on the appointment of foreign managers.
• All managers are deemed to have civil capacity to exercise a management position. 
• In a joint stock company structure, the manager cannot be a manager or member of the supervisory board in more than five companies, must not have a record of criminal conviction, and must not be imposed with security measure ban to succeed in performing their activity in the company. 
• Independent director must be a natural person unrelated to any part of the company’s directors and should not have served as an executive director or was not employed by the company. Additionally, an independent director must not have owned more than 20% of share capital and was not employed or engaged in any transaction with the company, nor generated more than 20% of its annual revenues in the past. 

Liabilities of Directors and Officers of a Serbia Company 

Directors assume special duties, including:

• Duty of care
• Duty to avoid conflict of interest
• Duty to report transactions involving personal interests. 
• Duty to keep trade secrets.
• Duty of non-competition. 
• Must be responsible for bookkeeping and accuracy of the company’s financial statements. 

Parent Company Liability 

• Parent companies must prepare, submit, and publish all consolidated financial statements. 
• Consolidated financial statements must be registered and published in the register of financial statements, managed by the Business Registers Agency. 
• A parent company that is a part of a group of companies is not required to prepare consolidated financial statements, unless the parent company is headquartered overseas. 

Serbia Taxation Regime 

• A tax resident business is subject to taxation for any profit that it generates in Serbia and other countries. 
• A non-resident taxpayer is any legal entity formed and have a head office or management in Serbia. 
• Apart from corporate profit tax, all entities that deliver goods and render services in Serbia, including persons without a head office in Serbia are subject to Value Added Tax assessment. 
• Any non-resident is subject to taxation for any profit that it generates operating in Serbia, unless otherwise prescribed by double tax treaties. 
• Tax residents are taxed on their worldwide income, while non-tax residents are taxed on their income obtained by operating in Serbia. 

Foreign-owned companies are subject to pay the following taxes:

• Corporate income tax at 15% of the taxable profits. Tax declaration must be filed within 180 days from expiration of relevant tax period. Corporate income tax must be paid in monthly tax advances by the 15th of the current month for the previous month. 
• Social security contributions at a rate of 19.9%. 
• Property tax rate at 0.4%. Tax declaration must be filed within 30 days from the acquisition of property and by 31 March of each year. 
• Property transfer tax rate at 2.5%. Tax declaration must be filed within 30 days on the transfer of property. 
• Value Added Tax at a rate of 20%. 
• Environmental tax depends on the decision of the local government. In Belgrade, environmental tax is levied at 2.64% for business premises.
  

Dividends Paid to Foreign Shareholders

Dividends paid to foreign corporate shareholders are levied at 20%, unless otherwise prescribed by double tax treaties. 

Dividends Received from Foreign Companies

A resident taxpayer can reduce its corporate profit tax by the amount of tax paid by its non-resident branch in another state on the profit from which dividends have been paid out. 

Interest Paid to Foreign Corporate Shareholders

Interest paid to foreign corporate shareholders are taxed at 20%, unless otherwise prescribed by double tax treaties. 

On the other hand, interest paid to foreign corporate shareholders incorporated in preferential tax jurisdictions are levied at 25%. 

Intellectual Royalties Paid to Foreign Corporate Shareholders

IP royalties paid to foreign corporate shareholders are levied at 20%, unless otherwise prescribed by double tax treaties. 

On the other hands, IP royalties paid to foreign corporate shareholders incorporated in preferential tax jurisdictions are levied at 25%. 

Serbia Thin Capitalization Rules

In case of a debt to a creditor with the status of an associated person, as defined by Law of Corporate Income Tax of 2001, the amount of interest and costs from a loan up to four times the value of a taxpayer’s own capital will be considered as expenditure in the fiscal balance sheet of any taxpayer other than a bank or financial leasing company. 

Serbia Transfer Pricing Rules

A taxpayer must include transactions including transfer pricing in its tax statement. They must declare the value of transactions at prices that would have been fetched on the market for such similar transactions. The difference between the determined price by arm’s length principle and tax payer’s transfer price will be included in the tax base. 

Serbia Double Taxation Treaties

To date, Serbia has a total of 54 double tax treaties. These agreements are designed to attract more investors from contracting countries. 

Some notable tax treaties are as follows: 

• Smaller withholding taxes on dividends apply in cases of ownership exceeding the prescribed limits of 20% and 25% share capital is applicable when a company is owned by an investor or legal entity of Austria, Bulgaria, Denmark, France, Finland India, Germany, The Netherlands, Norway, and Sweden. 
• Tax rate for most treaty countries with Serbia are set at 10%, with the exceptional of Egypt and Belgium where the tax rate is 15%, and Belarus, where the tax rate is levied at 8%. 
• Royalties are taxed at a rate of 0% for France and Sweden and 5% to 10% for other contracting countries. 
• Double tax treaty with Luxembourg covers Luxembourg income tax on individuals corporation tax, capital tax, and communal trade tax. 

Damalion provides a comprehensive solution for foreign investors and corporate entities looking to establish their presence in Serbia. We aim to help clients to expand their business in premier locations across the globe. Our global service network consists of professional service providers, such as accountants and lawyers to help in the registration and management of your company in Serbia. We guarantee seamless, high-quality consulting that you can rely on through every stage of your company’s founding, growth, and expansion. Our team of Damalion experts can assist you with you from Serbia company formation to opening a bank account, ensuring you have everything that you need for fast incorporation in Serbia. Reach out to a Damalion expert today to learn more. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.