Marcus is the sole owner of a Serbian LLC he founded three years ago. The company has been profitable for two years running, and he wants to move some of that money to his account in Germany. His accountant tells him to "just pay yourself a dividend." Marcus transfers the money, the accountant files the paperwork, and six months later the Serbian Tax Administration opens an inspection. The problem: the members' assembly never adopted a distribution decision, and no withholding tax was remitted. What Marcus transferred was not a dividend. It was an undeclared loan from the company to himself, reclassified as income, with interest, penalties, and personal liability for the director attached.
This scenario plays out in our practice more often than it should. Extracting profit from a Serbian company is not complicated, but it has a specific legal sequence that must be followed. Skip one step and what looks like a routine transfer becomes a tax exposure. This article covers that sequence from the beginning: what a dividend is under Serbian law, when the company is permitted to pay it, and only then how it is taxed.
Contents
1. What is a dividend?
Most misclassification problems, including Marcus's, start here: the owner treats the company's bank account as an extension of their personal finances. Serbian law draws a sharp line between the two. A dividend is a specific legal category: a payment made to a member of a limited liability company (DOO) or a shareholder of a joint stock company (AD) out of the company's confirmed net profit, following a formal assembly decision. The legal framework is the Companies Act (Zakon o privrednim drustvima).[1]
A dividend is not a director's fee, which is compensation for managing the company. It is not a salary, which a member can receive if they are also employed. It is not a loan to the member, and it is not a return of capital originally contributed. Each category has a distinct legal and tax treatment. The Serbian Tax Administration scrutinises outgoing payments from companies to their owners, and misclassification can trigger tax reassessments, interest, and penalties on both the company and the individual.
A useful analogy: think of the company's profit as a locked compartment. The key to that compartment is the assembly decision. Without the decision, the money belongs to the company, not the member. Taking it out without the key is not a dividend; it is a loan or, worse, undeclared income.
In a single-member LLC, the entire distributed profit goes to the sole member. In a multi-member LLC, each member receives a share proportional to their ownership percentage, unless the founding act specifies a different distribution key.
The bottom line: If there is no assembly decision authorising a specific distribution, there is no dividend. Any payment to a member before that decision is made is something else entirely, and the Tax Administration will treat it accordingly.
2. How is profit distributed in a Serbian company?
The procedural chain that Marcus skipped, written out in full:
- The company closes its financial year and prepares annual financial statements (balance sheet, income statement, and accompanying reports).
- The statements are submitted to the Business Registers Agency (APR) by the end of March of the following year.
- The members' assembly adopts a decision confirming the financial statements and, separately or in the same session, a decision on the use of profit by the end of June. That decision specifies the amount to be distributed as a dividend.
- The company withholds the applicable tax at source, files the PPO-PD return, and transfers the net amount to the member's account.
Interim dividends
Serbian law also allows distributions before the end of the financial year. For an interim distribution to be lawful, the director must first prepare interim financial statements confirming sufficient distributable profit. The interim amount cannot exceed the net profit shown in those statements, minus estimated taxes for the full year. In practice, interim distributions are less common because the documentation requirements are identical to annual distributions, with the added step of specially preparing the interim statements.
The bottom line: The assembly decision is not a formality that can be backdated or skipped. It is the legal trigger. No decision, no dividend.
3. When can a dividend be paid? The solvency test
A dividend may only be paid if two conditions are met simultaneously. First, the company's net assets must not fall below its paid-in share capital plus any reserves the company is required to maintain by law or its articles of association, either before or after the payment. Second, the total amount distributed must not exceed the profit for the current financial year, increased by any retained earnings from prior periods and reserves available for distribution, and reduced by any accumulated losses and mandatory reserves. If both conditions are satisfied, the distribution is lawful. If either is not met, the payment is prohibited regardless of the profit shown in the financial statements. A shareholder who receives a payment made in breach of these rules, and who knew or ought to have known that the payment was unlawful, is obliged to return the amount to the company.
The bottom line: Before any distribution, two questions: does the company have confirmed net profit? And will it still be able to pay its bills after the payment? Both must be yes.
4. Withholding tax on dividends: the 20% rule
Once a valid distribution decision exists and the solvency test is satisfied, the tax question arises: how much of the declared dividend will actually reach the foreign member?
A dividend paid to a non-resident, whether an individual or a legal entity, is subject to withholding tax (porez po odbitku) at the point of payment. The standard rate is 20%.
The Serbian company acts as the withholding agent: it calculates the tax, deducts it from the gross dividend, files the PPO-PD return electronically through the Tax Administration's ePorezi portal, and remits the tax to the state budget within three days of payment. The foreign member receives the net amount.
Dividends paid to a Serbian resident individual carry a different rate: 15% personal income tax under the Personal Income Tax Act (Zakon o porezu na dohodak gradjana). Dividends paid between two Serbian tax-resident companies are fully exempt.
5. Reduced rates under double taxation treaties
Serbia has one of the widest double taxation treaty networks among Southeast European economies. Active treaties cover all major EU member states, the United Kingdom, the United States, China, Switzerland, the UAE, and most countries in the region (Ministry of Finance, full list at mfin.gov.rs).[5]
Most treaties follow the OECD Model Convention and apply two tiers: a lower rate for qualifying corporate shareholders holding a minimum percentage of the paying company's capital (typically 25%), and a higher rate for all other shareholders. The lower rate is generally 5%; the higher is typically 10–15%.
| Country | Rate: qualifying corporate shareholder | Rate: other shareholders |
|---|---|---|
| Germany | 15% | 15% |
| Austria | 5% | 15% |
| United Kingdom | 5% | 15% |
| France | 5% | 15% |
| Switzerland | 5% | 15% |
| Cyprus | 10% | 10% |
| UAE | 5% | 10% |
| Hungary | 5% | 15% |
| No DTT with Serbia | 20% domestic rate applies | |
Treaty rates must be verified against the original treaty text, as some have been updated by protocols. The rates above apply to dividends only; interest and royalties carry different treaty provisions.
The bottom line: If your country has a treaty with Serbia, the 20% rate almost certainly does not apply to you. But you must actively claim the treaty rate before payment, not after.
6. Repatriating dividends abroad: foreign exchange rules
Does the dividend have to pass through a Serbian account first?
No. There is no legal requirement for the dividend to be credited to a Serbian bank account before being sent abroad. Under the Law on Foreign Exchange Operations (Zakon o deviznom poslovanju), dividends paid to non-residents are classified as current account transactions and are not subject to transfer restrictions.[7]
In practice, the Serbian company's bank will require the following before executing the international transfer:
- The members' assembly decision on profit distribution.
- Proof that withholding tax has been paid (stamped PPO-PD return or tax payment confirmation).
- The foreign recipient's full bank details (IBAN, SWIFT/BIC, bank name and address).
- In some cases, the most recent audited financial statements confirming distributable profit.
The dividend is declared in Serbian dinars (RSD). The bank converts to the requested foreign currency at the commercial exchange rate on the day of transfer. There is no obligation to use an official National Bank rate. Large distributions are typically converted to EUR or USD. A non-resident member who does have a Serbian bank account can receive the dividend there and manage the onward transfer themselves, but this is a personal preference, not a legal requirement. For more on opening a Serbian bank account as a non-resident, see our guide on non-resident bank accounts in Serbia.
The bottom line: There are no restrictions. The money goes where you direct it, as soon as the tax is paid and the bank has the paperwork.
Frequently asked questions
What is a dividend in Serbian law?
A dividend is a member's share in the profit that the company's members' assembly has formally decided to distribute. It arises only from confirmed net profit shown in approved financial statements, after covering any accumulated losses from prior years. It is not a salary, a director's fee, or a loan repayment. Any payment to a member made without a prior assembly distribution decision is not a dividend under Serbian law and will be reclassified by the Tax Administration.
How are dividends taxed in Serbia?
Dividends paid to non-resident shareholders are subject to 20% withholding tax. The Serbian company deducts the tax before payment and remits it to the Tax Administration within three days. If a double taxation treaty applies and the required residency certificate is provided before payment, the rate is reduced to 5% or 15% depending on the treaty and the shareholder's ownership stake.
Can I repatriate profits from a Serbian company?
Yes, and directly. Serbian foreign exchange law does not restrict dividend transfers abroad, and there is no requirement for the money to pass through a Serbian bank account first. After withholding tax has been paid, the net amount transfers via SWIFT directly to the foreign member's bank account abroad. The bank requires the assembly decision, proof of tax payment, and the recipient's IBAN. No approval from the National Bank of Serbia is needed.
Is there a participation exemption for dividends between Serbian companies?
Yes. Under Article 25 of the Corporate Income Tax Act, dividends received by a Serbian tax-resident company from another Serbian tax-resident company are excluded from the recipient's taxable income. No withholding tax applies to intra-Serbian dividend flows. This is one of the main reasons foreign groups structure their Serbian investments through a Serbian holding company rather than through direct ownership from abroad.
What happens if a dividend is paid without an assembly decision?
The Tax Administration will not treat the payment as a dividend. It is most commonly reclassified as a loan to the member or undeclared income, triggering interest charges, a tax assessment, and potential personal liability for the director. The distribution documentation, including the assembly decision and the PPO-PD return, must exist before the money is transferred.
If you have questions about profit distribution or the tax treatment of dividends in your Serbian company, contact us through our corporate law page or reach out directly.
About the authors
- Companies Act (Zakon o privrednim drustvima), Official Gazette of the RS, No. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019 and 109/2021.
- Ministry of Finance of the Republic of Serbia, list of applicable double taxation treaties: mfin.gov.rs.
- Law on Foreign Exchange Operations (Zakon o deviznom poslovanju), Official Gazette of the RS, No. 62/2006, 31/2011, 119/2012, 139/2014, 30/2018 and 92/2023.
