Up to this moment, you have probably realized that Serbia has become one of the best and most popular places in Europe if you are a foreigner seeking a great environment, lifestyle, and liberalized immigration procedures. However, we would like to point out one additional aspect, of why Serbia is so attractive for all nationals – business potential.
With that in mind, we would like to use a few minutes of your time and present you with the costs of running a company in Serbia. If you have not incorporated a company in Serbia until now, you will definitely consider that option after reading our blog.
1. Costs related to the company incorporation, before the Serbian Business Registers Agency
We have already answered the most important questions one can have while thinking about establishing a company in Serbia. Having all the answers in one place can always be useful, so having a guide by your side is a good option.
In the procedure of the company formation, before the Serbian Business Registers Agency[i] (hereinafter: the SBRA), the founder(s) should pay attention to the administrative fees related to the establishment procedure itself. The amount differs on the type of legal entity. For example, average costs related to the establishment of a limited liability company (LLC), which is the most common form of the companies in Serbia, amount to:
- EUR 55 (RSD 6,500) for electronic application for the registration,
- EUR 8 (RSD 1,000) for reservation of the desired business name,
- EUR 45 for issuance of the electronic certificate (price may be different, depending on the issuer), necessary for signing the financial statements and other documents electronically.
SBRA is the publicly available registry that contains all necessary information regarding the company. In case of a change of any of the registered information, it is necessary to change that information with SBRA, as well. In this regard, it is important to consider SBRA’s expenses related to the change of the registered information:
- EUR 25 (RSD 3,100) for registering changes related to LLC, whereas if you are changing more than one data with one application, every additional change is charged for approx. EUR 13 (RSD 1.500) per change,
- EUR 50 (RSD 6,000) in case you do not obey the deadline for registering the change related to the LLC, in front of the SBRA,
- Approx EUR 30 (RSD 3.300) if you decide to close the LLC,
- EUR 16 (RSD 1.900) is the administrative fee for obtaining an SBRA’s extract about the LLC’s data.
If you decide to hire attorneys to support you during these processes, you should also include attorney’s fees planed budget.
Even though the topic of this blog is the expenses related to running a company in Serbia, we would like to briefly present the average costs related to the entrepreneurship establishment, and changes related thereto:
- EUR 13 (RSD 1.500) for electronic application,
- EUR 8 (RSD 1,000) for reservation of the desired business name,
- EUR 7 (RSD 850) for registering change of any data related to the entrepreneurship, whereas if you are changing more than one data with one application, every additional change is charged for 450 RSD per change,
- EUR 8 (RSD 1,000) you would like to obtain an extract about registered data of the entrepreneurship, issued by the SBRA.
2. Share capital
Now that we have seen how much the SBRA charges for different types of registration, it is important to answer to the question – what is the minimum, or maximum amount of the share capital?
The good news is that the minimum share capital of the LLC is only RSD 100.00, which is less than EUR 1. Besides, there is no prescribed maximum, so a founders can invest in the share capital however they want, as long as they obeys the minimum criteria.
On the other hand, there are different rules for certain entities. If you are wondering whether to establish a joint stock company, please disregard the abovementioned.
Foreign investors who are seeking the opportunity to establish joint stock companies should know that the minimum share capital is approx. EUR 25,530 (RSD 3,000,000).
Additionally, it is important to note that for some companies providing services that are subject to special regulations, the law may impose different amounts of the minimum share capital.
Rental costs for the company’s offices vary in the city, and region within the city, thus, are still the lowest compared to some other European countries. However, if your business model includes services that can be provided remotely, and you do not need a physical office, you may consider having a virtual office.
4. What can the company expect after incorporation?
The list of necessary funds, for running a company in Serbia is not closed yet.
First things first – corporate income tax, which amounts to 15% in Serbia.
Besides the corporate income tax and other accounting duties that companies have, these are other main obligations:
- Municipal eco-tax – the amount depends on the size of the company and the negative impact it has on the environment based on its field of activity. Most companies will be paying around EUR 50 per year;
- Communal services fees – again, the factors that determine the amount your company will be paying are the category, and the municipality where the company’s seat is registered. In most cases, the company will be paying EUR 60 per year;
- The local municipal tax for displaying a company’s sign on a business premises is determined by the local tax authority based on the submitted tax returns. The threshold is approx. EUR 425,170 (RSD 50,000,000.00) of revenue in the previous year.
The company should also keep in mind that there are utility posts, such as water, electricity, and gas costs.
5. Fees for being a member of the Chamber of Commerce and Industry of Serbia
Every legal entity established in Serbia is a member of the Chamber of Commerce. To be able to practice all the rights and benefits of membership, every company has to be aware of the monthly fees.
The amount of the fee is determined by the category of the company, and the submitted tax returns. The fee can vary from approx. EUR 5 (RSD 600), for micro legal entities, to even approx. EUR 1,575 (RSD 185.000).
6. Transfer prices
Transfer prices denote the prices established during transactions involving affiliated entities. Given this definition, the question that immediately arises: who qualifies as related parties concerning transfer pricing?
In terms of transfer pricing or the Transfer Pricing Report, the Corporate Profit Tax Law delineates the definition of related parties.
Related parties encompass:
- Entities with direct or indirect capital ties (parent companies, sister companies, and subsidiary companies) surpassing 25%,
- Entities engaged in a relationship of control (exerting significant influence on business decisions),
- Control is recognized when there is ownership of more than 25% of votes in management bodies,
- Family members (both immediate and extended).
Entities mandated to compile a Transfer Pricing Report include both entrepreneurs and legal entities involved in transactions with related parties concerning assets or the assumption of liabilities.
Essentially, if any form of transaction with related parties is conducted within a given tax period, there is a substantial likelihood that the preparation of a Transfer Pricing Report will be mandatory.
7. Introduction to the tax system in Serbia
The tax system in Serbia is attractive to numerous foreign investors seeking opportunities in the country.
As mentioned above, corporate income tax amounts to 15%. The capital gains tax is 15% also. Notably, the personal income tax rate stands at 10%. For non-residents in Serbia, a 20% withholding tax is applied for instance to dividends, and royalties and other incomes arising from and related to the IP.
Regarding the standard Value Added Tax (VAT), it is set at a rate of 20% for the majority of goods, services, and saleable supplies. Thus, not every entity has to be in the VAT system, and if you would like to find out more about this topic, an Attorney at Law in the tax field is the right solution for you.
8. Tax incentives for companies
In recent years, the Serbian business landscape has seen the emergence of numerous tax incentives and exemptions, making it more attractive for tech companies to expand their operations in our country. Through analysis of the practice, and our clients’ work, we’ve come to understand that some of the provided incentives are perceived as highly valuable advantages and are effectively leveraged.
With that in mind, it is good to know that, for instance, there are:
- “IP BOX” regime – reduces income tax from 15% to effective 3%,
- “R&D” incentives – refer to the reduction of the corporate income tax for the legal entities that conduct research and development activities in Serbia.
If this caught your attention, you will be thrilled to hear that IP Box and R&D deduction can be combined, thus reducing the corporate income tax to 0%.
We are not done yet – don’t forget the incentives for employees!
9. Tax incentives for employing foreign workers
It is widely acknowledged that Serbia has emerged as one of the most sought-after destinations in Europe, particularly in the field of immigration law. We are confident that, with the insights into costs and tax incentives provided, your desire to relocate here will be further reinforced.
Serbia is known for its relatively low labor costs compared to other European countries. However, companies in the Republic of Serbia who hire foreign employees can benefit from incentives. If all legal conditions are met, incentives are paid in the amount of 70% of the calculated and paid personal income tax and 100% of the calculated and paid contributions for mandatory pension and disability insurance.
Beyond the generally low employment-related costs, establishing a company in Serbia, and deciding to engage a foreign, specialized workforce, opens up the opportunity to employ many individuals. This option is particularly advantageous for employers intending to relocate their business to Serbia along with their workforce.
Making smart optimization, while profiting
Understanding the costs associated with running a company in Serbia is essential for making well-informed business decisions. From company formation to labour and utility costs, each aspect plays a crucial role in the overall financial landscape. Navigating these costs effectively ensures a smoother and more successful business operation in the Serbian business environment.