You’ve decided to invest in a property in Serbia? The first thing on your to-do list is to check whether citizens of Your country are entitled to gain ownership over property in the Republic of Serbia and under which conditions.
To find that out, you must check whether there is a concluded bilateral agreement between the Republic of Serbia and your country that regulates the issue of obtaining the property of a national of that country in another country. In the absence of such an agreement, it is necessary to check whether the countries have factual reciprocity.
It should be emphasized that the acquisition of agricultural land is reserved exclusively for Serbian citizens. The exception is the ability of EU citizens to acquire agricultural land, with very restrictive conditions.
If the answer is positive and you, as a foreigner, may buy a property in Serbia, you should proceed to the next step – undertaking all necessary previous actions (due diligence). This implies finding the right property, inspecting the real estate, agreeing with the seller about the purchasing price, and moving to the realization of the real estate sale and purchase process.
If the citizens of your country cannot acquire property in Serbia, you can overcome this obstacle by establishing a company in Serbia. Namely, even though some foreigners are not entitled to gain ownership over a property in Serbia (in the lack of reciprocity), there is no legal obstacle to establishing a legal entity, i.e., a company. As explained thoroughly in our blog Company Formation in Serbia in 7 Steps, foreign legal and natural persons can establish companies without any restrictions. Not only that, but foreigners can also establish the so-called Special Purpose Vehicle to acquire agricultural land through a domestic legal entity. Additionally, the legal entity established following the laws of the Republic of Serbia, can without any obstacles purchase real estate, nevertheless of the citizenship the founder or ultimate beneficiary owner holds
After you have found the property suitable for You, it is necessary to perform legal due diligence on the property. What do we mean by this? In addition to going to the site and inspecting the property, it is necessary to carry out legal due diligence on the property, check whether there is an encumbrance, mortgage, annotations on the property, etc. The real estate industry has encountered numerous issues in Serbia, starting with properties for sale in Serbia that have not been registered into the Real Estate Cadaster to properties built without the permission of the competent authority, property subject to dispute, etc. For this reason, be careful when choosing a property and performing your due diligence.
To avoid doubts or difficulties in knowing whether some encumbrances present the obstacle in conveyancing, you should ask for legal assistance. In Serbia, only real estate lawyers are professionally trained to give you advice on buying property in Serbia.
Apart from legal and factual due diligence of the property in the matter, you need a real estate lawyer who works in the field of real estate law for the next step – drafting a real estate sale and purchase agreement. Once the parties agree on the price, method of payment and the deadline for the transfer of the property into possession, the lawyer is the one who will put the seller’s and buyer’s wishes on paper.
The lawyer advises what would be the best solution for both contracting parties, to achieve an agreement and avoid any potential misunderstanding. The lawyer also manages the way of transferring the money for the purchase price, especially when the buyer is paying for the purchase price from a foreign country.
After the contracting parties have agreed to all terms, it is necessary to schedule the notarization-solemnization of the real estate sale and purchase agreement, before the Notary Public. A Notary Public is competent if they are located in the area of the property in matter. Contracting parties sign the agreement drafted by a lawyer.
The Notary Public informs the contracting parties about their rights and obligations related to the agreement, what exactly means the notarization-solemnization of the agreement, and that only based on the notarized agreement, the buyer will not become the owner of the real estate. All the above is stated in the Notary Clause on the confirmation of the document, and thus it is considered that the agreement is concluded.
However, you should bear in mind that the buyer has not yet become the owner of the abovementioned real estate. Based on the notarized-solemnized real estate sale and purchase agreement and a permit for registration in the Real Estate Cadaster (clausula intabulandi), the buyer is registered as the owner in the competent Real Estate Cadaster.
The buyer pays the agreed purchase price, and the seller transfers into possession the property on the real estate to the buyer. The payment of the purchase price shall be made by transferring the funds from the buyer’s bank account to the seller’s bank account. The transfer of possession is carried out when the seller lets the buyer into the real estate and provides the transfer of the keys.
For instance, the contracting parties can agree that the buyer will pay the purchase price in total in 5 working days, from the day of notarization-solemnization of the real estate sale and purchase agreement, while the seller will be obliged to transfer into possession of the real estate, immediately after the payment of the purchase price.
The abovementioned example is just one of the possible ways how the contracting parties can regulate their mutual contractual obligations. For the specifics of each case, it is desirable to consult professional legal assistance, to find the best solution and balance the positions of both contracting parties.
After the notarization-solemnization of the Real Estate Sale and Purchase Agreement, it is necessary to register the ownership of the buyer in the central, public, and unique register of the ownership right over the properties in the Republic of Serbia. The Republic Geodetic Authority, which has its departments for Real Estate Cadaster across the country, is the only competent authority for registration of ownership of the Real Estate. For the difference between the previous procedure when the buyer was obliged to personally submit the Request for registration of ownership of a real estate to the Real Estate Cadaster, right after the solemnization of documents, the procedure is now simplified.
After the solemnization of the Purchase Agreement and after obtaining the permission for registering the ownership of the real estate (clausula intabulandi) from the seller, Notary Public officially sends the Purchase Agreement and other necessary documents to the Real Estate Cadaster to register the ownership of the Real Estate without any activity neither from the seller or the buyer.
By introducing the Notary Public’s obligation to deliver to the competent Real Estate Cadaster the notarized-solemnized Real Estate Sale and Purchase Agreement, within 24 hours from the moment of notarization, which represents the submission of the request for registering of the buyer’s ownership rights, the whole process is eased. In that way, additional legal security has been introduced in the real estate field. The possibility of any abuses and embezzlement that have happened in the past, is not reduced.
Even though you might have thought that after concluding and notarizing the agreement, the procedure is completed, you must pay attention to some other activities that accompany the real estate sale and purchase procedure.
When buying property in Serbia, you will be charged with absolute rights transfer tax. During the notarization-solemnization of the real estate sale and purchase agreement, the tax return for the tax on the transfer of absolute rights is being filled. The Notary Public is obliged to deliver the abovementioned filled tax return within 24 hours from the moment of notarization of the agreement to the competent tax authorities.
Following the Property Tax Law, the taxpayer is the seller, the one who is transferring his ownership right to the buyer. However, in practice, the more common situation is that the contracting parties agree for the buyer to pay the tax, and therefore, the agreements state that the buyer will pay the tax on the transfer of absolute rights.
The tax base, for determining the tax on the transfer of the absolute rights is the stipulated purchase price of the real estate, if the stipulated price is not lower than the market value of the real estate. On the other hand, if the competent tax authority believes that the stipulated purchase price is lower than the market value of the real estate, the competent tax authority has a timeline of 60 days from the day of submission of the tax return, to assess and determine that the tax base will be the market value of the real estate. The tax rate is 2.5% of the stipulated purchase price, i.e., the market value of the real estate that is the subject of the agreement.
In addition to the tax on the transfer of the absolute rights, which is paid only once, during the purchase of each property, you should also bear in mind the property tax. As well as the submission of the tax return for the tax on the transfer of the absolute rights, this tax return for the property tax is submitted by the Notary Public.
Property tax is determined on the basis of the annual Decision and is being paid quarterly. The tax base for determining the property tax is the value of the real estate, estimated by the competent tax authority. The tax rate is 0.4% for real estate valued up to 10 million dinars, while it goes up for the more valuable real estate.
Additionally, there is one more possibility, in accordance with the age of digitalization, and that is the electronic submission of the tax return for the tax on the transfer of the absolute rights, and tax on the gift and inheritance (in case you gain ownership over a gift, or inherit something), via portal eTaxes. Firstly, you must download a free app, that will allow you to access the portal. In order to access and log into the portal, and submit the tax returns by yourself, you must have an electronic signature.
In order to complete the entire procedure of buying a property in Serbia as a foreigner, it is also necessary to make changes of the account holder with the competent companies (eg., for electricity, water supply, etc.)
The cost of buying a property in Serbia depends on the value of the property itself. The higher the value, the higher the cost.
In addition to the purchase price and the accompanying bank transfer fees, expenses that the buyer needs to bear in mind when it comes to the actual transfer of ownership are as follows:
- the absolute rights transfer tax: 2.5% of the stipulated purchase price, i.e., the market value of the property
- attorney’s fees
- fee for notarization-solemnization of the Real Estate Sale and Purchase Agreement before the Notary Public
Natural persons are required to provide personal documents of both the seller and the buyer. Foreign natural persons are required to submit a passport, while foreign legal entities are required to submit an Extract from the foreign competent business registers agency, which has to be properly legalized or supplied with the Apostille stamp (except if it is issued by the competent authority of the country with which Serbia has concluded a bilateral agreement on the abolition of the need of legalization). Apart from the fact that the documents must be properly internationally legalized, they must be translated by the court translator to the Serbian language, to be used in front of the authorities in the Republic of Serbia.
In addition, prior to the solemnization of the agreement before the Notary Public, the contracting parties can deliver to the Notary Public the Extract from the Real Estate Cadaster, to check whether everything is fine with the real estate that is the subject of the agreement and whether the seller is registered as the owner. Thus, contracting parties are not obliged to do so, since the legal obligation, ex officio, is for the Notary Public to check that before each notarization-solemnization. Furthermore, the seller should tell whether he is married or not, and provide evidence whether the property he is selling is in the regime of the separate or joint property, in case he is married.
Also, the relevant information is whether the buyer is married, to determine whether the real estate he is purchasing presents his separate or joint property. In case he is married, he should obtain the Marriage Certificate from the country where the marriage was concluded. In this case, also, the Marriage Certificate must be internationally legalized and translated, if the marriage was concluded in a foreign country.
The Law does not regulate this issue but starts from a point that it is not necessary to have a contractual (diplomatic) reciprocity with a foreign country, but, in practice, it is enough to give a permit to citizens of the Republic of Serbia to acquire property on the territory of that foreign country (factual reciprocity).
Likewise, foreigners may inherit real property on the territory of the Republic of Serbia based on the assumed factual mutuality, while the stakeholders in the procedure may prove the contrary.
If you want to double-check if the factual reciprocity between the Republic of Serbia, and the country of your citizenship, exists in the practice, there is always a possibility to file a request to the Ministry of Justice of the Republic of Serbia. In this case, the Attorney at Law who specialized in the Real Estate field of law can be of significant help, and offer you the proper advice and legal assistance.