BUYING PROPERTY IN SERBIA FOR FOREIGNERS IN 7 STEPS

You are not a Serbian citizen but are interested in buying property in Serbia? Or wish to know whether buying property in Serbia is possible, what are the procedures and costs? We decided to provide answers to FAQs for our foreign clients

25
Apr 2018

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BUYING PROPERTY IN SERBIA – PROCEDURES FOR FOREIGNERS

1) Check whether citizens of your country are eligible to acquire real property in Serbia

You have decided to invest in property in Serbia. But what is the situation with buying property in Serbia for foreigners? Make sure to check whether citizens of your country can acquire property in Serbia as foreigners. To check this, you have to verify whether your country (x) and Serbia have concluded a bilateral agreement regulating the issue of foreigners acquiring real estate. Furthermore, check if factual reciprocity is sufficient enough and who must prove the existence of factual reciprocity. Reciprocity or mutuality means that foreigners can acquire ownership of property under the same conditions under which the citizens of the Republic of Serbia can acquire property in their respective countries. There is legal, diplomatic and factual reciprocity.

You can find more about the countries with which Serbia has concluded reciprocity on the website of the Ministry of Justice of the RS.

Under these conditions, foreigners can acquire houses, apartments, business premises, but cannot buy agricultural land in Serbia. Agricultural land has special rules and the agricultural land for sale in Serbia is reserved for Serbian citizens, but with certain exceptions for EU citizens who can buy agricultural land in Serbia under certain conditions.

Bear in mind the difference between inter vivos transfer (such as concluding a sales and purchase agreement or a deed of gift) and mortis causa transfer (such as inheritance). This also needs to be taken into account in terms of permissiveness and reciprocity.

Additionally, note that the Law distinguishes between persons who perform a business activity in Serbia and persons who do not perform any activity in Serbia when it comes to acquiring property. Foreign natural persons and legal entities who perform activities in the Republic of Serbia may, under conditions of reciprocity, acquire property for sale in Serbia which is necessary to perform business activities. On the other hand, foreign natural persons who do not perform a certain activity may acquire the rights to property ownership only of apartments or apartment buildings under the same conditions as the citizens of the Republic of Serbia. All of the above is, of course, provided there is reciprocity.

If the answer is positive, and you as a foreigner may buy a property in Serbia, the next step is to find an appropriate property to buy in Serbia, perform due diligence, come to an agreement on the price and move into realization.

2) Decide on the property and perform due diligence

After you have found your right property, it is necessary to perform real estate legal due diligence. What do we mean by this? In addition to going to the site and inspecting the property, it is necessary to carry out a legal due diligence of 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.

In Serbia, only real estate lawyers are professionally trained to give you advice on buying property in Serbia.

3) Draft a Purchase Agreement

Apart from legal and factual due diligence of the property in the matter, you need a real estate lawyer who works in a real estate law firm for the next step – drafting a purchase agreement. Once the parties agree on the price, method of payment and the deadline for the transfer of the property, the lawyer puts the seller and buyer’s wishes on paper. The lawyer also manages the way of transferring the money for the purchase.

4) Solemnization before the Notary Public

After the Contracting Parties have come to an agreement on all terms, it is necessary to book a certification-solemnization of the agreement before the Notary Public. A Notary Public is competent if their location is in the area of the property in matter. Contracting Parties sign the agreement drawn up by a lawyer and the Notarial Clause on the confirmation of the document before the Notary public. However, keep in mind that at that moment, the buyer has not yet become the owner of the property in question.

5) Payment of the purchase price and transfer of the property

The buyer pays the agreed purchase price, and the seller transfers 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 account to the seller’s 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.

6) Procedure before the real estate cadaster

After the certification, your job is still not complete, because foreigners have to submit a request for registration of the ownership right in a public registry. The Republic Geodetic Authority, which has its departments for real estate cadaster is in charge of registering real estate on the territory of the RS. Therefore, it is necessary for the buyer to submit an application for registration of the ownership right to the competent real estate cadaster. The competent department of the Real Estate Cadaster issues a Decision, which authorizes the registration of ownership rights on the purchased property and that concludes the procedure of the acquisition of property. In other words, only when the Decision of the Real Estate Cadaster that permits registration of ownership rights in the name of the buyer becomes final, the buyer shall become the owner.

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7) Taxes and communal expenses

After the conclusion of the agreement and the acquisition of the real estate, some other activities should accompany the purchase of the property.

Absolute rights transfer tax

When buying property in Serbia, you will be charged with absolute rights transfer tax. The seller (as a taxpayer) submits the tax return within 30 days from the date of the certification – solemnization of the Agreement with the Notary public. In practice, however, 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 absolute rights transfer tax, although the seller is supposed to pay the tax according to the law.

The tax rate is 2.5% of the market value. If the Agreement stipulates a price that is higher than the market price, the tax will be calculated at the agreed price. Market value is assessed by the competent tax administration.

Property tax

In addition to the absolute rights transfer tax, which is paid only once during the purchase of each property, you are also required to file a tax return on property tax. Property tax is determined on the basis of the annual Decision and is being paid quarterly. 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.

Change of the account holder

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.)

FAQs

What are costs on the buyer’s side for buying property in Serbia?

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 market value of the property
  • attorney’s fees
  • fee for certification-solemnization of the Agreement before the Notary Public
  • fee for registering property rights.

Which paperwork is necessary to buy an apartment or buy a house for sale in Serbia?

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 a Copy from the competent business entities registry, which has to be properly legalized or supplied with the Apostille (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 to legalize foreign documents) and certified by a court interpreter. In addition, immediately prior to the solemnization of the agreement before the Notary, the real estate folio from the competent real estate cadaster should be submitted for the property that is the subject of the agreement, which proves ownership of the seller. Furthermore, the seller should provide evidence to whether the property they are selling is part of their special or marital property.

Which kind of reciprocity applies when acquiring property in the Republic of Serbia through inter vivos transfer, and which kind of reciprocity through mortis causa transfer?

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 on the basis of the assumed factual mutuality, while the stakeholders in the procedure may prove the contrary.

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