In the process of joining the European Union, Serbia has been improving the investment environment for many years, as well as amending numerous laws to attract foreign investment. The purpose of the amendments to laws is harmonization with the EU legislation, as well as making Serbia a competitive investment market.
These significant changes have put Serbia in a high position on a list of countries, which investors all around the world take into consideration when deciding where to invest.
Under Serbian laws, foreign investors enjoy investment freedom.
Let us make it clear at the beginning that a foreign investor is considered a company or an individual with a registered seat or residency abroad, who invests in business activity in Serbia.
It is paramount to clarify that foreign investors enjoy the same treatment as nationals for their investments in Serbia. This means they have the same treatment in matters of rights and obligations as Serbian investors unless otherwise regulated by the Law on Investments .
After paying all taxes and settling other obligations related to public revenues, foreign investors are free to transfer their income, such as dividends, fees for the use of IP rights, and other funds related to the investment in Serbia.
Situated in Southeast Europe, Serbia has a quite favorable geographical position.
The Danube, which passes through Serbia, connects ten European countries.
All the important roads cross Serbia, thanks to its position between Western and Eastern Europe. Also, both road and rail traffic from Northern, Western, and Central Europe pass through Serbia on their way to southeastern Europe and southwestern Asia.
Developed traffic connections, as well as good geographical position, are incredibly important for the development of the business, presence at the market, and easier way to connect to your business partners and suppliers from all parts of Europe and the world.
While deciding whether you should invest in or/and start a business in Serbia, one of the main things you should be well informed about is tax legislation as well as tax incentives prescribed by Serbian Laws.
When you compare the tax rates prescribed by Serbian Laws with the ones in other European countries, you will surely be motivated to invest in Serbia.
Additionally, one of the most important taxes for all businesses is the Company Income Tax and the table below shows some examples of the CIT rates in European countries. Taking into account the quality of life, the rest of the expenses for your business, together with the rest of the favorable occasions for business owners in Serbia, we truly believe Serbia is a good environment to start a business.
The attractive CIT rate is not the only thing that motivates investors all around the world to start their businesses in Serbia.
With its favorable provisions, especially regarding innovative activities, relevant laws make Serbia an incredibly good environment for investing in a business or establishing a new one. The main reasons for continuing the trend of adopting the tax advantages is promoting innovative activities and development of the IT sector.
From the beginning of 2020, the qualified employers who fulfill all the conditions prescribed by law are in a position to use tax benefits for employees – foreigners and returnees .
There are favorable tax provisions related to each tax category. If you go through our blog related to Tax Incentives for Companies in Serbia , you can get a general insight on all of them, and see whether you qualify for using some of these advantages.
A new business is established after the registration procedure before the Serbian Business Registers Agency and the opening of a corporate bank account in Serbia.
The procedure of registering the company in the Business Register, before the Serbian Business Registers Agency, is quite simple and by engaging a legal professional in the field of company law , the minimum of your engagement would be needed. Also, the whole process can be done in 3-5 days, since the Serbian Business Registers Agency needs that much time to issue their decision. Before that, depending on the complexity of the ownership structure, a certain amount of time would be needed in order to prepare all the documents and to draft the company’s most important document – the Founding act.
Regarding the Serbian Business Registers Agency fees for the company formation as well as changes of all kinds (for example, registering your seat at one address, and later changing it to a different one), Serbia is quite competitive in comparison to other European countries.
The share capital of the company may consist of monetary or non-monetary contributions. The minimum amount of the share capital in the limited liability company is RSD 100, and for the founders who are willing to apply for a temporary residence permit based on their position in the company, the minimum amount is EUR 250 (equivalent amount in RSD).
Numerous business obligations and hectic lifestyles, in general, may often prevent people from traveling just in order to perform formalities. In the process of company formation, these formalities are the notarization of the Founding act, physical presence in the bank during the procedure of opening a bank account, etc.
Because of that, Serbia is quite attractive for such investors since the whole procedure of company formation can be performed remotely.
A company shall have a Serbian business seat address, from which the company is considered to be managing its business operations.
Since a lot of the company’s business operations are performed remotely worldwide (especially for the innovative activities in the IT sector), an interesting and popular way to meet this requirement, with less cost, is engaging virtual seat services for your Serbian company.
Foreigner’s investment in Serbia, in the form of import of equipment, except for passenger cars and gambling machines, could be exempt from customs duties and other import duties, in case imported equipment is in accordance with environmental regulations in Serbia.
The Commission for Protection of Competition in Serbia has been receiving positive evaluations of its work and constant improvement of transparency for years. The Foreign Investors Council recommends the use of more advanced economic analyzes in the procedures of examining the violation of competition, as well as the use of advanced software that increases the quality of the economic analysis.
Certainly, Serbia does not lag behind the developed European countries regarding fair market competition.
Besides the incentives provided for any legal entity in Serbia, there are incentives and grants specially intended for foreign investors.
As a form of financial support, the Republic of Serbia offers special cash grants for Greenfield and Brownfield investments, as two types of foreign direct investment in Serbia.
For support of an investment of national importance as well as an investment that promotes local economic development, the Republic of Serbia can sell construction land at a lower price than the market price to an investor.
For those investors who hire more than 100 employees and invest more than 8.5 million euros, the Republic of Serbia offers a 10-year CIT holiday.
Performing business within one of the 15 Free Zones in Serbia can provide a certain preferential tax regime. Most importantly, there is an exemption from VAT for income generated through business activities.
Both domestic and foreign legal entities are eligible to establish and manage the Free Zones. Free Zones are suitable for performing all kinds of business activities, including manufacturing, storage, trade, banking, and insurance.
The profit gained in the Free Zone can be transferred to any country in the world, without any kind of permission as well as without any taxes and charges.
The investors in the Free Zone can rent warehouses, business premises as well as other spaces with preferential conditions.
The new changes in the Labor Law announced for 2022 are aimed at making the Serbian labor market competitive with EU countries.
As an employer, you would not have a problem to find well-educated young graduates who speak English at a high proficiency level, since Serbia has a great EPI score and takes a high, 15 th place on a list of the countries all around the world.
Thanks to the high-quality education system, the conditions of the Serbian labor market seem quite optimistic.
Something of greater importance to foreigners, both as employers and employees, are the provisions of the Law on Foreigners (hereinafter: LoF) as well as Law on the Employment of Foreigners (hereinafter: LoEF) since the employment of foreigners in Serbia is regulated under these Laws.
All matters related to the residence permit of foreigners in Serbia are prescribed under LoF.
Regarding the LoEF provisions, there is a difference between the foreigners who need and those who do not need a work permit to perform business activities in Serbia.
The work permit is not required for the specific categories of government and non-government employees, such as foreigners with the rights to privileges and immunities, family members of diplomatic or consular mission members, certain representatives of the non-governmental sector as well as representatives of foreign media, and volunteers.
Also, the work permit is not mandatory for the foreigners who do not stay longer than 90 days in Serbia within 6 months , from the day of the first entry into Serbia in cases when the foreigner is:
- the owner, founder, representative, or member of the authoritative body of the Serbian legal entity , in case they are not employed at this legal entity;
- establishing business contacts or attending business meetings in Serbia, and performing other activities without gaining an income in Serbia to prepare the foreign employer to enter the Serbian market ;
- lecturer or researcher who is participating in the organization of professional events or scientific projects or presenting different scientific or technical achievements, as well as their staff;
- performing educational, sports, artistic, cultural and other activities or residing in Serbia in relation to scientific, artistic, cultural or sports events, organized by competent organizations, state authorities or provincial or local authorities, as well as following organizational and technical staff;
- on secondment , performing activities related to supply of goods, supply or lease of machines or equipment and its delivery, installment, setting up, repairing, or training for the usage of such machines or equipment;
- performing activities regarding the setting up and presentation of the equipment on commercial and other fairs and exhibitions.
In case you do not fall into any of these categories, or you are a foreigner who would like to live and work in Serbia longer than 90 days in a 6 month period, you are obliged to obtain a work permit in order to be able to work in Serbia.
We explain the whole procedure of obtaining the work permit in our blog .
Serbia has a Double Tax Avoidance Agreement with 59 countries all around the world and this fact initially makes Serbia favorable for starting or relocating a business.
Besides that, the last amendments of the Personal Income Tax Law and the Law on Mandatory Social Security Contributions (hereinafter: PITL) includes some new tax benefits.
Whether you are interested in employing foreigners in Serbia, or you, as a foreigner, are planning to enter into an employment agreement with a Serbian employer, there are some favorable provisions regarding taxes and social insurance contributions.
PITL prescribes that employers who employ youth repatriates can pay tax and contributions with a 70% reduction. The further conditions for using the tax and contributions base reduction are prescribed by Laws, and you can find the practical explanation in our blog .
Additionally, newly settled taxpayers employed by an employer who is performing the innovative activity and fulfills other conditions prescribed by the Law can use the tax and contribution incentive as well.
The question of engaging foreign employees is always directly connected with the residence of foreigners in Serbia. In 2020, Serbian authorities have adopted some favorable bylaws regulating that matter in order to enable foreigners to stay in Serbia as well as to make Serbia a more appealing business environment.
In accordance with provisions of the Regulation on the criteria for determining the categories of foreigners and the categories of foreigners to whom the temporary residence permit in Serbia may be granted regardless of the grounds for granting temporary residence (hereinafter: Regulation ), the temporary residence permit may be granted to the categories of foreigners who:
- have established a company in Serbia whose innovative activity is confirmed by the registered Science technology park (whose founder is the Republic of Serbia, an autonomous province, Belgrade or another local government unit) – so-called ” start-up “,
- invest in an already registered company in Serbia, ie in the activity of that company by investing in basic tangible and intangible assets – so-called ” investor “,
- have a decision on professional recognition of a higher education issued by the competent authority of the Republic of Serbia – so-called ” talent “.