Stay in the loop with the most important updates
Legal consultant: Anja Berić
Associate: Marija Medić
Whether it is due to the mild climate, delicious food, or the generosity of the local people, in recent years Serbia is continually becoming a more and more attractive location for many ambitious foreigners from all over the world who wish to establish or extend their business activities outside of their domestic countries. However, the everlasting question is whether any foreigner can settle and do business in Serbia.
Joke aside – it is evident that the growth of the IT industry, simplification of the procedures of company formation, and the number of tax benefits introduced in recent years have collectively resulted in the desire of a great number of foreigners to come and settle in Serbia.
A lot of world countries are, for some time now, recognized as attractive for foreigners when it comes to company formation. According to the Global Startup Ecosystem Index 2022 made by StartupBlink, the countries such as, for instance, USA, UK, Sweden, and Germany, found their place among the top 20 countries for founding a startup. As an emerging market for foreign experts looking for relocation for their new business ventures, Serbia settled at 52nd position, which is justified having in mind the growing numbers of foreigners who have settled here in a previous couple of years.
The one main “obstacle” on their way which needed to be resolved is conducting the necessary procedures to make their residence and work activities accordant to Serbian law. For those who did not yet manage to inform properly on this topic, this blog will provide a brief explanation of this process to clarify the steps towards living and working in Serbia.
To spend a certain (longer) time in Serbia, every foreigner must obtain a temporary residence permit in the procedure initiated by filing an adequate request. Such a request can be based on several legal grounds, and, among them, the one particularly interesting for any investment-oriented businessman is applying based on the company formation and/or employment in the Serbian entity.
Let’s make it clear at the beginning – the applicable law recognizes only the temporary residence permit based on employment, whereas there is no mention of company formation per se as a legal ground for requesting the temporary residence. Regardless, the status of the founder and/or shareholder in the Serbian company does represent the valid basis for applying for temporary residence here. How? We’ll explain in a short example:
In both cases, the application for the permits will be subject to similar, but not the same procedures and conditions. The foreigner’s name must appear in the Business Register’s Agency’s database about the Serbian entity, proving that you conduct any type of work concerning that company (for example, as the founder, the managing director, the other representative, etc.). However, each of these possibilities may appear more convenient for you depending on the particular circumstances –to enable you to choose which one suits your needs better, we will explain both of these options below.
But, before we move on to the specificities, let’s remind ourselves of some basic information regarding company formation as a legal ground for obtaining a temporary residence permit. After all, that is the first step in this process in each case.
We already wrote in detail about the company formation in Serbia, so we won’t stay on it for too long, but we anyhow suggest starting with a brief reminder.
First, you need a founding act including all the mandatory information stipulated by the law. This act can be drafted in form of a decision (if you are the only founder) or an agreement (if you partnered with another shareholder).
The signature of the founder(s) on the founding act must be notarized by the Serbian notary public, which may be burdensome for foreigners who cannot come to Serbia before the formation of the company and beginning of the procedure for obtaining the permit for the temporary residence. In such cases, it may be useful to authorize a person in Serbia to sign the founding act on behalf of the founder, in which case the founder does not even have to come personally to Serbia to register the company. Such authorization is provided by signing a Power of Attorney in the country where the founder is located, properly legalizing it, and translating the legalization to Serbian, after which such Power of Attorney can be used.
In both cases, once the founding act, along with the ancillary necessary documentation, is prepared, it is time to submit it to the BRA. However, if you did not plan to come to Serbia any time soon, another option is forming a company remotely.
Several activities need to be undertaken once the procedure of company formation is completed:
At the same time, what you can do is start collecting the documentation which must be filed to the authorities along with the application for the temporary residence and work permit. For more details about the application and ancillary documentation – continue reading.
December 1, 2020, brought a very warmly welcomed innovation to the field of Serbian immigration law. Namely, the joint request for issuing both the temporary residence permit and work permit was introduced which enabled each foreigner wishing to work and settle in Serbia to submit the request for both of these permits at the same time.
Before the joint request has been introduced, these were two separate procedures – according to the formerly applicable legislation, all foreigners were obliged to first obtain a Serbian temporary residence, and afterward, apply for a work permit. As a result, the entire procedure of settling in Serbia usually lasted significantly longer for all the foreigners, which did not contribute to the attractiveness of living and working in Serbia.
Now, two authorities involved in this procedure (the Ministry of Interior, on one side, and the National Bureau of Employment (hereinafter: the NBE), on the other side) mutually decide on the fulfillment of the conditions for both permits.
Even though the two procedures are joined, the lists of the documentation that needs to be delivered to each of the two competent authorities are long. The type of work permit you apply for can affect the list, as well.
For these reasons, this part of the process usually seems the most difficult, and the professional assistance of an immigration lawyer is almost always necessary, to help you understand and collect the needed documents.
Once the documentation is prepared, there are a few following stages before the temporary residence permit and work permit are finally obtained:
The joint request itself is submitted to the Ministry of Interior Affairs, through the competent Police Department for Foreigners. Unlike some of the previously explained procedures, this step cannot be delegated to a representative – in other words, it requires the foreigner to be physically present in Serbia.
Before coming before the Police Department for Foreigners, the foreigner must have everything else in place – the short-term permit for residing in Serbia, the place to live, health insurance…
Interestingly, the Police Department for Foreigners forwards the documents to the NBE and that way initiates the NBE’s part of the process. Anyhow, the NBE is competent for issuance of the work permit, so its task is to examine whether the conditions for the foreigner to start working in Serbia are met. Once a work permit is issued, the procedure is completed which means that the foreigner residing and working in Serbia is official and legal.
Finally, let’s get back to differing the two scenarios:
Let’s imagine we have two founders who have signed the founding act of a Serbian company named “The Firm” and that way became owners of 50% of the company each. Both Founder A (we will name him Mike) and Founder B, Anne, wish to stay in Serbia for a longer time and to apply for residency based on being shareholders of the Serbian entity. However, Mike wishes to be the Managing Director while Anne is not interested in being registered as Managing Director of The Firm, and they decide to, besides Anne being one of the Managing Directors, additionally engage the services of Nicole, who will as well be registered as a Managing Director of The Firm. In this example, we can detect the differences between the legal ground and the type of work permit for each of the founders, as well as the one that the Managing Director will obtain.
It can be noticed that the fact that Anne is the founder and the Managing Director of her company at the same time makes no difference regarding the legal ground for her temporary residence or the type of work permit in Serbia.
The list of the documents which need to be submitted to the NBE differs depending on whether the foreigner applies for the work permit based on employment or for self-employment.
Also, as it can be noted, one additional step is required in the latter case – the Labor Market Test.
Labor Market Test is an examination conducted by the NBE to check whether there are unemployed Serbian citizens who might fill in any of the open work positions at domestic employers. The goal of this test is to ensure that domestic citizens have priority over the foreigners who are coming here to work – if there are available unemployed persons registered at the NBE’s record who fulfill the conditions for working on the particular (open) position, the work permit for that particular position cannot be issued to the foreigner.
It’s also important to have in mind that the Managing Director does not have to be engaged in the company by the employment agreement (i.e., as an officially employed person), but can also be engaged through the Agreement on the rights and obligations of the Managing Director. Although from the labor law point of view, these two types of engagement have significant differences, when we look from the aspect of rights of foreigners, it is irrelevant which one of the two agreements is concluded with the Managing Director.
Not much. The same procedure which applies to Mike, who did not establish employment in The Firm but has obtained the work permit for self-employment, applies to the entrepreneurs, as well. Depending on your business goals and strategy, registering as an entrepreneur may be more or less convenient, and the simplicity of this procedure surely is its biggest advantage.
As it can be concluded from this brief guide, there is a way for a foreigner to establish a business presence in Serbia and at the same time change the environment by settling here. The key preconditions are good planning, organization, and being properly informed of the procedure itself. Hopefully, this brief guide answered some of the most frequent open questions regarding this topic and explained the necessity to take a first step towards a new life and business abroad.