Purchase of Real Estate Through a Legal Entity

The purchase of real estate through a legal entity (LLC or other legal entity) in Serbia is a common practice, especially when it comes to investment or business activities. Whether a company is buying an apartment, commercial space, or another type of property, it is important to understand the legal, tax, and accounting framework in order for the entire process to be safe and compliant with regulations.

The legal basis for this type of purchase is regulated through several laws, primarily the Law on Foundations of Property Relations, the Law on Real Estate Transactions, the Property Tax Law, and the Value Added Tax Law. Domestic legal entities, such as LLC companies, can purchase real estate without special restrictions, while for foreign legal entities the principle of reciprocity applies.

Before the purchase itself, one of the most important steps is property verification. Insight into the cadastre allows determination of ownership, whether there are any encumbrances, and whether the property is legally registered. This verification is crucial because it can prevent serious legal and financial issues later on.

The purchase agreement must be made in written form and notarized by a public notary. In practice, the most important thing is that it clearly defines the price, payment method, and transfer of ownership rights. Payment is almost always made cashless, via bank transfer, and the bank may request additional documentation regarding the origin of funds.

The tax treatment depends on the type of property and its status:

• for new construction, VAT of 10% is charged

• for resale property, a 2.5% property transfer tax is paid

After the purchase, the legal entity is obliged to pay property tax, which depends on the value and location of the real estate.

It is also important to distinguish between a DOO and an entrepreneur — in a DOO, the property is owned by the company, while in the case of an entrepreneur it is formally owned by a natural person.

If the property is used for business operations, its tax treatment is considered as business premises, regardless of whether it is an apartment or a commercial space.

When purchasing real estate through a legal entity, we recommend involving your accountant in this process (https://creativefinance.rs/). An accountant is necessary because the property, apartment or any real estate is entered into the business books and into the balance sheet as an asset (fixed asset). By entering the asset into the company, the company’s share capital also increases, and in Serbia the most common form of company is a DOO. Therefore, from an accounting perspective, the asset must be properly recorded and aligned with regulations, which is why cooperation with an accounting agency is of great importance.

After the contract is concluded, the public notary submits a request for registration of ownership rights in the cadastre, and the process is usually completed within one to two weeks.

Purchasing through a legal entity brings certain advantages. It allows depreciation and potential VAT deduction, and in some cases also facilitates later ownership transfer through the sale of company shares. Additionally, the property can be directly used for business activities.

On the other hand, there are also certain risks:

• capital gains tax may arise upon sale

• there are no tax reliefs like those for individuals

• mandatory bookkeeping and proper asset recording is required

For this reason, it is recommended to involve both a legal advisor and an accountant in the process.

The property is recorded as a fixed asset in the company’s books, so it is important that everything is properly recorded and compliant with regulations. Good preparation and professional support significantly reduce risks and contribute to a safe transaction.