In a few years Serbia became popular jurisdiction for foreign investors due to various benefits and generally positive investment environment.
Still, among individual entrepreneurs and also among small and middle size enterprises,
especially in case they have fully or partially operated in offshore jurisdictions it is noticeable that certain misconceptions related to Serbian jurisdiction still exist.
Such misconceptions do not, of course, mean that investors think of Serbia as an offshore jurisdictions: it relates to possibilities and obligations towards the state that are often neglected or misunderstood. In order to help our Clients and partners avoid mistakes, we will try to identify and explain most significant differences below.
Lately, even classical offshore jurisdictions started imposing substance rules to resident legal entities. In Serbia, in order to make sure your bank account is stable and in order to make sure you meet all legal requirements for obtainment of residency and work permits for company personnel, you need to have your company registered on a legitimate address and that the address/office is not a virtual one. Throughout bank account opening process bank will require information about the website of the company, personnel and other information regarding company address.
Substance rules are not exclusively related to requirements of banks and state authorities, but to AML/CFT procedures that can even be initiated and controlled by correspondent banks.
Accounting, financial and tax rates
Serbian companies are obliged to submit financial and tax reports to corporate registry and Tax Administration. Serbian financial reports are submitted in accordance with relevant international accounting rules.
Serbian personal tax rate is at 10 to 15% and corporate tax rate is at 15% as well. Serbian individuals and companies may be subject to capital gains tax, VAT and withholding tax (in case of payments to foreign legal entities). On the other side, Serbia offers tax incentives in various areas of business, with IT being the most beneficial.
Bank accounts: opening and executing transactions
Keeping in mind that the banks are, together with the central bank of Serbia, responsible for monitoring of transactions and cross-border payments, every transaction must be followed with adequate documentation, explaining legal and financial basis of the transaction and, in case goods are allowed, documentation related to subject goods that is being presented to the bank in the moment transaction takes place and even after the transaction is executed (for example, in case of advance payments for goods).
Payments to physical persons and payments received from physical persons are under special regime that regulates legal, administrative, financial and tax framework into which operations with physical persons must be put. One of the most common misconceptions about Serbian legal entities is that operations with physical persons are not subject to any special rules.
Another important difference is that Serbian companies cannot open accounts in foreign banks without permission given by central bank. Either way, this is a solvable matter.
Legal and transparency
Serbian legislation doesn’t recognize fiduciary services, I. e. nominees in ownership and management structure of the company are not recognized as such. Bearer shares are not allowed in Serbia (foreign companies with bearer shares are considered as high-risk structures in accordance with AML/CFT regulations).
In addition to that, it is mandatory that Serbian companies declare, within a semi-public, internal registry, their beneficial owners. Registered agents and secretaries do not exist as a legal category in Serbia. Serbian companies do not pay yearly renewal fee to the state.
Last but not the least: Serbian company can be registered in less than 3 working days which is on average faster if compared to company registration process in classical offshore jurisdictions.