Author: Stefan P

Serbia has become an attractive location for cryptocurrency businesses due to several factors that create a welcoming environment for startups, blockchain developers, and investors. Key reasons why Serbia is considered a good place for crypto businesses include:

 

 

 

Progressive Legal Framework for Cryptocurrencies

 

• Serbia implemented a Digital Assets Law in December 2020 to regulate cryptocurrencies. This law establishes a legal framework for the creation, exchange, and management of digital assets, including cryptocurrencies and tokens. The aim is to provide businesses with a more predictable environment.
• By defining how digital assets are regulated, the law ensures that businesses and investors are aware of the legal and tax implications. Serbia’s decision to regulate the cryptocurrency space has made the country a safer and more appealing destination for legitimate businesses.
• The National Bank of Serbia (NBS) is responsible for overseeing the regulation of virtual currency services, ensuring that businesses comply with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.

 

 

 

Tax Incentives and Favorable Taxation

 

• Serbia offers competitive tax rates for businesses and individuals involved in cryptocurrency activities. The corporate tax rate is 15%, and capital gains tax rates are also low, making it attractive for crypto entrepreneurs and investors.
• Income from cryptocurrency activities such as trading profits, mining, or business operations is subject to tax, but the tax regime is relatively favorable compared to many other countries, especially within the European Union (EU).
• For individuals, gains from crypto trading are taxed at 15%, while companies involved in crypto may benefit from incentives for employing tech professionals or investing in innovation.

 

 

 

Strong Tech and Blockchain Talent

 

• Serbia is home to a talented pool of IT professionals with expertise in software development and blockchain technology.
• The country’s education system, particularly in technical fields like engineering, mathematics, and computer science, produces graduates with skills highly relevant to the crypto and blockchain sectors. This makes it easier for businesses to find local talent.
• Several successful blockchain development companies have emerged from Serbia, and the country has a growing community of blockchain developers and crypto enthusiasts.

 

 

 

Affordable Costs of Living and Doing Business

 

• The cost of living in Serbia is relatively low compared to Western Europe or North America, which makes it attractive for both startups and established businesses. Office space, employee wages, and general business expenses are more affordable, allowing companies to stretch their budgets further.
• Additionally, the lower cost of living makes Serbia an appealing location for digital nomads and remote workers in the crypto industry. They can enjoy a high quality of life while benefiting from lower operating costs.

 

 

 

Increasing Venture Capital and Investment Opportunities

 

• The growing recognition of Serbia as a technology hub has attracted the attention of international venture capital firms and angel investors. There has been an increase in investment in tech startups, including blockchain and crypto companies.
• With a favorable business environment, crypto startups can attract funding more easily, both locally and internationally, benefiting from lower costs while accessing global markets.

 

 

 

Crypto-Friendly Banking and Payment Solutions

 

• Serbia has a more pragmatic approach to banking services for crypto businesses compared to some other countries. Some banks and financial institutions in Serbia are open to working with crypto companies, making it easier to conduct business.
• The Digital Assets Law provides regulatory clarity, ensuring that crypto businesses can operate within a well-defined legal framework and reducing uncertainty in banking and financial transactions.

 

 

 

Conclusion

 

Serbia’s combination of progressive regulations, a strong tech talent pool, favorable taxation, and a supportive ecosystem makes it an attractive destination for cryptocurrency businesses. The country’s government and crypto community are actively working to foster a pro-innovation environment, positioning Serbia as a growing hub for blockchain and crypto companies.

Serbia offers a range of IT grants, tax credits, and incentive programs to bolster the growth of its technology sector, a key component of the national economy. These initiatives are typically supported by the Serbian government, the European Union, and various organizations dedicated to promoting innovation, startups, and IT development. Notable examples include:

 

 

1. Innovation Fund

 

– Mini-Grants Program: This program supports early-stage companies in developing innovative products, services, or technologies. It provides co-financing for projects, helping startups and small businesses with funding for R&D activities.

– Matching Grants Program: Targets more developed companies, offering co-financing for projects with the potential to create new or significantly improved products, services, or processes.

 

 

 

2. EU Pre-Accession Assistance (IPA)

 

– The EU provides financial support to Serbia through the IPA, which includes grants for various sectors, including IT. These grants often focus on enhancing digital infrastructure, improving IT education, and supporting tech startups.

 

 

 

3. Digital Serbia Initiative

 

– Although not a direct grant program, this initiative collaborates with various stakeholders, including the government, to support Serbia’s digital transformation. It offers resources, mentorship, and occasionally funding opportunities for tech startups and IT projects.

 

 

 

4. Startup Ecosystem Support

 

– Several local and international organizations, such as Startit, ICT Hub, and Impact Hub Belgrade, offer grants, competitions, and accelerator programs for tech startups in Serbia. These programs often provide seed funding, mentorship, and access to investor network.

 

 

 

 

5. R&D Tax Incentives

 

– Although not a direct grant, Serbia offers tax incentives for companies that invest in research and development activities, which can significantly reduce the cost of IT projects.

 

 

 

 

6. Tax credit for startup investments

 

– Companies that invest in the capital of newly founded Serbian companies engaged in innovative activities, including IT, can benefit from a tax credit to reduce their calculated profit tax. The tax credit amounts to 30% of the investment made.

 

 

 

 

7. IP Box

 

–  Companies can exclude income derived from exploitation fee deposited on the author’s work or subject of related rights (author’s work), that is the invention, from their corporate income tax base.

 

 

These grants and programs are vital for supporting the growth of Serbia’s IT sector, offering numerous opportunities for startups, established companies, and innovators to secure funding and resources.

 

Should you require any clarification or have additional questions, please do not hesitate to contact Welcome to Serbia.

 

For foreign citizens planning a longer family stay in Serbia, enrolling children in local schools may seem like a challenging task.
However, through a rich offer of public and private schools, some of which provide education in a foreign language, this country offers many opportunities for acquiring new knowledge.

 

First and foremost, it is important to note that the education of foreign citizens, stateless persons, and citizenship applicants is defined by law, which stipulates that they are educated under the same conditions as Serbian citizens.

What does the education system in Serbia look like and how does it function? What is required for enrollment when it comes to foreign citizens? This guide is here to provide you with all the necessary information to make the process of enrolling in primary or secondary school simple and easy.

 

 

 

Primary Education in Serbia

 

In the Republic of Serbia, primary education is a legal obligation, and children start school at the age of seven (at least 6.5, and no more than 7.5 years old). A school psychologist assesses whether a child is ready to start school. Children aged between 6 and 6.5 years can enroll in the first grade if they show the necessary maturity. Similarly, based on the psychologist’s opinion, enrollment can be postponed for a year.

 

Since 2006, all children are required to attend at least nine months of preschool preparation before enrolling in the first grade. This program can be conducted either in preschool institutions or in primary schools. Entrance exams are required only for primary music and ballet schools, which are considered art schools.

Children enroll in the school located in the area where they live. Parents can also choose a school outside their area if there are available places in the chosen school.

 

 

 

Organization of Classes and Grouping of Students

 

Primary education lasts eight years and is divided into two cycles, each consisting of four grades. From the first to the fourth grade, one teacher is responsible for one class and teaches all subjects except for language and some elective subjects.

From the fifth to the eighth grade, each subject is taught by a different teacher specialized in a particular field. One of the teachers is the main teacher responsible for leading the class.

Students of the same age are divided into smaller groups – classes consisting of up to 30 students. Classes in special schools, attended by children with developmental needs, cannot have more than ten students.

 

 

 

Types of Primary Schools in Serbia

 

Primary schools can follow a national or foreign program and can be public or private. Classes in national schools can be conducted bilingually (in a foreign and Serbian language) or in a foreign language and the language and script of a national minority, with the consent of the Ministry. A foreign program, in a foreign language, is provided by a foreign school on the territory of Serbia.

As defined by law, within the school program, for children and students who do not know the Serbian language, the school can implement an individual program to acquire elementary knowledge of the Serbian language. Typically, such students are in classes where their mother tongue is taught as an additional language.

 

 

 

Organization of the School Year

 

The school year starts on September 1, and the teaching part of the school year consists of two semesters. The first semester begins on the first working day in September and ends one or two working days before December 31. The second semester begins around January 20 and ends in the second week of June. Final year students, eighth-graders, finish the school year two weeks earlier to prepare for the final exam.

Between the two semesters, there is a winter break, and between two school years, there is a summer break. Also, there is a spring break lasting about five working days, and there are several one-day or two-day breaks for national or religious holidays.

 

 

 

Documentation Required for Enrolling a Foreigner in Primary School

 

A parent can submit a request for enrollment in a preschool institution electronically through the eUprava portal. Depending on the parent’s status, it is necessary to scan:

 

For employees in foreign companies:

• Residence registration for all family members;
• Employer’s confirmation translated and certified by a court interpreter.

 

For embassy employees:

• Confirmation of employment status issued by the embassy;
• Photocopy of the diplomatic ID card (for embassy employees, for children and parents).

 

 

For enrollment in the first grade, it is necessary to submit: the child’s birth certificate, a residence certificate, a certificate of completed preschool program, and a doctor’s certificate of completed medical examination.

It is important to note that although proof of residence is required for enrolling foreigners in primary school, children from vulnerable social groups (migrants, refugees, and asylum seekers) can enroll in primary school without proof of residence or necessary documentation, provided they submit proof of the child’s medical examination.

 

If the child has already started school in another country, the foreign citizen or stateless person has the right to request the recognition of a foreign school certificate, which is nostrified by the competent institution in Serbia (ENIC/NARIC center). Also, all necessary documents, such as diplomas and birth certificates, must be translated into Serbian and certified by an authorized court interpreter.

 

 

 

Secondary School in Serbia

 

Unlike primary education, secondary school is not obligatory. Students usually enroll in secondary school at the age of 15, after completing primary school. Depending on the chosen school, education lasts from three to four years.

The criteria for enrolling in secondary school are the final exam taken after completing primary school and the student’s school achievements (grade average) during primary education. Better results on the final exam and a higher grade average increase the likelihood of admission to the desired school.

Enrollment in secondary schools follows the submission of a wish list, and the child will be admitted to the first desired secondary school for which they have enough points. The wish list can include a minimum of 10 and a maximum of 20 schools. After the student allocation, the first enrollment period follows, usually held at the beginning of July, and those who remain unallocated will have another chance in the second enrollment period.

 

 

 

 

Types of Secondary Schools in Serbia

 

Secondary schools in Serbia are mostly public and free, but there are also many private schools. The language of instruction is Serbian, and other languages are available for national minorities where necessary. Students can choose between:

 

• General secondary schools, called gymnasiums, last four years. Since they do not provide specific professional training for a particular occupation, gymnasium graduates usually proceed to university. There are special gymnasiums intended for students with skills and knowledge in a specific area, such as mathematics, physics, IT, etc.
• Vocational secondary schools last three or four years and provide specialized education. Some fields include agriculture, construction, economics, trade, textile industry, transport, mechanical engineering, forestry, and wood processing. After finishing vocational secondary school, a student is ready to enter the labor market or continue their education.
• Art schools, such as music and ballet schools, can be mixed with artistic and general education subjects. Some students attend art school simultaneously with another general or vocational secondary school.
• Secondary schools for special education are for students who cannot attend regular schools.

 

Some schools operate on the principle of dual education, where students spend part of their time in professional practice. It can take place with a single employer or in different companies. During this time, students are entitled to a monthly allowance of at least 70% of the minimum wage in the Republic of Serbia.

 

Secondary school is considered completed after successfully passing the matriculation or final exam at the end of the schooling. Access to further university education is most often granted to students who have completed four-year programs, but some educational institutions also enroll students from three-year secondary schools.

 

 

 

Documentation Required for Enrolling Foreign Citizens in Secondary School

 

If a student is a foreign citizen and wishes to continue their education in Serbia, the parent initiates the process of nostrification of the diploma for the completed grade abroad, as in the case of primary school. The request is submitted to the Qualification Agency.

Refugees and migrants enroll in secondary school in those secondary school profiles where there are places available after the second round of enrollment, while foreign citizens enroll in secondary school beyond the number determined for student enrollment in the current school year.

In Serbia, endowments with private interest, often referred to as “private interest foundations” or “private endowments,” are legal entities established by individuals, families, or private entities to support specific causes or projects that align with their personal interests or values. These endowments blend philanthropic goals with the interests of the founders, allowing for targeted support in various sectors. Here are some key aspects and advantages of such endowments:

 

 

1. Personalized Philanthropy:

 

– Targeted Giving: Private interest endowments allow donors to support specific causes, projects, or institutions that align closely with their personal values and interests, ensuring their contributions have a focused impact.

–  Legacy Building: Donors can create a lasting legacy by establishing an endowment in their name or their family’s name, ensuring their philanthropic vision endures beyond their lifetime.

 

 

 

2. Flexible Funding:

 

–  Customizable Goals: These endowments can be tailored to support a wide range of initiatives, from education and healthcare to cultural preservation and community development.

–  Adaptability: The objectives of private interest endowments can be adjusted over time to reflect changing priorities or new opportunities, offering flexibility in their philanthropic efforts.

 

 

 

3. Tax Advantages:

 

– Tax Deductions: Donors can benefit from tax deductions on their contributions to the endowment, reducing their overall tax liability and providing an incentive for substantial giving.

–  Estate Planning: Establishing a private endowment can be an effective estate planning tool, potentially offering favorable tax treatment for assets transferred to the endowment.

 

 

 

4. Sustained Impact:

 

–  Long-term Support: Endowments provide a sustainable source of funding for ongoing projects or causes, ensuring continuous support without the need for frequent fundraising.

–  Investment Income: The endowment’s principal can be invested, and the income generated can fund programs and initiatives indefinitely, maximizing the impact of the original donation.

 

 

 

5. Operational Control:

 

–  Governance Structure: Donors can set up a governance structure that allows them to retain a degree of control over how the endowment is managed and how funds are allocated, ensuring alignment with their philanthropic goals.

–  Advisory Roles: Founders or their designated representatives can serve on advisory boards or committees, providing input and oversight on the endowment’s activities.

 

 

 

 

Conclusion

 

Private interest endowments in Serbia offer a powerful means for individuals and families to support causes they care about while benefiting from various tax and legacy advantages. By providing sustained and flexible funding, these endowments can drive long-term positive change in numerous sectors, reflecting the personal values and vision of their founders. As such, they represent a significant component of the philanthropic landscape in Serbia, contributing to the country’s social, cultural, and economic development.

In Serbia, international commercial contracts and cross-border payments are governed by specific legal and regulatory frameworks designed to ensure compliance with both domestic and international standards. Here’s an overview of these frameworks and key considerations for businesses involved in international transactions:

 

 

International Commercial Contracts

 

Legal Framework

 

 

1. Serbian Law on Obligations:

– Governs general principles of contract law, including the formation, execution, and termination of contracts.

– Applies to both domestic and international contracts unless otherwise specified.

 

2. Private International Law:

– The Law on Resolution of Conflict of Laws with Regulations of Other Countries dictates which jurisdiction’s law applies when there’s a conflict.

– Allows parties to an international contract to choose the applicable law and jurisdiction for dispute resolution.

 

3. International Conventions:

– Serbia is a party to the United Nations Convention on Contracts for the International Sale of Goods (CISG), which applies to international sales contracts unless parties opt-out.

– Other relevant conventions may include the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.

 

 

 

 

Cross-Border Payments

 

Regulatory Authorities

 

– National Bank of Serbia (NBS): Oversees cross-border payment systems and foreign exchange transactions.

– Ministry of Finance: Regulates taxation aspects of cross-border payments.

 

Legal Framework

 

1. Foreign Exchange Law:

– The Law on Foreign Exchange Operations governs the execution of cross-border payments and foreign exchange transactions.

– Residents and non-residents must conduct cross-border payments through authorized banks and financial institutions.

 

2. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF):

– The Law on the Prevention of Money Laundering and Financing of Terrorism imposes strict AML and CTF requirements.

– Financial institutions must conduct customer due diligence (CDD), monitor transactions, and report suspicious activities.

 

Key Considerations

 

1. Payment Systems:

– Use reputable banks and financial institutions with robust compliance systems.

– Utilize electronic payment platforms that facilitate secure and efficient cross-border transactions.

 

2. Reporting Requirements:

– Report cross-border payments exceeding specific thresholds to the NBS.

– Provide necessary documentation, such as invoices and contracts, to support the payment.

 

3. Taxation:

– Cross-border payments may be subject to withholding tax depending on the nature of the payment and applicable double taxation treaties (DTTs).

– Serbia has DTTs with many countries, which can reduce or eliminate withholding taxes on payments like dividends, interest, and royalties.

 

4. Compliance and Monitoring:

– Maintain ongoing compliance with domestic and international regulations.

– Regularly update internal policies and procedures to reflect changes in laws and best practices.

 

 

 

 

Practical Tips for Businesses

 

 

1. Engage Legal and Tax Advisors:

– Consult with legal and tax professionals experienced in international transactions to ensure compliance and optimize contractual terms.

 

2. Clear Contractual Terms:

– Draft contracts with clear and precise terms, especially regarding payment, delivery, dispute resolution, and governing law.

 

3. Banking and Financial Services:

– Choose reputable banks and financial institutions for handling cross-border transactions. These institutions should have robust compliance systems to ensure adherence to regulatory requirements.

– Utilize electronic payment systems and platforms that facilitate efficient and secure cross-border transactions.

 

 

By adhering to these frameworks and best practices, businesses can effectively manage international commercial contracts and cross-border payments in Serbia, ensuring legal compliance and operational efficiency.

 

Our legal and tax experts are available to assist you with your international business operations, as well as to collaborate with banks for cross-border payment implementation.

 

Please contact us for more information.

According to the law governing companies, a branch of a company (further: branch) is a separate organizational part of a company through which the company performs its activities by the law, while the branch does not have the status of a legal entity, and in legal transactions, it acts in the name and on behalf of the company.

Tax treatment for a branch of a foreign company in Serbia

 

 

Income tax

The corporate tax rate is 15%.
The transfer of the profit of a branch, as an organizational part of a non-resident legal entity that does not have the status of a legal entity, to its head office abroad, after the payment of profit tax by the law, is not subject to withholding tax according to Article 40 of the Law on Profit Tax, bearing in mind that it is not about the distribution of dividends or profit shares to a non-resident legal entity by a resident legal entity.

 

 

Income tax withholding on certain services that a non-resident legal entity opens for a resident one

The branch has no obligation to pay withholding tax on certain services. In the case of dividend payments, withholding tax is paid by the Agreement on the Avoidance of Double Taxation if such an agreement is concluded between Serbia and the country of the seat of a non-resident legal entity.

 

 

Value-added tax

The branch is obliged to apply the provisions of the Law on Value Added Tax.

 

 

Salaries and other income of natural persons

The branch is obliged to calculate and pay the withholding tax to natural persons.

 

 

Transfer pricing report

The branch is obliged to prepare a report on transfer prices if it has transactions with a non-resident head office, as well as with related parties of the non-resident head office.

 

 

Municipal tax

The branch does not apply for local taxes.

For more information about the branch, visit our blog: https://welcometoserbia.org/en/why-should-you-set-up-a-remote-branch-office-in-Serbia/.

 

For all the specifics of the business of a branch of a foreign legal entity in Serbia, feel free to contact our tax experts by email dilic@welcometoserbia.org.

To operate a cryptocurrency business in Serbia, obtaining a crypto license in Serbia is mandatory under the Law on Digital Assets. Here’s a detailed outline of the licensing process for crypto businesses in Serbia:

 

 

Types of Licenses

 

1. Virtual Currency Services License: Required for businesses providing services related to virtual currencies, such as exchanges, wallet providers, and other related services.
2. Digital Token Services License: Required for businesses involved with digital tokens, including issuance, trading platforms, and other token-related services.

 

 

Regulatory Authorities

 

The National Bank of Serbia (NBS): supervises entities providing virtual currency services.

Securities Commission: Regulates businesses involved with digital tokens and financial instruments.

 

 

 

Licensing Requirements

 

1. Business Registration:

– The entity must be registered in Serbia.

– It must have a legal structure, such as a limited liability company (LLC) or joint-stock company.

 

2. Capital Requirements:

– Minimum capital requirements must be met, which can vary depending on the type of service provided.

– Specific amounts are determined by the regulatory authority.

 

3. Operational Standards:

– The entity must have an operational framework, including secure IT systems, risk management protocols, and internal controls.

– Compliance with cybersecurity standards is essential.

 

4. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF):

– Implement comprehensive AML and CTF policies.

– Conduct customer due diligence (CDD) and know your customer (KYC) procedures.

– Report suspicious activities to the relevant authorities.

 

5. Management and Staffing:

– The business must have qualified and experienced management.

– Key personnel must pass fit and proper tests to ensure they are capable of performing their roles.

 

6. Documentation and Disclosures:

– Provide detailed business plans, including descriptions of services, operational procedures, and financial projections.

– Disclose information about the company’s beneficial owners and key management.

 

 

 

Licensing Process

 

1. Application Submission:

– Submit a detailed application to the relevant regulatory authority (the NBS or Securities Commission).

– Include all necessary documentation, such as business registration certificates, financial statements, AML/CTF policies, and proof of capital.

 

2. Review and Evaluation:

– The regulatory authority reviews the application to ensure compliance with legal and regulatory requirements.

– This process may involve in-depth checks and interviews with key personnel.

 

3. Approval and Issuance:

– If the application meets all requirements, the regulatory authority grants the license.

– The business can then legally operate in the cryptocurrency space in Serbia.

 

 

 

Summary

 

To operate a cryptocurrency business in Serbia, entities must obtain the appropriate license from either the National Bank of Serbia or the Securities Commission, depending on their services. The process involves meeting strict requirements related to business registration, capital, operational standards, AML/CTF compliance, and ongoing regulatory adherence. This regulatory framework aims to ensure the integrity and security of the cryptocurrency market in Serbia.

 

The Welcome to Serbia team can provide you with the practical know-how to start your Serbian cryptocurrency business or exchange. We are doing it now in compliance with current laws, and we have more than 5 clients who already have their own cryptocurrency business in Serbia. We are here to assist you in building a successful cryptocurrency business.

 

For more information, please contact us.

Free zones Serbia: Strategic location and extensive trade agreements streamline business with notable fiscal and customs benefits.

 

 

Geographic Position of Serbia as a Strategic Advantage

Serbia holds a central position on the Balkan Peninsula, at the crossroads of routes connecting Eastern and Western, Northern and Southern Europe. As a country at the confluence of the Danube River and on the periphery of the European Union, Serbia lies along the routes of significant European corridors 10 and 7, making it ideal for international trade.

 

 

International Trade Agreements

Serbia is a signatory to a number of significant trade agreements that facilitate business operations:

• Interim Trade Agreement with the European Union,
• CEFTA agreement, • Agreements with EFTA member countries,
• Free trade agreements with Russia, Belarus, Kazakhstan, and Turkey,
• Preferential trade regime with the United States.

 

 

Customs Facilitation

Goods intended for activities within free zones are exempt from customs duties and other import charges. Also, there is no requirement to provide a bank guarantee for customs debt for foreign goods used in production activities within the zones.

 

 

Fiscal Benefits

In free zones, business is exempt from paying VAT on:

• Entry of goods and provision of services related to entry,
• Transactions of goods and services within the zones,
• Transactions between users in different free zones,
• Consumption of energy sources.

 

 

Support from Local Government

Local authorities can provide additional benefits for the construction of facilities and infrastructure in free zones, including exemption from paying local taxes, fees, and duties, which further facilitates business operations.

 

 

Simplified Customs Procedures

Free zones apply simplified customs procedures, which significantly speeds up administrative processes.

 

 

One Stop Shop – Efficient Administration

Free zones offer a “One Stop Shop” service, where users can quickly and efficiently access various services such as transportation organization, freight forwarding services, insurance, banking operations, and many others, making free zones an attractive place for business. These advantages make the free zones in Serbia exceptionally attractive locations for investing and business development, enabling companies to maximize their efficiency and profitability in the international market.

 

A year ago, an investigation was conducted on the territory of Slovenia due to suspicion of abuse of position and money laundering. The investigation related to companies that issued fictitious invoices for allegedly performing construction works. Among them was a company from Bosnia and Herzegovina that issued fictitious invoices to companies in Slovenia and returned the money paid.

 

58 house searches were carried out on suspicion of money laundering and abuse of position, 36 persons were suspected, and 36 legal and 42 natural persons were included in the investigation. The total illegal property benefit amounts to more than five million euros.

 

 

 

What is a shell company?

 

Shell companies are legally permitted business entities, which do not own real assets or conduct business operations. Their very existence is legitimate, but the problem is in the illegitimate use of such companies. Most of these companies exist only by name, address and proof of registration as a financial entity.

 

Worrisome data from Moody’s Analytics

 

The mentioned case in Slovenia is not isolated and recent data from Moody’s Analytics show that there are almost 5 million suspicious companies in Great Britain alone. The total figure in the EU is estimated at around 4 million, with Cyprus and France taking the lead. There are potentially millions of fictitious, shell companies used to avoid taxes or sanctions.

 

The criteria used in the analysis include the lack of operations, connections with high-risk destinations, and the like. An analysis of the age of responsible persons was also conducted, and as they state, thousands of company directors are listed as younger than five years old. Also, a Belgian company is managed by a 900-year-old person.

 

Great Britain is at the very top of the Moody’s table, followed by Panama, Switzerland and Cyprus. Datta points out that in addition to the indicators, one should “look at the people behind the fake company … to see if there are other signs of nefarious activity.”

 

 

 

 

Who is behind the fake companies?

 

Ted Datta, Moody’s Analytics Financial Crimes Compliance team leader, says the findings are, among other things, an indication of a system that isn’t as systematic as it could be. He pointed to the lack of information in the official registers, which is worrying in itself, because the analysis of the financial system is based on them.

 

Part of the blame can be placed on the lawyers and middlemen who help individuals hide their wealth behind complex corporate structures. This is possible with few regulations and few checks.

The situation may soon change with new EU anti-money laundering rules requiring the institution providing the registration service to verify the identity of customers, just as banks do.

The U.K. tax authority HMRC has begun to fine some brokers for gross negligence, Datta noted, and expressed confusion as to why some shell company records are so obviously false. Namely, there are more than 22,000 companies that are registered at the address of the “Great Pyramid” in Egypt.

 

 

 

 

Directive of the European Commission on shell companies

 

On 22nd December 2022, the European Commission published a draft Directive aimed at controlling the use of various business entities in order to obtain tax benefits within the EU. For the most part, the Directive tries to deal with the prevention of attempts to avoid paying taxes by shell companies established by entities outside the EU member states. The Directive applies to companies based in the EU, associations and other entities without official legal personality.

Market participants who meet the criteria set by the Directive will have to submit an annual report regarding the operations of the shell company, and it is possible that they will be considered “shell companies”.

 

In order to determine whether a company will be considered “shell company”, the key indicators from the annual reports should be considered, as follows:

• The first level of indicators looks at the activities of the subjects based on the income they generate. The threshold is defined as 75% of total income in the last two years.
• To meet the second threshold, a cross-border element is required. If the company generates most of its income in transactions related to other jurisdictions or if it redirects the income to a company based abroad, then the company also meets the second threshold.
• The third threshold focuses on whether corporate governance and administration services are performed internally or externally.

The company will be considered a “shell company” if one of the set indicators is violated. The shell company will not be able to access the tax benefits and benefits of the member state’s tax treaty network.

An entity that meets all three thresholds is required to report information related to tax refunds.

 

 

 

 

Will the new EU rules be able to change anything?

 

Paul Tang, chairman of the tax committee of the European Parliament points out: I don’t see a strong enough reason why you should have shell companies” stating their problematic impact on tax collection and sanctions towards Russia.

Tang is pushing for new EU laws proposed by the Commission that would potentially deprive companies with dubious activities of the tax incentives they previously received based on revenue, cross-border activity and management.

– We need to increase revenues by solving tax evasion, and shell companies are at the centre of that. The Unshell directive, as it is known, is a “very targeted instrument”, which affects only a small part of companies. But in order to pass the Law, the proposal needs the unanimous support of all 27 EU member states, including Luxembourg.

Luxembourg is a major financial centre that the commission has already accused of facilitating “aggressive tax behaviour.” Belgian Finance Minister Vincent Van Peteghem said he wanted further analysis before supporting further procedure, citing “concerns about administrative burdens”.

 

With Belgium, as the country holding the presidency of the EU council, rushing to finalize a raft of legislation ahead of June’s European elections, Tang expressed hope that Van Peteghem would reconsider his position.

 

 

 

How to check shell companies?

 

Even with the new Laws, the question remains how you can practically check the company regarding the performance of suspicious activities. Defining the criteria too vague, broad or narrow will create a lot of bureaucracy and legal uncertainty. Datta calls this an “endless game” between those who enforce anti-money laundering rules and those who try to evade or break them. In all this, it is only possible to increase the cost of concealing wealth.

 

 

No real news on the real estate market in Serbia still at the beginning of 2024, except that in some locations prices have fallen by up to 20 percent. According to the real estate portal Nekretnine.rs, the highest price per square metre, in January,  was paid in Belgrade and still it is the most expensive city. The municipalities of Stari grad and Vračar still take the lead, where a slight price increase of 0.41 and 0.38 percent, respectively,was recorded.

 

New Belgrade is still an attractive location, but now somewhat cheaper than in the previous month. There is a great demand for the city municipality of Vračar, and one of the reasons is the decreasing number of available plots for construction. There is still great interest in Dorćol and Belgrade Waterfront.

 

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Residence permit by real estate investment

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The prices experiences the greatest downfall in Palilula, by 4.13 percent, where the recorded price was around 2,300 euros per m². The lowest price per m² was recorded in Mirijevo at 1,875 euros, as shown in the table below.

NEKRETNINE.RS	JANUARY
Belgrade	price/m2	trend%
Centre	3407	0.41%
New Belgrade	2605	-0.19%
Mirijevo	1875	0.00%
Palilula	2300	-4.13%
Voždovac	2542	1.03%
Vračar	3398	0.38%
Novi Sad	price/m2	trend%
Centre	2674	-0.48%
Novo naselje	2105	-1.96%
Podbara	2575	0.55%
Grbavica	2658	0.30%
Niš	price/m2	trend%
Bulevar Nemanjića	1650	0.12%
Pantelej	1494	0.00%
Durlan	1496	3.17%
Palilula	1476	-1.47%
Kragujevac	price/m2	trend%
Urban zone	1400	0.00%
Pančevo	price/m2	trend%
Urban zone	1365	0.22%

 

Table no. 1: Trends in real estate prices per square meter in Belgrade, in January 2024

 

Mirijevo and some parts of Zvezdara are more favourable than some of the more popular parts of the city, previously mentioned. However, the lowest prices can be found in Padinska skela, Borča, Krnjača and Karaburma. If you opt for more luxurious apartments, there is a much larger selection, and West 65, Belgrade Waterfront, A block and K district stand out among the locations.

 

 

 

 

Real estate prices in Novi Sad, Niš and Kragujevac

 

The central locations in Novi Sad became cheaper in January by 0.48 percent, while the price in Novo naselje dropped by 1.96 percent. In relation to the prices of real estate in Belgrade and Novi Sad, the rest of Serbia shows a more favourable picture, but they also generally record an increase in the price per square meter. New construction projects were also noted in Kragujevac and Niš, as well as on the mountains of Zlatibor, Kopaonik and Divčibare. Vrnjačka Banja, Srebrno jezero and Sokobanja are also attractive locations for domestic and foreign investors.

In the south of Serbia, real estate prices are almost twice as low as in the northern part of the country. The January report shows that prices in Niš were on a slight increase, with the exception of Palilula in Niš, where they fell by about 1.47 percent. The real estate prices in Kragujevac were stable during January and the average price amounted to 1,400 euros/m2.

 

 

 

In some locations, rents fell by up to 20%

 

As reported by the portal Nekretnine.rs , rents in seven locations fell by over 20%. In Durlan (in Niš), the average monthly rental price per square meter of living space fell by 20.22% and the rent of a 50 square meter apartment is currently being advertised at that location for around 355 euros.

 

In Novi Sad, rents fell the most in Novo naselje (by 6.67 %), followed by Grbavica (by 4.13 %) and Podbara (by 2.29 %). In Pancevo, a decrease of 5.71 % was recorded. In Belgrade, rents fell in two locations. In the Centre (by 1.76 %), the rent for 50 square meters was 835 euros on average and in Vračar by 0.64 %, so 50 square meters in January was 780 euros on average.

Rental prices increased in the following municipalities: Palilula, Voždovac, Mirijevo and New Belgrade. Also, in the centre of Novi Sad and Kragujevac, as well as in Niš, in the neighbourhoods of Bulevar Nemanjića and Pantelej, which is shown in the table below.

 

NEKRETNINE.RS	JANUARY
Belgrade	price/m2	trend%
Centre	16.7	-1.76%
New Belgrade	15.4	2.67%
Mirijevo	9.9	4.21%
Palilula	13.4	7.20%
Voždovac	12.2	4.27%
Vračar	16.6	-0.64%
Novi Sad	price/m2	trend%
Centre	11.4	3.64%
Novo naselje	8.4	-6.67%
Podbara	12.8	-2.29%
Grbavica	11.6	-4.13%
Niš	price/m2	trend%
Bulevar Nemanjića	7.2	10.77%
Pantelej	6.4	10.34%
Durlan	7.1	-20.22%
Palilula	5	0.00%
Kragujevac	price/m2	trend%
Urban zone	6.1	1.67%
Pančevo	price/m2	trend%
Urban zone	6.6	-5.71%

 

Table no. 2: Trends in real estate rental prices in January 2024

 

 

 

Data published by the Republic Geodetic Authority of Serbia for the fourth quarter of 2023

 

The data of the Republic Geodetic Authority for the last quarter of 2023 show that price growth slowed down, but that they continued to grow. Compared to the third quarter of 2023, housing prices in Serbia increased by 0.83 percent. Observed by region, compared to the fourth quarter of the previous year,  real estate prices increased in Belgrade by 5.79 percent, in Vojvodina by 4.67 percent, Šumadija and Western Serbia by 5.95 percent, and the strongest price growth of 8.16 percent was recorded in southern and eastern Serbia.

 

It is interesting that the average price of new apartments, which reached 10,000 euros per square meter, started to fall. The prices of first sale apartments, i.e. for purchase from investors, at the level of Serbia increased by 5.41 percent, while resale apartments showed a higher year-on-year growth, which amounted to 5.93 percent.

 

 

The total value of traded apartments in the third quarter of 2023 was 870 million euros compared to 1.219 billion euros in the same period in 2022. The number of concluded sales contracts compared to the third quarter increased by 12 percent, but according to experts, this can be attributed to seasonality. Market activity measured by the number of sales is at approximately the same level as at the end of 2019 and 2020, while the market value is at a significantly higher level due to the increase in real estate prices.

 

https://www.nekretnine.rs/magazin/2140/evo-gde-je-kvadrat-bio-najskuplji-presek-januarskih-cena-kvadrata-u-srbiji/

 

https://www.ekspres.net/biznis/padaju-cene-nekretnina-u-beogradu-18-2-2024

https://www.nekretnine.rs/magazin/2150/na-ovoj-lokaciji-u-srbiji-kirije-pale-preko-20-odsto/