Representative office or branch office of your Serbian company abroad? Which is better?
Legal status of a representative office
The Law on Companies refers to the opening of representative offices and branches of foreign companies in Serbia, and does not cover the opening of representative offices and branches of Serbian companies abroad. The Law on Foreign Exchange Transactions refers to direct investments abroad, including the opening of a representative office or branch abroad. Pursuant to this law, the National Bank of Serbia has adopted the “DECISION ON CONDITIONS AND SPECIFICATIONS OF HOLDING VALUES IN A BANK ABROAD FOR RESIDENTS (hereinafter the “NBS Decision”).
Paragraph 3.4. The NBS Decision establishes the rule of keeping currency in the bank account abroad – “for payment of current expenses for carrying out activities of representative offices or branches of legal entities abroad, except for representative offices specified in paragraph 2 of this Decision, as well as for payment of services in international goods and passenger transportation – up to the amount of planned monthly expenses – on the basis of specification of these expenses and on the basis of a document of the foreign authority confirming the establishment of a representative office or branch of the legal entity abroad” (hereinafter “Decision of the NBS”).
Paragraph 4 establishes the method of obtaining the National Bank’s authorization, which is limited to one year, after which it must be renewed – “The resident referred to in paragraph 3 of this Decision shall submit a written request to the National Bank of Serbia for authorization to keep foreign currency in a foreign bank account, which shall contain the applicant’s name, registration address, telephone number, subject of business activity, registration number, reason for keeping foreign currency abroad, amount and period of time for which the foreign currency is to be kept in a foreign bank account. The above-mentioned request shall be accompanied by the documentation stipulated in this Decision, while the National Bank of Serbia, if it deems it necessary, may request other documentation as well”
A representative office/branch is not considered a separate legal entity, but a part of a Serbian company abroad.
Transfer of funds between the parent company and the representative office
The transfer of funds from the representative office to the account of the parent company in Serbia is governed by the rules and laws in the country where your representative office was established. From the point of view of the National Bank of Serbia control, it is important that the amount in the representative office account does not exceed the amount authorized by the NBS. Otherwise, a new Authorization must be requested.
Serbian companies were mainly engaged in investment activities abroad and construction, and the NBS authorization is granted in accordance with the expected turnover under the construction contract. The essence of everything is to obtain NBS authorization and not to start without authorization.
Requirements of Serbian legislation in relation to representative office
It is necessary to notify the NBS quarterly about the turnover of accounts abroad (DI2 sample). It is also necessary to include the balance of the representative office in the balance sheet of the Serbian company. You should be especially careful with this, as international accounting standards are applied in Serbia, while in Russia and the USA, for example, they are not.
Conclusion: A representative office of a foreign company is a separate subdivision that exclusively represents and protects the interests of the organization. Compared to representative offices, branches of foreign companies have more power. In addition to all the capabilities of a representative office, the branch can conduct full-fledged commercial activities: sell goods, and provide services.
We can offer full legal assistance, preparation of documents, and obtaining all necessary permits in Serbia, as well as assistance in obtaining NBS authorization.