Serbia is a country located on the Balkan peninsula and is the link between northern, western, and southern Europe. Being in the heart of Europe, this country has a favorable strategical location, with typical continental weather of warm summers and cold winters.
One may wonder why is Serbia special from a financial point of view. The truth is that Serbia offers great opportunities for international business as the government actively promotes foreign investment. International investors, for example, obtain great incentives for creating job positions in Serbia. If you want to start a factory with over 100 people employed, you will definitely get huge benefits in the form of tax exemptions.
Serbia also offers great VAT exemptions and incentives for payroll expenses, along with double taxation treaties with three different continents (Europe, Asia, and Africa), which will help you trade in different regions at competitive costs.
Moreover, since this is a country that hasn´t yet joined the UE, the cost of living is lower than in most Europe, meaning that the company expenses and the average salaries are also lower. This country still maintains its own currency, the dinar, which also helps keep the prices low in the country. Other countries from eastern Europe that have adopted the Euro, such as Cyprus, Montenegro, or Slovakia, have higher prices than Serbia.
All these reasons make Serbia a really cost-effective option for conducting business in Europe. In Serbia you get the geographical advantages of a country in the heart of Europe, but the low costs, fiscal benefits and incentives that you may find in any popular trading center like Panama.
We believe that Serbia is great for Americans who wish to expand their businesses into Europe and the world. In this article we will describe all the fiscal and financial advantages that Serbia offers.
Advantages of investing in Serbia
- Interim Trade Agreement with EU.
– Central European Free Trade Agreement (CEFTA).
– Free Trade Agreement with EFTA.
– Free trade agreements with the Russian Federation (0% customs rate), Belarus and Kazakhstan.
- Free Trade Agreement with Turkey.
- USA – Generalized System of Preferences.
– Corporate profit tax is one of the lowest in Europe – 15%.
– 15 different free zones with interesting incentives for developing your business.
– Fast registration process: foreigners can register a company in Serbia in only 2 days, after all the documents have been approved.
- Open a bank account in two days for companies with foreign owners.
## Geographic advantages
- Serbia is locatedon the Balkan peninsula. Being in the heart of Europe it connects eastern, western, northern, and southern Europe.
- It covers an area of 88361 km² with approximately 7,5 million inhabitants.
- Mild continental climate with warm summers and cold winters.
- Located at the border of the EU and the intersection of the Pan-European corridors 10 and 7.
Free Zones in Serbia
- A freezone is a fenced and marked part of Serbia’s territory where commercial activities are carried out with many business and fiscal benefits.
- Free zones are highly developed centers of technology, telecommunications, and industry, and they present modern infrastructure and logistic support.
- Serbian free zones contribute to savings through different benefits and fiscal incentives.
- They increase employment.
- Freezones attract investments and contribute to the development of the region.
- They present advanced logistic centers (you´ll find all needs and services in one place).
The Free-trade zone in Serbia is an area in which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Only when the goods are moved outside the freezone and distributed among consumers, then they become subject to the prevailing customs duties, according to the country’s regulations. Serbia offers great incentives for the companies that are registered in their free zones.
The free zone in Apatin has a very favorable location because it’s close to the state border with Hungary and Croatia, lean on the Danube River.
This territory also has great connections with the rest of the country. The regional R-101 road crosses the territory of Apatin, connecting it to major cities like Sombor and Bogojevo, and extends to the border of the republic of Croatia. The waterway of the Danube River is defined with Pan-European Corridor 7, which is a road that connects 10 European countries.
What types of business can you conduct in Serbia?
Serbia is a great country to make money in a safe business environment.
This country is an excellent playground for every kind of business. First of all, it presents great opportunities for export products to great world powers like Russia, the EU, Turkey and China.
The Apatin free-zone, for example, is settled in Vojvodina, which is an important agricultural center of this country. Agricultural business here is very profitable, and we recommend working with final agricultural trade instead of production.
Every single sector here offers good income, especially if you have good connections, which you will have thanks to Privatus Maximus´ Serbian partners.
Moreover, the government offers many subsidies and incentives for the companies that are generating products and income and are creating job positions in the country.
Agricultural business is very profitable, and you have many products which we import from Ukraine in Serbia like Urea, Npk, Ammonium Sulfate.
The Serbian products are a great substitution of China’s products for Europe and Russia, still maintaining low costs thanks to Serbia´s cheap resources and tax incentives.
Advantages of the Apatin free-zone
- The Government of Serbia offers financial support for Greenfield and Brownfield projects in manufacturing sectors and services, which may be subject to international trade.
- The government can sell construction land at a price lower than the average market. This condition applies only if the project supports an investment project of national importance (if the land belongs to the national government) or that contributes to the local economic development (if the land belongs to the municipality).
Corporate income tax relief
- There is a tax holiday available for investors who hire more than 100 employees and invest more than 8.5 million euros. The company will be free of corporate tax for ten years, starting from the moment when the company starts generating profit.
- Serbia offers payroll tax incentives: if the company hires employees who were registered with the National Unemployment Agency for more than 6 months, then it will have a relief on taxes paid on net salary.
- 1-9 new jobs: 65% reduction.
- 10-99 new jobs: 70% reduction.
- 100+ new jobs: 75% reduction.
Note: the payroll tax incentives cannot be combined with financial incentives.
Double taxation treaties
Serbia has signed 59 treaties to avoid double taxation with countries in Europe, Asia, and Africa.
This opens incredible possibilities for trading and conducting business with different regions and the treaties make this trading very profitable. They cover income, capital and property taxes.
Annual income tax
The annual income is taxed if exceeding the amount of threefold the average annual salary in Serbia. The tax rate is 10% for the annual income amounting up to 6 times the average annual salary in Serbia, and 15% for the part of the annual income exceeding 6 times the average annual salary in Serbia.
Mandatory social security contributions
- 14% for pension and disability insurance.
- 5.15% for health insurance.
- 0.75% for unemployment insurance.
- Social security contributions and income taxes are estimated on the net income, amounts to about 65% of net earnings.
Reduced salary load labor costs
Starting from July 1st, 2014 new employment entitles employers to a sizable relief of taxes and contributions paid on net salary.
- 1-9 new jobs: 65% reduction.
- 10-99 new jobs: 70% reduction.
- 100+ new jobs: 75% reduction.
*This reduces the total salary load on a 20%
- The average salaries in Serbia are lower than in most Europe which ensures cost-effective operations. In this regard, total costs for employers stand at merely 50% of the level in EU countries from Eastern Europe. Social insurance charges and Salary Tax amount to roughly 65% of the net salary but thanks to the tax incentives, the tax burden can be reduced resulting in an increase in profit.
Corporate, withholding and value added taxes
Serbia’s tax regime is highly convenient for those who conduct business here. The corporate profit tax is one of the lowest in Europe, while the Value Added Tax is one of the most competitive in Central and Eastern Europe. This makes Serbia an undoubtedly attractive jurisdiction for foreigners who wish to conduct business in Europe without paying the draconian taxes of western Europe.
- The standard VAT rate is 20% (for most taxable supplies).
- The lower VAT rate is 10% (for basic food, daily newspapers, utilities, etc.).
- Corporate profit tax is paid at the uniform rate of 15%. All non-residents are only taxed on their Serbia-generated income.
- The withholding tax is not applied to dividend payments between Serbian entities. For non-residents a 20% withholding tax is calculated and paid on certain payments such as dividends, royalties, shares in profit, interest, capital gains, lease payments for real estate and other assets.
- For salaries, the personal income tax rate is 10%.
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Local government incentives
The local government can support the free-zone companies by promoting benefits for the developing of infrastructure.
These benefits are closely related to the exemption from payment of local taxes, fees and charges which are the responsibility of local governments. These exemptions can be: fees for the development of building land, compensation for land usage, compensation for municipal fees and expenses, access to local water and sewer infrastructure, charges for urban conditions and approvals, local utility taxes, and others.
Conducting business in Serbia brings great fiscal benefits and this is one of the reasons why we recommend this Balkan country as a business center in Europe. These are some of the great fiscal benefits that you will enjoy in this country:
- VAT exemption on the input of goods, trade of goods and services, and on the distribution of goods between two users.
- Free flow of capital, profits, and dividends.
- Funds from the budget of the Republic of Serbia for financing investment projects in the manufacturing sector that can be the subject of international trade.
- VAT exemption for carrying the goods into the free zone and for providing to free zone users the transport and other services directly related to carrying the goods into the free zone.
- VAT exemption for goods and services movement within the free zone.
- VAT exemption for goods and services movement between two zone users.
- VAT exemption for the production users for energy consumption.
- Exemption of certain taxes for foreign direct investments.
Exemption from payment of customs duties and other import duties
- Exemption for goods intended for the performance of activities and constructions in the free zone.
- Exemption from paying VAT between two free trade zone users.
- Customs department within the free zone.
- Simplified customs procedure for the free zone users.
- Export of goods and services from the zone and import of goods and services into the zone are free of customs and other charges.
- Exemption of customs and other import charges for the goods needed for doing business and building of objects in the free zone (this includes materials in general, equipment, construction materials).
- Temporary export of goods from the free-zone to be additionally processed or presented.
No sanctions, no restrictions
Any legal business from any nationality can settle in Serbia and enjoy the benefits it offers. There are no sanctions nor restricted nationalities.
Open your bank account with Privatus Maximus
Every company registered in the free-zone will need a bank account to operate, make transactions, pay salaries, etc.
If you want to open a bank account it is relatively easy when you already have a company registered, and the good news is that we at Privatus Maximus can help through the whole process. You can open a bank account in only 2 days, once all the documents have been submitted and the fees paid.
In general, when opening a bank account in Serbia, it is enough to provide the bank with the following documents and information:
- Documents that confirm the identity of the account managers (owners, directors, and others). These documents include passport, document proving permanent residence and other specific documents, of which you need to submit the original ones.
- Originals of the company’s corporate documents (this includes articles of association, memorandum of association, certificate of registration, decision on the appointment of a director and certificate of issue of shares. All documents must be notarized and apostatized.
- If the account is opened by a third party, he must present notarized certificate and apostatized power of attorney, as well as a resolution on its issuance.
- In some cases, the following documents are required, depending on the bank: recommendations from the client’s business partners and from other banks in which the client holds accounts, business cards, and counterpart names.
However, these requirements and documents may vary according to the bank and according to each client’s situation. For this reason, we recommend consulting with our experts who can give you personal advice.
Privatus Maximus has distinguished partners in different parts of the world.
Our experts have wide experience in asset protection tools like the Cyprus international trust or the Nevis trust, and also corporate and family office services worldwide, having offices all around the world including Latin America, Europe, the Middle East and Asia.
Our goal is to provide a plan which will help our clients to create the safe structure they are looking for in order to protect themselves and their families in times of distress and uncertainty.
Asset protection and tax optimization are important goals to keep in mind during troubled times, but the most valuable asset a person can have is freedom. Freedom of speech, freedom to travel, freedom to live in safe surroundings. Privatus Maximus works together with its partners with this philosophy in mind, and this is the basis of our practice.
We also have experienced professionals in the corporate area, who can register companies in Serbia and many other countries. Upon a personal consultation, you will be able to find out which jurisdiction fits best with your business goals and plans.
If you want to register a company in Serbia and conquer the European market, with the possibility of expanding to Asia and Africa as well, please contact us and ask for a private consultation with our experts.