Serbia has become one of Southeast Europe's most attractive destinations for foreign direct investment. With a 15% corporate income tax rate, strategic geographic location, skilled workforce, and ongoing EU accession reforms, the country offers compelling opportunities for SMEs looking to expand into the Balkans.

This comprehensive guide covers everything you need to know about establishing and operating a business in Serbia in 2025 — from company registration and tax obligations to employment regulations and investment incentives.

Why Foreign Companies Choose Serbia

Serbia's appeal to international investors stems from several competitive advantages. The country sits at the crossroads of Central and Southeast Europe, providing easy access to markets across the continent. Belgrade, the capital, serves as the economic hub with excellent connectivity to major European cities.

The Serbian government has implemented significant reforms to improve the business environment, streamline administrative procedures, and attract foreign capital. Combined with competitive labor costs and a well-educated workforce — particularly in IT, engineering, and languages — Serbia presents a strong value proposition for cost-conscious businesses seeking quality.

Key economic indicators support this growth trajectory. Foreign direct investment has increased steadily, infrastructure projects are underway, and the country continues aligning its regulatory framework with EU standards as part of the accession process.

Legal Framework: Choosing Your Business Structure

Foreign investors can establish several types of business entities in Serbia. The most common options include:

Limited Liability Company (DOO)

The DOO (Društvo sa ograničenom odgovornošću) is the preferred choice for most foreign SMEs. It offers limited liability protection for shareholders, straightforward registration requirements, and flexibility in management structure. There is no minimum capital requirement, though a nominal amount (typically EUR 1) must be registered.

Joint Stock Company (AD)

Larger enterprises or those planning to issue publicly traded shares may opt for a Joint Stock Company (Akcionarsko društvo). This structure suits companies requiring significant capital investment or those with multiple shareholders.

Branch Office

Foreign companies can establish a branch office in Serbia without creating a separate legal entity. The branch operates as an extension of the parent company and must register with the Serbian Business Registers Agency (SBRA). While administratively simpler, the parent company bears full liability for branch operations.

Representative Office

A representative office serves liaison and promotional functions but cannot engage in commercial activities or generate revenue in Serbia. This option suits companies conducting market research or building relationships before committing to full market entry.

Company Registration Process

Registering a company in Serbia involves several steps:

1. Reserve a company name with the Serbian Business Registers Agency

2. Prepare and notarize founding documents (Articles of Association, founding decision)

3. Open a temporary bank account for initial capital deposit

4. Submit registration application to SBRA

5. Obtain a tax identification number (PIB) from the Tax Administration

6. Register for VAT if applicable

7. Register employees with social security authorities

The entire process typically takes 5-7 business days when properly prepared. Working with experienced local advisors can significantly streamline registration and ensure compliance with all requirements.

Serbian Tax System: What You Need to Know

Understanding Serbia's tax framework is essential for financial planning and compliance. Here are the key taxes affecting businesses:

Corporate Income Tax (CIT)

Serbia applies a flat 15% corporate income tax rate on worldwide income for resident companies. This rate is among the most competitive in Europe. The tax year follows the calendar year, and annual returns must be filed within 180 days after year-end (typically by June 30).

Companies can carry forward tax losses for five years. Various deductions and incentives may reduce the effective tax burden further.

Value Added Tax (VAT)

VAT applies to most goods and services in Serbia:

- Standard rate: 20%

- Reduced rate: 10% (basic food products, medicines, newspapers, hotel accommodation, public transport)

VAT registration becomes mandatory when annual turnover exceeds RSD 8 million (approximately EUR 68,000). Voluntary registration is possible for businesses below this threshold. VAT returns are filed monthly or quarterly depending on turnover levels.

Personal Income Tax (PIT)

Individuals pay personal income tax on various income types:

- Employment income: 10%

- Self-employment income: 10%

- Capital gains: 15%

- Rental income: 20%

- Dividends and interest: 15%

Employers must withhold and remit PIT on behalf of employees when processing payroll.

Social Security Contributions

Both employers and employees contribute to Serbia's social security system covering pension, health, and unemployment insurance:

Employee contributions (paid from gross salary):

- Pension and disability insurance: 14%

- Health insurance: 5.15%

- Unemployment insurance: 0.75%

- Total employee: 19.9%

Employer contributions (paid on top of gross salary):

- Pension and disability insurance: 10%

- Health insurance: 5.15%

- Total employer: 15.15% (on the net salary base)

Withholding Tax

Payments to non-residents may be subject to withholding tax:

- Dividends: 20% (reducible under tax treaties)

- Interest: 20% (reducible under tax treaties)

- Royalties: 20% (reducible under tax treaties)

- Service fees: 20% (for certain services)

Serbia has signed double taxation treaties with over 60 countries, which may significantly reduce or eliminate withholding taxes on cross-border payments.

Transfer Pricing Requirements

Companies transacting with related parties must comply with Serbian transfer pricing rules, which align with OECD Guidelines. Related party relationships arise from:

- 25% or more direct/indirect ownership

- Common control situations

- Transactions with tax haven jurisdictions (regardless of ownership)

Transfer pricing documentation must be submitted annually with the corporate income tax return. For fiscal year 2025, the deadline falls at the end of June 2026.

Full documentation is required unless transactions qualify for simplified (short-form) reporting — generally when individual transaction values or aggregate annual transactions with a single related party fall below RSD 8 million.

Accounting and Financial Reporting

Serbian accounting standards align with International Financial Reporting Standards (IFRS). Companies must:

- Maintain books and records in Serbian language and Serbian Dinar (RSD)

- Prepare annual financial statements (balance sheet, income statement, cash flow statement, notes)

- Submit financial statements to SBRA by March 31 following the financial year

- Undergo statutory audit if meeting certain size thresholds

Proper bookkeeping practices are essential not only for compliance but also for effective financial management and tax planning.

Employment Law Essentials

Hiring employees in Serbia requires understanding the Labor Law framework:

Employment Contracts

Written employment contracts are mandatory and must specify:

- Job description and duties

- Working hours (standard: 40 hours/week)

- Salary and benefits

- Contract duration (fixed-term or indefinite)

- Probationary period (maximum 6 months)

- Notice period requirements

Termination

Employment termination must follow legal procedures. Notice periods cannot exceed 30 days. Employees terminated due to redundancy or organizational changes may be entitled to severance pay based on years of service.

Minimum Wage and Benefits

Serbia sets a national minimum wage adjusted annually. Beyond salary, employers must provide mandatory benefits through social security contributions. Many companies also offer voluntary benefits such as private health insurance, meal allowances, or transportation subsidies to attract talent.

Banking and Finance

Opening a corporate bank account is straightforward once company registration is complete. Serbian banks require:

- Certificate of incorporation from SBRA

- Tax identification number (PIB)

- Identification documents for authorized signatories

- Company founding documents

The National Bank of Serbia regulates the banking sector and maintains monetary stability. The Serbian Dinar (RSD) is the official currency, though many business contracts reference Euro amounts due to exchange rate considerations.

Foreign currency accounts are permitted, and companies engaged in international trade commonly maintain both RSD and EUR accounts.

Investment Incentives

Serbia offers various incentives to attract foreign investment:

Tax Incentives

- 10-year tax holiday for investments exceeding EUR 1 billion creating 100+ jobs in underdeveloped regions

- IP Box regime reducing effective tax rate on qualifying intellectual property income

- R&D incentive allowing double deduction of qualified research expenses

- Accelerated depreciation for certain assets

Employment Subsidies

Cash grants for job creation, with amounts varying by region and number of new employees. Underdeveloped areas receive higher subsidy rates.

Free Zones

Companies operating in designated free zones benefit from:

- VAT exemption on goods and services within the zone

- Streamlined customs procedures

- Duty-free import/export for goods remaining in the zone

International Trade Considerations

Serbia's trade position benefits from multiple agreements:

- EU Stabilisation and Association Agreement providing preferential access to EU markets

- CEFTA membership enabling duty-free trade with Western Balkan countries

- Free trade agreements with Russia, Turkey, EFTA countries, and others

As Serbia progresses toward EU membership, businesses should prepare for evolving regulatory alignment with European standards.

Import procedures require customs declarations, proper documentation, and payment of applicable duties and VAT. Export controls apply to certain goods requiring licenses.

Getting Started: Your Next Steps

Establishing a successful business in Serbia requires careful planning and local expertise. Key steps include:

1. Define your market entry strategy and business structure

2. Engage qualified legal and tax advisors familiar with Serbian regulations

3. Complete company registration and obtain necessary permits

4. Set up banking relationships and accounting systems

5. Hire local talent and establish compliant employment practices

6. Implement ongoing tax and regulatory compliance procedures

With proper preparation and professional guidance, foreign companies can navigate Serbia's business environment effectively and capitalize on the opportunities this growing market offers.

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Key Tax Rates at a Glance

Understanding Serbia's tax landscape starts with knowing the headline rates that will affect your bottom line.

Corporate income tax stands at a flat 15%, applying to resident companies on their worldwide income. This positions Serbia competitively against neighboring countries and many EU member states.

VAT operates on a dual-rate system: 20% standard rate for most goods and services, with a reduced 10% rate covering essential items like basic foodstuffs, medicines, and public transportation.

Personal income tax ranges from 10% to 20% depending on income type, with employment income taxed at 10% and capital gains at 15%.

Social security contributions add approximately 35% to total employment costs when combining employer and employee portions — a factor worth modeling carefully when planning your Serbian payroll structure.

Critical Compliance Deadlines

Missing tax deadlines in Serbia triggers penalties and interest charges. Mark these key dates:

- Corporate income tax returns: Due within 180 days after financial year-end (June 30 for calendar-year companies)

- Transfer pricing documentation: Submitted with annual CIT return

- VAT returns: Monthly (by 15th of following month) or quarterly depending on turnover

- Annual financial statements: Filed with SBRA by March 31

- Payroll taxes: Paid at time of salary payment

- Property tax: Quarterly installments

Planning your compliance calendar from company formation ensures you never face unexpected penalties.

Double Taxation Treaty Benefits

Serbia maintains tax treaties with over 60 countries, potentially reducing withholding taxes on dividends, interest, and royalties paid to foreign parent companies.

Treaty rates typically reduce the standard 20% withholding to 5-15% depending on the specific agreement and transaction type. Proper documentation and application procedures are required to claim treaty benefits.

Before structuring cross-border payments, review the applicable treaty provisions and ensure your company can meet the beneficial ownership and other qualifying requirements.

Transfer Pricing: Don't Overlook Related-Party Rules

Any transaction between your Serbian subsidiary and affiliated companies falls under transfer pricing scrutiny. This includes:

- Intercompany service fees

- Management charges

- Loan interest

- Royalty payments

- Goods purchases and sales

Documentation must demonstrate arm's length pricing using accepted methodologies aligned with OECD guidelines. The Serbian Tax Administration actively reviews transfer pricing during audits, making compliant documentation essential.

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Practical Considerations for Market Entry

Beyond tax and legal requirements, successful Serbian operations depend on understanding local business realities.

Serbian business culture values personal relationships and direct communication. While English proficiency is common in professional settings, investing time in relationship building pays dividends. Negotiations may proceed differently than in some Western markets, with decisions often requiring input from multiple stakeholders.

Banking procedures have improved significantly but can still require patience. Opening corporate accounts, obtaining approvals, and processing international transfers may take longer than expected. Build buffer time into your financial planning.

The professional services and IT sectors have grown substantially, providing access to qualified local talent at competitive costs. However, competition for top candidates has intensified, particularly in Belgrade. Consider your employment value proposition carefully when recruiting.

Why Local Tax Expertise Matters

Navigating Serbian tax and regulatory requirements without local expertise creates unnecessary risk. Common pitfalls include incorrect VAT treatment on complex transactions, transfer pricing documentation gaps, missed filing deadlines resulting in penalties, employment law violations, and improper withholding tax calculations.

Experienced local advisors understand both the written rules and their practical application, helping you structure operations efficiently while maintaining full compliance.

At Tax Advisor Serbia, we specialize in supporting foreign companies and expats. From initial structuring through ongoing compliance, you work directly with senior professionals — no handoffs to junior staff. Our clients benefit from Big Four expertise delivered with the responsiveness and personal attention only a boutique firm can provide.

Ready to Explore Serbia?

Serbia's combination of competitive tax rates, strategic location, and skilled workforce makes it worth serious consideration for your European expansion plans.

The path to successful market entry starts with proper planning and professional guidance. Whether you're exploring initial feasibility or ready to begin company formation, understanding your tax and legal obligations upfront prevents costly surprises later.

Book a free consultation to discuss your specific situation. We'll help you understand the requirements, identify opportunities, and develop a practical roadmap for your Serbian operations.

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