Regarding the Republic of Serbia, political stability played an important role in the process of fiscal consolidation. Better performance on the revenue side led to the budget surplus for the first time in decade resulting in a lower debt to GDP ratio. Inflation is within the target, while dinar is among the best performing currencies on the global scale. Serbia has favorable inflow of foreign direct investment in the recent years expecting the trend to continue...
Each region and each market has its own specifics, I see a huge business potential here, in terms of economy development and quality workforce. Looking at business relations with the clients, there is present a certain level of partnership and even friendship, which can help you create better business environment and results.
Serbia has massive potential in industrial production in various verticals. Siemens’ success stories prove that Serbia in general is a very good place for a production location. Productivity and quality of the qualified workforce who are motivated and adaptive, with long industrial culture provides an attractive basis for every foreign investor. Serbia has good geographic location which enables quick and easy access to other CEE and SEE countries. Additionally, the universities bring very good engineers to the markets.
Balkan is a region in a transition process, which with its many challenges also offers great opportunities for a future prosperity and chance to drive this part of Europe forward - to the new age - the one we can see in more developed countries in the world. This creates comparative advantage for this region, and the best indicator that the business climate is changing and enhancing is the increase in the number of major global companies choosing this location for their production site.
Serbia is definitely going forward but being a country in transition implies that digitalization of industry sector is still not on a high level and that investing in Industry 4.0 is a priority for further strengthening of country’s economy.
Region is moving forward in providing support to companies and their investments. Every year the situation is better, and we can all see clear improvements and new investments and creating stronger industrial base.
The Government of Serbia is committed to developing a stable and predictable business climate by implementing regulation which grants foreigners the same rights as its citizens to conduct business, with the benefits of a free market, favorable tax regime and investor incentives. On the other hand, gaps and ambiguities in the law are still present, the practice can sometimes change quite quickly and without warning and the changes are not always the ones that everyone would prefer.
The Stabilization and Association Agreement between the Republic of Serbia and the EU entered into force on 1 September 2013. It guarantees the alignment of national legislation with EU laws, conditions for investment and business are becoming recognizable and predictable for foreign investors.
1. Law on investments – This Law aims to enhance investment environment in the Republic of Serbia and provide equal treatment of foreign and domestic investors. Among others, this Law prescribes the freedom to invest, the protection of acquired rights, guarantees against expropriation, national treatment for foreign investors, the freedom to effectuate payments towards foreign entities, the right of foreign investors to transfer profits and property, incentives for investors whose beneficiaries can be both natural persons and legal entities subject to tax and social contributions and other public income in the Republic of Serbia.
The terms and conditions for the award of subsidies for new investments are more closely prescribed with the Decree on State Aid and the Decree on the Terms and Procedures for the Promotion of Direct Investments.
Prescribed awards of subsidies for new investments are tax and customs facilities in conformity with law, unrestricted importing, exemption from customs duty and direct cash subsidies, but all of them are conditioned by the fulfilment of a large number of different criteria concerning the qualification conditions, procedure, and deadlines for the completion of the investment.
2. Corporate law - Foreign investors wishing to establish a business presence in Serbia have an opportunity to incorporate a branch office or representative office of the foreign company. There are 4 forms of business entities: general partnership, limited partnership, limited liability company and joint stock company.
3. Tax regime – Serbian tax regime is highly favorable for business activities. Corporate income tax is 15 % for all entities and is one of the lowest in Europe. Companies incorporated in Serbia are Serbian tax residents and therefore required to pay the tax on their worldwide income. For non-residents in Serbia, withholding tax of 20% is calculated and paid for certain payments such as dividends, profit share, royalties, interests, capital gains, lease of real estate-related payment and other taxable property. Value added tax rates are among the most competitive in Central and Eastern Europe and amount to 20% (standard value-added tax rate) for most taxable income, and 10% (lower value-added tax rate) for basic foodstuffs, daily newspapers, public utility services, etc. On the other hand, the tax system in Serbia is not predictable, because it is constantly changing. Bureaucracy and the constant change of regulations have led to the inconsistent operation of the tax administration, which in turn undermines the legal security of taxpayers in Serbia.
4. Free trade regime - The Stabilization and Association Agreement between the Republic of Serbia and the EU introduced trade liberalisation with the EU. Serbian products have been given access to a market of 490 million. This resulted in a constant increase in export from Serbia and a reduction in the trade deficit with the EU. The Agreement with Russia stipulates that goods produced in Serbia, which have at least 51 % value added in the country, are considered of Serbian origin and exported to Russian Federation customs free. Serbia is the only country outside the Commonwealth of Independent States which enjoys the benefits of free trade with Russia.
5. Labour Law - The advantage of the existing Labour law is that it allows the possibility of engaging staff based on the employment agreement (which can be for an indefinite or a definite term) and based on the out-of-employment agreement. The provisions of the existing Labour Law reduce flexibility and certain forms of engagement (as it does not recognize staff leasing and limits the possibilities of engagement outside employment), which have a negative impact on employment rates and the increase of gray economy. From a potential investor’s point of view, the main disadvantage of the existing Law is the strengthened protection of employees and the difficult conditions for cancelling employment agreements. This Law also regulates the procedure for obtaining residency and work permits
6. Visa policy – Serbia grants visa-free entry to most Schengen Annex II nationalities, and residence in them for up to 90 days within a 6-months period. It also grants visa-free entry to several additional countries – Azerbaijan, Bahrain, Belarus, Bolivia, Burundi, China, Cuba, Guinea-Bissau, India, Indonesia, Iran, Jamaica, Kazakhstan, Kuwait, Mongolia, Oman, Qatar, Russia, Suriname, Tunisia and Turkey.
7. Serbian Law on Public-Private Partnership and Concessions – it introduced the concept of long-term co-operation between a public and a private partner in order to provide finance, construction, reconstruction, operation or maintenance of infrastructure and other facilities of public interest, and to provide services of public interest.
| Pros |
| Free trade agreements both with the EU and Russia |
| Subsidies for investors |
| Low tax rates |
| Wide range of DTTs |
| Flexible labor regulations |
There are numerous tax incentives for investors such as corporate tax holiday for 10 years for investments over €8 million with 100 new jobs created, signed treaties on avoiding double taxation with 57 countries, partial compensation of taxes and social contributions paid on salaries under certain conditions, etc.
A) Reduction of tax and contributions paid on net salary
Reductions represent a refund for a part of total costs of employees’ salaries and they are implemented on the total value of tax paid for salaries (10% on gross) and contributions for mandatory pension and invalidity insurance (26% on gross), in case new jobs were created in the following manner:
Consequently, the total cost of salaries which are paid by the employer, are reduced to half – (around 30%, instead of 64% of net salary calculated on the average salary in Serbia). It is important to say that these reductions are applicable only for persons registered as unemployed at the National Employment Agency (labor office) for minimum 6 months continuously before the employment.
According to the Law on individual income tax, the gross salary is taxed at 10% rate. The tax base is gross salary reduced by the nontaxable sum of RSD11,790 (around €100), monthly for full-time employees. Law which regulates contributions for mandatory social security defines the rates by which the contributions are calculated and paid on gross salary (which is not reduced for previously mentioned RSD11,790 ):
If an employer uses any other incentives, he cannot use this tax reduction for employing unemployed persons.
B) Relief from corporate income tax
Law which regulates corporate income tax provides the tax rate of 15%. However, if the taxpayer invests in fixed assets more than 1 billion RSD (about €8 million) and if in the period of investment additionally creates at least 100 new jobs, he can get corporate tax income holiday for a period of 10 years proportional to his investment, starting from the first year when taxable income is made. Investing in equity and increasing equity of the company is also considered as an investment in fixed assets. Tax incentive cannot be achieved for acquiring equipment already used in the Republic of Serbia, neither for certain types of assets.
C) Tax statement losses transfer to tax balance sheet in the next 5 years
The Law on corporate tax income provides that capital loss realized from the sale of property/equity right can be offset with capital gains, created during the sale of other property/equity right in the same year. If there is still some capital loss remaining after the offset, it is allowed to offset it with future capital gains for the next five years.
D) Agreements on avoidance of double taxation
The Republic of Serbia has signed the agreements on avoidance of double taxation with 58 countries which refer to the laws that regulate corporate income tax, property tax and individual income tax. Depending on the particular country, it is provided to pay certain taxes only in one country, if the taxpayer is operating a business in two countries which have signed the agreement. There is the list of countries in the following table.
| No. | Countries | Avoiding double taxation |
| 1 |
Albania |
In force |
| 2 |
Armenia |
In force |
| 3 |
Austria |
In force |
| 4 |
Azerbaijan |
In force |
| 5 |
Belgium |
In force |
| 6 |
Belarus |
In force |
| 7 |
Bosnia and Herzegovina |
In force |
| 8 |
Bulgaria |
In force |
| 9 |
Canada |
In force |
| 10 |
China |
In force |
| 11 |
Croatia |
In force |
| 12 |
Cyprus |
In force |
| 13 |
Czech Republic |
In force |
| 14 |
Denmark |
In force |
| 15 |
Egypt |
In force |
| 16 |
Estonia |
In force |
| 17 |
Finland |
In force |
| 18 |
France |
In force |
| 19 |
Germany |
In force |
| 20 |
Georgia |
In force |
| 21 |
Greece |
In force |
| 22 |
Hungary |
In force |
| 23 |
India |
In force |
| 24 |
Ireland |
In force |
| 25 |
Iran, Islamic Republic of |
In force |
| 26 |
Italy |
In force |
| 27 |
Kazakhstan |
In force |
| 28 |
Korea, Dem. People's Rep. of |
In force |
| 29 |
Kuwait |
In force |
| 30 |
Latvia |
In force |
| 31 |
Libya |
In force |
| 32 |
Lithuania |
In force |
| 33 |
Luxembourg |
In force |
| 34 |
North Macedonia |
In force |
| 35 |
Malta |
In force |
| 36 |
Malesia |
In force |
| 37 |
Moldova |
In force |
| 38 |
Montenegro |
In force |
| 39 |
Netherlands |
In force |
| 40 |
Norway |
In force |
| 41 |
Pakistan |
In force |
| 42 |
Poland |
In force |
| 43 |
Republic of Corea |
In force |
| 44 |
Romania |
In force |
| 45 |
Russian Federation |
In force |
| 46 |
Slovakia |
In force |
| 47 |
Slovenia |
In force |
| 48 |
Spain |
In force |
| 49 |
Sri Lanka |
In force |
| 50 |
Sweden |
In force |
| 51 |
Switzerland |
In force |
| 52 |
Tunisia |
In force |
| 53 |
Turkey |
In force |
| 54 |
Ukraine |
In force |
| 55 |
United Arab Emirates |
In force |
| 56 |
United Kingdom |
In force |
| 57 |
Qatar |
In force |
| 58 |
Vietnam |
In force |
There are 14 active free economic zones in Serbia, functioning as PPPs between municipalities and (one or more) enterprises. The zones house 240 multinational companies. These zones currently produce 16% of all exports; employ more than 22 000 people, and had a combined turnover of EUR 4.6 million in 2015 (almost double the turnover in 2012).
Special economic zones in Serbia
| Special economic zone | Area in hectares | Number of manufacturing enterprises | main operating industry | Number of people employed | Total turnover (EUR millions) |
| Apatin | 415 | Zone is not fully active | Petroleum | 0 | 0.1 |
| Subotica | 44 | 5 | Electrotechnics | 3521 | 622 |
| Zrenjanin | 98 | 5 | Plastics | 3398 | 206 |
| Novi Sad | 75 | 6 | Petroleum | 251 | 82 |
| Šabac | 244 | 6 | Automotive | 56 | 9 |
| Smederevo | 143 | 6 | Metal | 1363 | 36 |
| Svilajnac | 33 | 1 | Electric works | 392 | 85 |
| Kragujevac | 176 | 7 | Automotive | 4354 | 2490 |
| Užice | 55 | 6 | Copper | 1950 | 393 |
| Kruševac | 64 | 1 | Rubber/Chemical | 1150 | 15 |
| Pirot | 116 | 16 | Rubber-Pneumatics | 5808 | 689 |
| Vranje | 123 | Zone is not active | Footwear | 0 | 0 |
| Beograd | 98 | Zone is not active | 0 | 0 |
Note: The table contains the 12 free economic zones in Serbia except the 2 in Belgrade and Priboj for which relevant data is not available. The data are relevant as of the year 2014.
Types of incentives in Serbia
| Incentives | Awarded aid | Eligibility criteria | Condition for use of aid | Length of incentives | Zone specific |
| State grants based on the eligible costs of gross salaries for new jobs. | 20-40% for investment projects (depending on the regional level of development) with specific limitations on the amount per new job created. | Investors who have investment projects in sectors that are in accordance with the decree and apply for grants before the start of the realisation of the project. - Investors who can provide a minimum of 25% of eligible costs from their own resources or from other sources, which do not contain any other state grants. |
- Large investors are required to demonstrate incentive effects. - Investors are required to maintain investment at the same locations once investment is realised for a specified period of time: at least 5 years after the implementation of the project for large enterprises, or at least 3 years for small and medium-sized businesses. - Investors cannot reduce the number of employees after the implementation of the investment project, over a period of 5 years for large enterprises, and 3 years for small and medium enterprises. - Create at least 20-50 jobs and invest at least EUR 150 000-600 000 of the eligible costs of investment (depending on the regional level of development). |
n/a | No |
| Increase in state grant based on the amount of eligible investment costs. | Up to 30% increase (depending on the regional level of development). | No | |||
| Increase in state grants for labour-intensive projects. | Up to 20% increase of the eligible costs of gross salaries (for any increase in the number of new jobs created over 200 – 1000 new jobs | No | |||
| The National Employment Service Grant. | Employment Subsidies Programme (grant amount per employee: EUR 850 – 1,700), Apprentice Programme (grant amount per employee: EUR 170 – 210), Retraining Programme (grant amount per employee: EUR 850) | No | |||
| Corporate Profit Tax Holiday. | Exemption from corporate profit tax for period of 10 years | Being a domestic or foreign company registered and operating in Serbia . | - Start reporting taxable profits. - Invest amount exceeding approximately EUR 8.5 million in fixed assets. - Employ at least 100 additional employees. |
10 years | No |
| Carry forward of losses. | Companies have right to carry forward tax losses in order to pay less taxes on their future profits | Being a domestic or foreign company registered and operating in Serbia. | State losses in tax returns over a period of 5 years. | n/a | No |
| ding double taxation. | Corporate income tax credit. | Being a domestic or foreign company registered and operating in Serbia. | Pay tax on the profit generated abroad on the already paid amount. | n/a | No |
| Customs duty exemptions. | Customs-free imports of raw materials and semi-finished goods, as well as imports of machinery and equipment. | Being a domestic or foreign company registered and operating in Serbia. | Undertake import activities. | n/a | Yes, but not mandatory |
| Value added tax exemptions in free zones. | Exemption from VAT on income generated from commercial activities. | Being a domestic or foreign company registered and operating in Serbia. | Be located in the zone and undertake trading activities. | No limitation while in the zone | Yes |
| Local tax relief. | City building land and development lease fees exemptions or deductions, as well as other local fee exemptions or deductions. | Being a domestic or foreign company registered and operating in Serbia. | Be located in a specific municipality. | n/a | No |
Regulatory framework
- Law on Free Zones ("Official Gazette RS" No/. 62/06)
- Customs Law ("Official Gazette RS", No. 73/2003, 61/2005, 85/2005 - other law and 63/2006 - corrected other law)
- Subordinate legal acts delegated to these law
| Zone name | Size (ha) | Number of investors | Cumulative investment in EUR millions |
| Pirot | 116 | 16 | 266 |
| Zrenjanin | 98 | 5 | 12 |
| Subotica | 44 | 5 | 77 |
| Novi Sad | 75 | 6 | 4 |
| FAS Kragujevac | 176 | 7 | 1278 |
| Sabac | 244 | 1 | 4 |
| Uzice | 55 | 6 | 39 |
| Krusevac | 65 | 1 | 1 |
| Smederevo | 143 | 6 | 6 |
| Svilajnac | 33 | 1 | 1 |
| Global Competitiveness Index | RANK 72 |
| Ease of doing business | RANK 44 |
| Starting Business rank | RANK 40 |
| Global logistics report | RANK 65 |
| Rank | Institutions | Infrastructure | Health | Skills | Labor market | Product market | Business dynamism | Innovation |
| Serbia | 75 | 51 | 76 | 55 | 54 | 73 | 54 | 59 |
| EUR/kwh | ||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | ||
| Serbia | 0.058 | 0.064 | 0.066 | 0.071 | 0.072 | |
| EU - 27 | 0.209 | 0.205 | 0.207 | 0.213 | 0.216 | |
This region is poised to record better than average growth figures of economic output, employment, wages, new investments that shall positively affect banking revenues. Furthermore, planned accession to EU will foster stability and further economic development of the region. Overall experience is very positive.
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