Subsidiaries in Serbia

Serbia is one of the best countries to expand your business. It has a diverse population, and the country offers several business opportunities in energy, automobiles, machinery, and several other sectors. The nation comes under the upper middle-income category, and the GNI per capita is $6,390. 

The country is ranked 44 in the ease of doing business index. The country improved its ranking from 48 to 44 owing to improvements on specific parameters, construction permits, getting credit, etc. Hence, establishing a subsidiary business in Serbia is not that challenging. The nominal GDP of Serbia is predicted to be $65 billion. Also, the taxation of foreign subsidiaries in Serbia is relatively easy to understand. Post-pandemic, the country has recovered from the crisis reasonably well. The consumption and investment expenditure of the country has increased as the Government introduced policies like the 30-month policy coordination instrument, etc., to attract foreign investments.

If you plan to expand your business in Serbia, you can start by establishing a subsidiary. The guide will help you to set up a subsidiary in Serbia and decode the entire process.

What are the Types of Subsidiaries in Serbia?

Serbia has different kinds of companies. Before you set up a subsidiary in Serbia, you must choose the type of company you want to incorporate. Some of the options available include

  • Private Limited Liability Company:
  1. Most companies take the form of private limited liability companies in Serbia. 
  2. You need at least one shareholder to start a public limited liability company in Serbia. A limited company cannot have more than 50 shareholders.
  3. You need a minimum share capital of EUR 500 to start your business.
  4. In these companies, the shareholders are responsible for all the company’s debts, profits, and earnings.

    If the number of shareholders increases, the company will have to change its type to a joint stock company. You must appoint a director responsible for submitting the financial reports to the concerned authorities at the end of the year. The company will have to update the terms of the Articles of Incorporation. If the terms expire, the company will have to wind up its operations in Serbia.

  • Joint Stock Company:
    1. Serbia has two kinds of joint stock companies- open and closed.
    2. The only difference between an open and closed joint stock company is that a closed company can have a maximum of 100 shareholders. In comparison, an open stock company can have more than 100 shareholders.
    3. You need to specify the joint stock company you want to open in Serbia.
    4. You need a minimum capital of EUR 10,000 to open a joint stock company in Serbia.
    5. If you plan on incorporating an open joint stock company, you must have a minimum share capital of EUR 25,000.
  • Partnerships:
    1. A partnership business is a legal entity where two or more individuals or parties come together to start a business.
    2. The Articles of Association of a partnership company must include all details like the company’s name, the partner’s basic information, the company’s address, etc.
    3. Also, you must have a partnership agreement that will govern the terms of the partnership.
    4. The partners will be held liable for any debts and earnings.
    5. In Serbia, there is no minimum requirement for share capital in the case of partnership companies.

When you incorporate a subsidiary business in Serbia, you can choose from any of these types based on the level of control, budget, etc.

How to Set Up a Subsidiary in Serbia?

Serbia has a flexible economy and is known for its favorable taxation system. Hence, it is easier to incorporate a subsidiary in Serbia. Irrespective of the type of company, many businesses look forward to expanding their business operations in Serbia. 

To start a subsidiary company in Serbia, you can take the following steps:

Step 1: Business incorporation

  • Decide a business name based on the business operations and check if it is available.
  • Provide a declaration of intention to open a subsidiary in Serbia to the Business Registers Agency.

Step 2: Business registration

  • Once you submit the declaration, you must provide the Articles of Association and other important documents.
  • The documents should be duly notarized and submitted to the Business Registers Agency
  • Fill out the registration form and provide all the necessary details like:
    1. Name of the business
    2. Company Identification Number
    3. Address of the office
    4. Nature of the business
    5. Date when the business begins
    6. Information about the shareholders of the company
    7. The selected code of activity
    8. The share capital of the business

Step 3: Register for pension, employment, and health fund

  • You must register the company with other vital institutions like pension, employment, and health fund. 

Step 4: Set up a bank account

  • You cannot start business operations before setting up a bank account in Serbia.
  • You can open a bank account for your company in a national or a private bank in Serbia.

Step 5: Register for tax

  • You must also register the business with the country’s tax authorities to make regular tax payments to the Government.
  •  Also, in Serbia, VAT registration is mandatory, and you must register to start your business operations. You need to pay the application fee based on the type of subsidiary you have incorporated in Serbia. 
  • RSD 5,900 for a limited liability company

You also need to get the founding act of the company verified by a notary in Serbia. This will cost you somewhere around RSD 5,840.

You need to appoint a representative for the business who is a Serbia national. 

Once all these steps are complete, it will take around two more weeks to establish the subsidiary in Serbia.

Benefits of Setting Up a Serbia Subsidiary

Setting up a subsidiary in Serbia has its own set of advantages. You must try to expand to the Serbian territories because:

  • Serbia has jumped and secured 44th rank in the World Bank ease of doing business report 2020.  
  • There are no restrictions on company incorporation in Serbia as the Government actively seeks foreign investments in the country.
  • Serbia allows you to incorporate wholly-owned subsidiaries. Also, these businesses can perform their business transactions using the currency of their choice.
  • The labor market of Serbia is highly lucrative, and almost everyone knows how to speak English, which makes operations hassle-free.
  • The country has flexible and advantageous tax policies, like a 10-year exemption from Corporate Profit Tax if you hire more than 100 employees in your newly formed subsidiary. These benefits are available to companies that invest more than 1 billion RSD.
  • Serbia has entered into several trade agreements with different countries and tries to accommodate the business needs of companies from other countries.
  • Geographically, Serbia is very well connected to the rest of the world. Serbia is at the border of the European Union, which gives the country access to all the European countries. Hence, business operations can easily expand to other countries as well.

Documents to Prepare When Opening a Subsidiary in Serbia

You must submit a few essential documents related to the parent company and the subsidiary you are about to open in Serbia. Reach out to the Business Registers Agency and fill out the form of incorporation. Along with the form, you need to submit all the necessary documents.

  • A registration application for setting up a subsidiary in Serbia
  • The proof of identity of all the members of the company
  • The Memorandum of Association with the signatures of all the founding members
  • Proof of the registration fee payment

Once you have arranged all the documents, the founder or any authorized person must submit the documents to the registered authorities. Post incorporation, the registrar will issue the following documents and information:

  • Company number
  • Tax identification number
  • Health Insurance Number

As soon as you receive these details, you will be ready to start business operations in Serbia.

What Business Forms can Serbia Subsidiaries Take?

Serbia allows you to open a wholly-owned or partially-owned subsidiary. A company can be termed a subsidiary when a parent company has about 50 to 90 percent stake. 

Generally, companies in Serbia can take the following business forms:

  • A limited liability company
  • A partnership
  • A limited partnership company
  • A joint-stock company

A limited liability firm is the most popular business form a company can take. The company allows you to hire any number of local and foreign employees that can help you with the business operations. 

Serbia Subsidiary Laws

Before you set up a subsidiary in Serbia, you must know about all the laws that govern these subsidiaries. 

The owners of the subsidiary should follow the below subsidiary laws:

  • Partnership- At least two or more individuals or institutions are required to start a partnership company in Serbia.
  • A limited liability company-
    1. The share capital cannot be less than 100 RSD
    2. The company must maintain a book of records for all the monetary transactions and submit the tax application regularly to the authorities.

Apart from the laws listed above, there are some other subsidiary laws that you need to follow in Serbia:

  • As soon as the firm is incorporated, you must register for VAT and other social contributions.
  • You must prepare a company seal and register it before the commencement of business operations.
  • Register all the employment contracts of the company with the authorities of the Employment Law
  • Register the company with the Pension and Health Funds

Before setting up a subsidiary in Serbia, you must know all the company’s incorporation rules. You can also get in touch with a lawyer or a consultant who can help you navigate your way through these laws.

Post Incorporation Compliance

As soon as the company is registered, you must try to complete some activities and gather essential information about the newly formed subsidiary. The foreign subsidiary compliance in Serbia includes:

  • Collecting the Certificate of Incorporation from the Business Registers Agency
  • Collect the company number (CN)
  • Collect the tax identification number (TIN)
  • Submit the details of all the founding members and the shareholders to the registrar
  • Open a bank account to facilitate all the transactions
  • Hire an auditor or a team of accountants to help you with bookkeeping, VAT registration, etc.
  • Get an electronic certificate and a digital signature for the company and its directors.

Taxes on Subsidiaries in Serbia

All the companies and foreign subsidiaries that are a part of Serbia must pay taxes on the income earned in the country. 

  • A 15% corporate tax applies to all companies operating in Serbia
  • The subsidiaries also pay a corporate tax of 15%, like the other companies in Serbia

The rate of the capital gains tax is 15%. However, the non-residents of Serbia have to pay a 20% tax on capital profits.

Tax Incentives for Businesses Setting Up a Subsidiary in Serbia

Serbia has the reputation of being one of the most tax-friendly countries in Europe. It has one of the lowest tax rates, which is quite low compared to the European average. Some of the tax incentives include:

  • A corporate income tax of 3% applies to the revenues earned through any intellectual property in Serbia.
  • The companies working in the research and development sector receive a double deduction in terms of taxes. 
  • The country provides a tax credit to companies investing in Serbia start-ups.
  • According to the Personal Income Tax law, the company’s founders are exempt from paying taxes.

Other Important Considerations

Companies must budget the time and money needed to set up a subsidiary in Serbia. It would be advisable to plan and coordinate payment of the associated expenses with the subsidiary setup process.

You also require the time to travel back and forth to Serbia when signing paperwork, hiring, or working with other local vendors. If your packed schedule keeps you from completing the necessary trip arrangements, think about employing a delegate to handle the foundation of the company’s Serbia subsidiary.

How Multiplier’s Employer of Record Can Help You Hire and Expand in Serbia?

Planning a business expansion takes time and money, be it domestic or abroad. However, it may be challenging to uphold that nation’s labor regulations and business practices when expanding to a foreign country.

Why not hire a third-party service provider like Multiplier to resolve this obstacle in your company’s growth?

Multiplier handles all the formalities associated with entering a new market, such as payroll processing, onboarding talent, etc., without establishing a company. We help you onboard local and foreign talent while ensuring that all labor rules and regulations in Serbia are strictly followed.

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Frequently Asked Questions

Companies that invest at least 1 billion RSD and onboard over 100 employees get a tax holiday of 10 years in Serbia.

In Serbia, if a construction job exceeds six months, it is considered a permanent establishment.

Companies should pay a withholding tax if a non-resident company earns revenue from market research, rental, and interest services. The rate of withholding tax is 20%.

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