In recent years, Serbia has become increasingly attractive for companies in the IT sector. If you are considering relocating your business to another country or hiring new employees, operating in the Republic of Serbia can be a viable solution.
Serbia offers numerous benefits for business development and successful operations, including tax incentives for employing foreigners, which are particularly significant for IT companies. There is a growing demand for IT services and innovative IT solutions. This is one of the reasons why IT firms are being established more frequently in our country.
Below, you will find more information on how to establish an IT company in Serbia and the advantages of operating IT companies in our country.
1.1. Why Establish or Relocate an IT Company to Operate in Serbia?
Serbia, as a country, enjoys a highly advantageous geographical position on the Balkan Peninsula. Its road infrastructure and central location in Southeastern Europe connect it not only with the European Union but also with countries beyond the European continent.
Free trade agreements, double taxation avoidance treaties, a stable banking system, the flow of various currencies, and other advantages are significant benefits our country offers compared to most other nations worldwide.
Furthermore, Serbia stands as one of the most attractive destinations for foreign investments, primarily due to numerous tax incentives that facilitate favorable, easy, and swift employment of foreigners. Concerning the arrival of foreigners, attention is also drawn to the low cost of living expenses.
1.2. Benefits of Establishing an IT Company in Serbia
The introduction of digitization, the development of new technologies and innovations on one side, and the global market and remote work opportunities on the other create promising prospects for establishing IT companies. Below, we will list the most significant advantages of doing business in the Republic of Serbia, including the IT sector, which applies to domestic and foreign IT companies.
The favorable tax treatment, and incentives for employing foreign nationals are highly significant to companies operating in Serbia.
Benefits exist for IT companies whose founders are domestic residents, as well as for foreign IT companies that have relocated their business to Serbia:
- Simple company establishment procedures,
- Tax incentives for employing highly qualified foreigners,
- Other tax incentives for hiring foreigners,
- Incentives for research and development,
- Tax incentives for innovative startups,
- IP Box tax relief,
- Simplified acquisition of residence and work permits,
- Remote work from a virtual office,
- VAT entry threshold,
- Business digitization and electronic invoicing,
- Favorable tax and contribution rates.
1.3. Legal Forms of Companies in Serbia
The first step before establishing an IT company is choosing the legal form of the business entity. The subsequent procedure depends on this choice.
According to the Law on Business Organizations of the Republic of Serbia, the following legal forms of business entities can be registered in our country: sole proprietorship, limited liability company (LLC), partnership, limited partnership, and joint-stock company.
In practice, when it comes to activities in the IT sector, the most common forms of organization are the establishment of LLC companies or the registration of entrepreneurs. Other forms of organization include:
- Branch of a business entity: Represents a separate organizational part of a business entity located in the territory of the Republic of Serbia through which it conducts its activities (it can be a branch of a domestic legal entity or a branch of a foreign company).
- Representative office of a foreign business entity: Represents a separate organizational part of a foreign company in Serbia, which can perform preliminary and preparatory activities to conclude legal transactions for that business entity.
1.4. Registration Process and Establishment of an IT Company in Serbia – Steps
Several key steps precede the registration procedure, and several efforts are related to the establishment process. We have detailed all these steps in the article “Complete Guide to Establishing a Company in Serbia.”
In the following are all the steps for establishing an IT company in Serbia:
- Choosing a company name.
- Selecting the primary activity code for the company.
- Determining the company’s address (business headquarters).
- Preparation and signing of the founding act for establishing an LLC.
- Gathering other necessary documentation required for the establishment of an LLC.
- Submitting the registration application for the establishment of the company to the Business Registers Agency (APR).
- Creating a company seal – no longer mandatory in business, but it can be made and used for document verification and protection against unwanted actions.
- Opening a business bank account.
- Obtaining a qualified electronic certificate (electronic signature).
- Submitting a tax return for advance payment of corporate income tax via the eTaxes portal, which must be done within 15 days from the IT company’s establishment date.
- Central registry of beneficial owners – registering the beneficial owners of all registered companies (this obligation applies to all companies, including LLCs).
2.1. Simple Procedure for Establishing an IT Company in Serbia
Digitalization has modernized the process of company establishment, allowing many administrative tasks to be completed electronically. Establishing an IT company in Serbia follows a similar process to other companies. The specific procedure and required documents depend on the type of legal structure chosen for the company.
The establishment is carried out through the Business Registers Agency. After registration, the Business Registers Agency allows each company to obtain the following:
- Registration/identification number,
- Tax identification number (PIB),
- Registration for lump-sum taxation or personal income tax or VAT (depending on the legal form and choice),
- Confirmation of the submitted declaration (Form M-A),
- Health insurance policyholder number.
If a company is being established online, the documentation submitted must be in electronic form, except for personal identification documents. For electronic submission of the registration application for establishment, the following is required:
- Electronic signature,
- Installed electronic card reader and NEXU application for electronic signing, Visa, MasterCard, or Dina debit/credit card to pay the fee.
2.2. Registering an Entrepreneur as an IT Company
An entrepreneur represents an individual registered with the Business Registers Agency (APR) to conduct business activities and generate profit. Establishing an entrepreneur as an IT company is similar to registering any other entrepreneur.
Registration can be done through a one-stop shop, which involves collecting and submitting the necessary documentation. Additionally, it’s possible to establish an entrepreneur online (electronically).
The following documents are required to register as an entrepreneur:
- A unique registration application for establishing an entrepreneur.
- Proof of the entrepreneur’s identity.
- Proof of payment of the entrepreneur establishment fee.
- Approval from relevant authorities for conducting specific activities (if required for the chosen business operation).
2.3. Setting Up an LLC as an IT Company
An LLC is a business entity established by one or more founders. The ownership structure and share in the company’s authorized capital are held by all members (founders). LLC is the most common registered company in Serbia and can have one or more members.
In Serbia, an LLC can only be established electronically. The decision for eRegistration of an LLC has been in effect since May 17, 2023. From that date onward, it is impossible to submit a paper-based registration application to establish an LLC. Instead, it is only submitted online through a special application provided by the Business Registers Agency (APR).
Documentation required for establishing an LLC includes:
- Electronic registration application for establishment.
- Articles of association of the company (decision for a single-member company or an agreement for a multi-member company), signed with an electronic certificate of the founder or digitized following the law.
- Proof of identity for company members (for domestic individuals – photocopy of ID card, and for foreigners, a photocopy of the passport or ID card if issued to a foreigner; if the founder is a foreign legal entity, an extract from the register),
- Decision on appointing a representative if specified outside the articles of association.
- Certified signature of the representative.
- Bank confirmation of the payment for the financial contribution, or an agreement among members regarding the evaluation of non-monetary contributions, including the assessment of their value.
- Proof of payment for the registration of the establishment.
- Proof of payment for the registration and publication of the Founding Act.
3.1. Employment Incentives for Highly Skilled Foreign Workers in Serbia
Through tax incentives, Serbia encourages the employment of highly skilled foreign workers. Companies or employers in the Republic of Serbia can utilize tax incentives for employing highly qualified foreign workers.
Incentives for employing foreigners can be obtained in the form of reduced income tax and contributions for pension and disability insurance (PIO). In this case, for one or more employed newcomers, the employer pays:
- 70% of the income tax,
- 100% of the calculated and paid contributions for mandatory pension and disability insurance (PIO).
These tax benefits are available to domestic companies and foreign employers registered in Serbia. One condition for utilizing this incentive is the amount of the worker’s monthly salary – the basic monthly wage must be higher than 300,000 dinars.
3.2. Other Benefits for Employing Foreigners
Companies in our country that employ foreigners can also take advantage of other tax incentives for hiring foreign nationals. These are tax incentives that can allow employers to pay a lower amount of taxes and contributions for foreigners they hire over the next five years.
If certain conditions are met, the company may be entitled to the following incentives:
- Reduction of the base for income tax by 70%;
- Reduction of the base for contributions by 70%.
3.3. Research and Development Incentives
Tax incentives for research and development are particularly appealing to IT companies due to the nature of their operations. These incentives pertain to tax exemptions provided for research and development activities.
Entities registered in the Republic of Serbia engaged in research and development projects within the territory of Serbia can laverage these incentives. These incentives apply to the salaries of employees engaged in research and development activities.
The benefits of these incentives are related to income tax and contributions. Companies using them may be exempt from paying a portion of income tax and contributions for:
- 70% of income tax,
- 100% of contributions for pension and disability insurance.
3.4. Tax Benefits for Innovative Startups
Newly established companies conducting innovative activities within the territory of the Republic of Serbia as their predominant activity are considered innovative startups (inventing new products, processes, technologies, services, or significant modifications of existing ones).
The founders employed in that legal entity can obtain tax benefits for innovative startups.
If the founder establishes an employment relationship within the legal entity, they will be eligible for income tax and contributions tax exemption.
In this case, they will not be obliged to pay taxes and contributions for salaries paid within three years from the date of establishment.
To qualify for these benefits, one of the conditions is the salary amount – tax exemption is applicable for founder’s salaries up to 150,000.00 dinars.
3.5. Tax Benefit IP Box
The tax benefit IP Box refers to a reduction in the corporate income tax. Under this incentive, if certain conditions are met, a legal entity can be exempt from paying corporate income tax on 80% of the revenue generated.
This benefit is available to startups with copyright or related rights and generates income by licensing their deposited intellectual property (copyrighted or related rights work).
This incentive particularly appeals to IT companies, given their intellectual property, such as software, applications, patents, and similar assets.
4. Simple Procedure for Work and Residence Permits for Foreigners
The process of obtaining residence and work permits and the procedure for employing foreigners in the Republic of Serbia has been significantly simplified.
A fast administrative procedure, implementation of temporary residence and work permit acquisition processes, and electronic application submissions greatly expedite the process of employing foreigners.
5. IT Companies and Entry into the VAT System
VAT registration is optional because there is a limit for entering the VAT system. The threshold is 8,000,000 dinars for turnover in the last 365 days.
For this reason, after establishing an IT company, it is necessary to assess future business on an annual basis. For turnover less than eight million, the company is not obligated to become a value-added tax (VAT) payer.
If the limit is exceeded, the IT company is obliged to register in the VAT system.
In the Republic of Serbia, there are two VAT rates:
- General tax rate – 20%,
- Special tax rate – 10%.
6. Headquarters Address and Virtual Office
Relocating or registering a company at a virtual office address in Serbia makes remote work easier for companies, as there is no requirement for physical presence in a business space.
Establishing an IT company in Serbia with a virtual office headquarters is convenient for both domestic IT companies (offering intellectual services, remote work, startups, and all firms providing online services) and foreign companies.
The Obligation of Issuing and Receiving E-Invoices for IT Companies
The digitalization of businesses is accelerating and simplifying operations in Serbia, particularly concerning using the e-invoice system (sending, receiving, and storing electronic invoices).
Under the Law on Electronic Invoicing, the obligation to manage electronic invoices through the National E-Invoice Registry (SEF) applies to:
- Public sector (budget users, state-owned enterprises),
- Private sector companies subject to value-added tax,
- Tax representatives of foreign entities, and
- Voluntary users of SEF (companies not mandated to use SEF but have voluntarily opted for it).
Legal entities and entrepreneurs not registered for VAT, engaging in transactions with the public sector, must register in SEF as voluntary users.
7. Competitive Tax and Contribution Rates in Serbia
The tax system in Serbia is highly favorable compared to other EU countries; tax rates, social contributions, and income taxes classify it among the more advantageous states in Europe.
This further positions Serbia as an attractive destination for new foreign investments, fostering the development of the private sector and creating future employment opportunities.
When calculating income, social contribution rates are competitive compared to neighboring countries:
- 14% for pension and disability insurance,
- 15% for health insurance, and
- 75% for unemployment insurance.
HLB T&M Consulting, an agency specializing in accounting services, provides comprehensive services related to payroll services, application of tax benefits for employing foreigners, tax consultancy, and other services related to establishing an IT company in Serbia. Contact us for more information.
