Company formation in Serbia – 18 most important questions

Almost inevitably, many questions arise when founding a company. This problem is faced by both domestic investors and foreign companies that want to establish a company in Serbia. Practice has shown that the whole process of set up of a company can be significantly accelerated if you have a ready answer to each possible “What if” situation.

1. What is the best legal form of company?

The basic legal forms of companies in Serbia according to the Law of companies can be:

1. Limited Liability Company
2. Branch office
3. Partnership
4. Limited partnership
5. Joint Stock Company

A limited liability company is the most common option chosen when founding a company, since it best suits different types of activities and business in Serbia.

2. Business name of the company – all the rules that needs to be followed

When selecting a business name in the process of company formation, certain legal rules and technical instructions for choosing a company name in Serbia must be followed in order for the registration application to be accepted. The founder of a company has the freedom to choose a name for his company, but possibilities are limited by the right to use someone else’s personal name, as well as the characteristics of political and geographical territories. The business name of the company consists of the name, legal form and location of the headquarters.

The most important thing that must be respected is that the name of your company must not be the same as the name of another company. It must be different from the name of another company, so as not to mislead the identity with that company.

The legal form is indicated in the business name as follows:

1. Partnership – “o.d” or “od”
2. Limited partnership – “k.d” or “kd”
3. Limited liability company – “d.o.o.” or “doo”
4. Joint stock company – “ad” or “ad”

The Business Registers Agency will not allow the registration of a company if there are any restrictions regarding the business name.

3. How much shareholding capital is required to start a business?

Shareholding capital in a limited liability company can be monetary or non-monetary. When it comes to cash contributions when founding a company, the minimum amount needed to establish a limited liability company is 100 dinars. The law can also define higher amounts for certain activities. This is the minimum amount of share capital that must be subscribed (but not paid) for the process of founding a company, while specific investments in equipment, infrastructure, materials will depend on the business you are engaged in.

Contributions in the company must always be expressed in dinars. The payment of capital can be made in foreign currency, in accordance with the law governing foreign exchange operations, but the dinar equivalent of deposits must be calculated at the middle exchange rate of the National Bank of Serbia on the day of deposit payment.

4. Which costs will you incur if you decide to start a business?

To start a business, you must register a company. Registration is done with the Private Registry Agency with the payment of appropriate fees. The fee for the registration of the establishment of a company is 4,900 dinars (40 euros), the fee for the establishment of single and multi-member companies electronically is 4,500 dinars. The fee for establishing a branch or representative office of a foreign legal entity is also RSD 4,900 (EUR 40). All information related to fees can be found on the website of the Agency for the Registry.

4.1 Documentation necessary for the establishment of a company

1. Founding act of the company with certified signatures of the members of the company
2. Proof of identity of the members of the company – a photocopy of the identity card or passport of a natural person and / or an excerpt from the register in which the company is registered.
3. Decision on the appointment of a representative, if not determined by the founding act
4. Signature of the representative certified by the competent authority
5. Bank confirmation on the payment of the cash deposit, ie the agreement of the members on the assessment of the non-cash deposit

5. Is there a difference between a director and a company founder?

A member of a company or the founder of a company is a person who founds the company or later joins it as a founder and shareholder. A member is the owner of a share in the company in a certain percentage, on the basis of which he exercises management rights in the company. All members of the company form the company’s assembly, the assembly decides on the most important issues of the company, such as: adoption of financial statements, deciding on increasing and decreasing share capital, appointing directors, deciding on a member’s request to withdraw from the company, deciding on status changes, etc.

The company has one or more directors who are the legal representatives of the company. The number of directors is defined by the founding act or the decision of the company’s assembly. Specifically, some of the actions for which the director is responsible are concluding contracts with third parties, concluding employment contracts with employees, negotiating with business partners… Also, with the stated powers that the director has, comes his responsibility for the company’s operations. The director is responsible for the proper keeping of business books and the accuracy of financial statements. Therefore, the director is the most responsible person in the company for business operation.

6. Can the founder be the director of the company at the same time?

There are no legal restrictions on being both a founder and a director of a company. Very often this is a situation in practice. Of course, there are many advantages and disadvantages to being a director at the same time. The issue of appointing director is one of the most important items for any company. Apart from the decision to establish a company, this is certainly the second most important item. One person can even be a director in several companies, because there are no limits for this positions. The only advice is to regulate the non-compete clauses in all contracts in the right way. Namely, the contract may provide for a non-compete clause, which stipulates that, without the consent of the employer, the employee may not perform specific tasks in his own name and for his own account, or in the name or on behalf of another natural or legal person. This clause can be agreed with the effect during the employment relationship (for example, a programmer cannot work as a freelancer after working hours), but also with the effect after the termination of the employment relationship.

6.1 Company in which the founder and director is a foreign person

In recent years, Serbia has become an attractive area for establishing companies in many areas. Numerous tax reliefs through the change of tax laws affect the establishment of companies dealing with innovation, IT sector, development of artificial intelligence and the other similar activities. The founders of such companies are mostly foreign nationals and, in most cases, they are also directors.

Hiring a non-resident director brings with it the obligation to take care of his status in the Republic of Serbia in connection with temporary residence and work permit. As a foreigner, a person engaged in the position of director has the right to submit a request for temporary residence. Every foreigner who wants to establish an employment relationship in Serbia, after acquiring a temporary residence, must obtain a work permit. The applicant for a work permit for foreigners is an employer. This therefore also applies to the director who establishes the employment relationship.

7. Do I have to be employed by a company if I am a director?

The answer to this question is that you don’t have to. Regarding the form of engagement, the Labor Law provides for two types of contracts that can be concluded with the director. One of them is a standard employment contract, on the basis of which the director enters into an employment relationship, while the other form of engagement is the work of the director outside the employment relationship, and on the basis of a contract on the rights and obligations of the director.

8. Is it possible to establish a company in Serbia that will have a virtual address?

A virtual office is a business concept that does not bind legal entities and companies to a business space and a specific place of residence. This model allows companies to have their registered address (headquarter), while doing business from anywhere. The concept of virtual address in Serbia proved to be especially effective during the COVID-19 pandemic, when working from home, working over the Internet and other similar business options. Of course, this concept will not always be suitable for all companies, but in most cases where modern IT activities occur, a virtual office is the right choice.

9. Is physical presence necessary when establishing a company in Serbia?

It is not necessary. If you enclose the appropriate documentation required by the local authorities, authorize a proxy in Serbia with a power of attorney to act on your behalf and for your account, you can open a company and a bank account for your company without coming to Serbia.

10. How to secure an electronic signature in Serbia?

In order for the local authorities to accept an electronic certificate for all further operations, it must be issued by one of the certified bodies in the Republic of Serbia. Certification bodies in the Republic of Serbia are:

1. Public company “Post of Serbia”;
2. Serbian Chamber of Commerce;
3. MUP (Ministry of police) of the Republic of Serbia;
4. Halcom a.d. Belgrade;
5. E-Smart Systems d.o.o.

11. How long does it take to set up a company in Serbia?

From the moment of submitting the registration application to the Business Registers Agency, the company will be established in 5 working days. That is how long the procedure of deciding the Agency for Business Registers is whether to accept or reject the application.

12. In which cases is an apostille required on documents?

In order for a document from your country to be suitable for international use, and thus for use in Serbia, depending on the country you come from, the document must:

• to go through the so-called procedure of full legalization or
• have an apostille on the document or
• no apostille is required.

Which obligation will exist in each case, depends on whether the country from which the document originates is a signatory to the Hague Convention on the elimination of the need for legalization of Foreign Public Documents. Serbia has signed a bilateral agreement on mutual exemption of public documents from legalization (in some cases, only some categories of public documents are exempt from legalization). Countries with which Serbia has concluded a bilateral agreement on mutual release of public documents from legalization are: Algeria, Austria, Belgium, Belarus, Bosnia and Herzegovina, Bulgaria, Czech Republic, Slovakia, France, Greece, Croatia, Italy, Iraq, Cyprus, Hungary, Northern Macedonia, Poland, Romania, the Russian Federation, Montenegro, Ukraine and Slovenia.

13. Do companies in Serbia have to use the seal?

In the process of registration, the company may or may not opt ​​for the option of using the seal. State bodies, organizations, courts and other legal entities cannot point out objections if the company does not use the seal when concluding legal transactions.

The practice is often different, and companies often face the problem of requiring a seal. One gets the impression that the application of this provision of the law has not fully come to total acceptance, so our advice is to choose the option of using the seal, at least for some time in starting period of business.

14. How to get tax relief when opening a company in Serbia?

In order to attract our citizens who studied abroad, and whose professional staff is needed on the domestic market, the Republic of Serbia has provided a large number of tax reliefs and exemptions from contributions for compulsory social insurance.

Thus, for example, if a newly settled taxpayer concludes an employment contract for an indefinite period of time, the taxes and contributions of that employee are calculated on a basis that is reduced by as much as 70%. The condition for that is that the salary of the newly settled taxpayer, who did not mostly stay in Serbia for at least 24 months before starting work, is at least EUR 1600 NET, and the salary of the newly settled taxpayer, who spent the last 12 months studying or training abroad and is younger than 40 year, minimum 145,107 RSD (gross 1). These amounts will certainly be adjusted from year to year.

Simultaneously with the conclusion of the contract, the newly settled taxpayer must settle in the Republic of Serbia and be considered its taxpayer in terms of the laws of the Republic of Serbia, and having in mind the agreements on avoidance of double taxation (these conditions are checked for each country individually). All these benefits are applied during the first 5 years of his employment, regardless of the change of employer. That is, in the event of a change of employer, the employee “carries with him” this relief.

A special advantage in terms of tax relief appears with innovative startup companies, which are being established in Serbia.

15. Does the company have to register for VAT?

If you have a total annual turnover of up to 8,000,000 RSD, you are not obliged to register as a VAT payer. If you are not a VAT payer, you do not calculate VAT for goods and services, you do not have the right to show VAT in invoices, you do not have the right to deduct previous VAT, nor are you obliged to keep records prescribed by the VAT Law. Of course, even when you have a total annual turnover of up to 8,000,000 RSD, you can choose to be a VAT payer. Also, the supply of goods and services can be exempted from the obligation to pay VAT on certain items, which is a benefit that many are happy to use if they are VAT payers.

16. Can I get residency in Serbia if I set up a company?

You can apply for a temporary residence permit in Serbia both as a founder and as a director. If you apply as a director, there is no restriction due to the type of contract (whether you are a director with or without employment).

Depending on the basis on which you decide to apply for a temporary stay in Serbia, it also depends on the documentation required by the Police Administration and, of course, the National Employment Service in the event of a later application for a work permit.

17. Establishment of a company and lease of business premises

If you cannot provide your own premises, the lease of business premises is an important item that you must take into account. Taxes can be a significant expense associated with renting real estate.

The type and amount of tax are determined by factors such as e.g. whether the lessor is a natural or legal person and whether it is in the VAT system. Finally, a specific situation is the case when the lessor is not in the VAT system. In any case, in order to be able to determine which tax is relevant for a specific lease, it is necessary to first determine from whom you are renting business premises.

If VAT applied, the general rate of 20% will be added; if, for example, it is a lease from a natural person who is not a VAT payer, the corresponding tax is the tax on real estate income in the amount of 20%. Finally, in the case where the rent is treated as income of a legal entity that is not in the VAT system, regular corporate income tax is paid, with the corporate income tax rate being 15%.

When VAT is applied, the general VAT rate for taxable turnover of goods and services is 20%

18. Do I need bookkeeping services after starting a business?

If you are starting a business in Serbia or you want to improve your business, choosing a bookkeeping firm is a very important factor. Before choosing an accounting company, estimate what services you will need. Of course, in most cases, every company will need:

• Preparation of basic bookkeeping records, keeping business books in accordance with the provisions of the Law on Accounting and Auditing and records of all financial transactions and accounts,
• Collection and posting of all business documentation on a monthly basis and control of the correctness of documentation,
• Processing of accounting documentation and preparation of financial and tax statements required for the reporting package,
• Posting daily transactions in accordance with the accounting principles and regulations of the Law on Foreign Exchange Operations, International Accounting and Financial Standards and in accordance with IAS / IFRS,
• Reconciliation of monthly, quarterly and annual balance sheets (bank statements, received and issued invoices and all other relevant reports),
• Keeping a register of fixed assets, records of financial accounting and possibly commodity accounting,
• Updating and keeping personnel records, calculating salaries, salary compensations and submitting tax returns for regular taxes and employee contributions.

Bookkeeping firm HLB Consulting provides its clients with high quality bookkeeping services and cooperates with a large number of domestic and foreign clients. HLB Consulting provides accounting and financial consulting services, payroll services, business and legal consulting. We cooperate with small, medium and large companies, as well as startups and international companies that do business in Serbia.