The Republic of Serbia is an attractive destination for establishing companies both when the founders are residents and when they are non-residents, i.e. foreigners as company founders. The main challenge they face is financing their business from abroad.
When we say financing of a company’s operations from abroad, it refers to the provision of financial support by a non-resident, whether it is a natural or legal person.
The issue of foreign financing can play an extremely important role in the development of companies that are established to operate in Serbia. For example due to the expansion of business, for research purposes, then for investments in new technologies or development of new products/services, for the sake of expansion or introduction of new markets, then for optimization of business or costs and the like.
That is why it is important to understand well who can provide financial support to companies that are registered to conduct their business in Serbia. More specifically, it should be clarified who can finance the operations of companies from abroad, while ensuring compliance with the key laws that define this issue.
The two laws that must be complied with and whose regulations must be respected are:
- Law on Foreign Exchange Operations and
- Law on Business Companies.
The issue of financial support is important for several reasons, and below are more detailed explanations and information regarding the mentioned topic:
- in what way can business operations in Serbia be financed from abroad;
- who finances business operations from abroad (foreign natural persons or foreign legal entities).
Ways of financing business operations of companies in Serbia from abroad?
Legal entities registered to perform activities in the Republic of Serbia can be financed in several ways. When it comes to non-resident founders (foreigners), the most common are:
- financing of operations from abroad through additional payments by non-residents, which does not increase the basic capital of the company;
- financing of the company’s operations from abroad through an increase in the basic capital
- financial credit or loan from abroad as a form of business financing;
- financing business from abroad through loans from non-resident founders.
Business financing through additional payments by non-residents that do not increase the basic capital of the company
The financing of business operations of companies from abroad through additional non-residents who do not increase the basic capital of that company is defined by the Law on Business Companies. Non-residents are foreign founders or members of legal entities in Serbia who have the possibility to make additional or supplementary payments to the founders and members of the company, so that there is no increase in the basic capital of the company.
In accordance with the mentioned law, additional payments do not increase the basic capital of the company and they can only be in cash. This practically means that non-residents who are members or founders of a company operating in Serbia can pay a certain amount of money to that company, and in this way there will be no increase in the basic capital.
This is one of the ways to finance the business of a legal entity by a non-resident. In addition to the payment of the registered basic capital of the company (at least 100 dinars for LLC, Serbian DOO), non-resident founders or members of the company, when they make additional or supplementary payments, actually finance the company’s operations in that way.
The obligation for additional payments that do not increase the basic capital is defined by the founding act or the decision of the assembly. It is determined either in proportion to the share of the founder/member in the company or the exact amount of additional payments is determined. The articles of incorporation or the decision of the assembly after the establishment of the company can determine the deadlines for returning additional payments.
We wrote about this topic in detail – additional payments by the founders that do not increase the basic capital of the company.
Financing business from abroad and increasing the basic capital
Financing of companies from abroad can also be done through an increase in the basic capital of a legal entity by a non-resident, as a natural person. In that case, the non-resident is a member of that company.
The company’s basic capital can be increased in the following way:
- through the roles of non-residents (meaning a non-resident who is a natural person);
- through conversion of claims of non-residents into basic capital.
Loan conversion refers to claims that a non-resident has against a company, as a resident legal entity, which are converted into a share of the company’s share capital.
Business financing through foreign loans
Businesses registered to perform activities in Serbia can also finance their operations through foreign loans (loans), in accordance with the Law on Foreign Exchange Operations. Financial loans obtained from abroad can be used for:
- payment of import of goods and services,
- financing for the execution of investment works abroad that residents conclude within the scope of their activities,
- for repayment of previously used loans from abroad (refinancing).
As you can see, it is a type of loan. For other purposes, financial loans from abroad for business financing can only be used under the conditions defined by the National Bank of Serbia.
Who can finance business from abroad as a non-resident
A company can finance its operations in Serbia through a financial loan from abroad or a loan from a non-resident. A non-resident can be a legal entity, but he can also borrow from a non-resident who is a natural person. It may or may not be a member of that society.
The method and conditions of using financial loans from abroad are defined by the Decision on the method of using financial loans from abroad. In accordance with the decision, non-residents who can provide a loan from abroad (financial credit or loan) are:
- banks,
- foreign legal and natural persons,
- branches of foreign legal entities from non-resident founders.
A non-resident loan as a way of financing business from abroad
A foreign founder or member of an LLC, whether a legal entity or a natural person as a non-resident, can help a company registered in the Republic of Serbia through a loan. In order for this financial transaction to be legitimate, it is necessary to observe all the provisions and prescribed conditions of the Law on Foreign Exchange Operations.
The accounting agency HLB TM Belgrade provides comprehensive services regarding the registration of an LLC in Serbia, including the preparation of the articles of incorporation, as well as all related activities related to the business operations of companies in the Republic of Serbia. For professional support, as well as any additional questions or information, please feel free to contact us.
