PayPal in Serbia: A Guide to the Legal and Compliance Framework

PayPal is one of the most widely used ways to send and receive money over the internet globally — but in Serbia, its use is governed by a specific legal framework that many users don’t fully understand. For individuals, freelancers, and business owners, knowing what’s allowed and what isn’t is essential to avoid potential issues with the Tax Administration and the National Bank of Serbia (NBS).

This guide explains how PayPal functions within Serbian legislation, who is allowed to use it, for which purposes, and what’s at risk if it’s used outside the permitted framework.

Table of contents:

The legal framework: Foreign Exchange Law and electronic money

The primary legal instrument regulating the use of electronic payment services in Serbia is the Law on Foreign Exchange Operations (Zakon o deviznom poslovanju). While the law doesn’t mention PayPal directly, it sets the framework for all electronic payment services that involve cross-border transactions.

Unlike banks, PayPal falls into the category of an electronic money institution. For a company to provide electronic money services in Serbia in a way that includes transactions between residents, it must be licensed by the National Bank of Serbia (NBS).

PayPal is not registered as a domestic electronic money institution in Serbia. Its legal seat is abroad, and it’s from that fact that the rules governing what residents — both individuals and companies — can and can’t do through its service arise.

What individuals are allowed to do

Individuals in Serbia may use PayPal exclusively for cross-border transactions — that is, for sending and receiving money between themselves and parties located outside Serbia.

In practice, this means:

• A resident can receive money from a foreign party — for example, for freelance services, sales of digital content, or donations from abroad
• A resident can send money to a foreign party — for example, to purchase goods or services abroad

What the law does not permit:

• Sending or receiving money via PayPal between two residents in Serbia
• Using PayPal as a domestic payment method between parties located in the same country

This restriction is often overlooked, particularly for reciprocal payments between freelancers and domestic clients who assume PayPal is simply “another payment method.”

What companies are allowed to do

The rules are similar for companies, but with additional obligations that go beyond the Foreign Exchange Law itself. Businesses registered in Serbia may use PayPal only for cross-border transactions — meaning collections from foreign customers or payments to foreign suppliers.

Unlike individuals, every legal entity that receives or sends money via PayPal has accounting and tax obligations that must be met:

• Funds received via PayPal must be recorded in accordance with the Serbian Accounting Law
• VAT treatment for digital services sold abroad has specific rules that depend on the customer’s status and the type of service
• Revenue is recognised in the tax period in which it is actually received — either into the PayPal account or transferred to the company’s operating account

Companies that use PayPal without proper accounting treatment and correct VAT handling expose themselves to the risk of a Tax Administration inspection, and in practice this is one of the more common triggers for further review.

→ For a wider overview of accounting for foreign-owned Serbian entities, see our accounting services page.

Domestic electronic money institutions

Over recent years, licensed domestic electronic money institutions have started to appear in Serbia. Their existence makes it possible to carry out electronic payments between residents of Serbia without breaching the Foreign Exchange Law.

The current register of licensed institutions is available on the National Bank of Serbia’s website. For companies considering the introduction of online payments in their business model, checking the NBS register and consulting with an accounting firm are recommended first steps before implementing any solution.

How PayPal works in practice

For users in Serbia, opening a PayPal account is technically straightforward — an email address and a linked payment card are required. PayPal doesn’t operate in Serbian dinars; it uses foreign currencies, and each transaction is converted into the account currency at the exchange rate PayPal sets.

Fees are made up of a percentage-based component and a fixed component, and vary by transaction type and currency. Current fee amounts change periodically, and are best confirmed directly on PayPal’s website before you rely on any specific figure.

From a security perspective, PayPal uses standard encryption and data protection mechanisms common to major international payment services. For users, this is one of the reasons for its popularity — a sense of security when buying from unknown sellers.

What Tax Administration control looks like

The Tax Administration actively monitors transactions that flow through electronic payment services, particularly cross-border money movements. Unreported income — even small amounts — can lead to:

• Additional tax assessments with interest for unreported receipts
• Penalties for failure to file or for incorrect filings
• In more serious cases — criminal liability for tax evasion

For companies, the risk is particularly high because the Tax Administration reviews the alignment of all financial flows with accounting documentation. When the books contain no trace of a PayPal transaction that is clearly visible from other sources — such as bank records or PayPal reports the Tax Administration can request — the burden of explanation falls on the taxpayer.

What this means for your business

If your company uses or plans to use PayPal (or similar services) as part of its operations, it’s essential to:

1. Understand which transactions qualify as cross-border and are therefore permitted, and which are not
2. Record all incoming and outgoing PayPal transactions in your accounting books promptly and correctly
3. Comply with VAT rules for digital services, where applicable to your business
4. Consult a specialist before launching a web shop, subscription model, or any billing model that involves PayPal or similar services

If you work as a freelancer or entrepreneur, the same principles apply — reporting all incoming payments from abroad in line with current regulations is not optional, regardless of the amount.

Talk to us

If you’re not sure whether your current use of PayPal — or similar payment services — fits within the Serbian legal framework, or if you’re preparing a business model that involves online payments, HLB TM can help you align your practice with the applicable rules.