Expanding Your Business to Serbia: A Legal and Strategic Guide for 2024–2025

The Serbian business environment has undergone a fundamental transformation in recent years, becoming an attractive destination for Czech companies seeking expansion. This article analyzes the legislative framework, the tax system, and labor market dynamics that are essential to understand before entering the market in 2024 and 2025. Our Prague-based legal team focuses on practical steps for establishing a branch, digital registration, and the specific nuances of trading in the region under local and international regulations.

Quick Market Overview

• Labor Market Transformation: Serbia is experiencing rapid digitalization with increasing demand for IT specialists and technicians, while interest in traditional administrative roles is declining. Unemployment has stabilized around 9%, but the shortage of skilled workers in highly specialized sectors presents a challenge for international investors.
• Strategic Investment Opportunities: International companies can benefit from a favorable tax regime (15% corporate income tax), access to EU markets, and the recently implemented Free Trade Agreement with China. Government incentives include tax holidays for large-scale investments and payroll tax relief for employing new categories of workers.
• Regulatory and Administrative Framework: Establishing a business requires knowledge of local registration procedures and labor regulations for foreigners. The process is increasingly digitalized, including mandatory electronic invoicing (SEF), yet contains specific nuances requiring expert guidance from a law firm in Prague with Balkan expertise.
• Geopolitical Context: Investors should consider Serbia's position between EU integration and economic ties outside the Union. It is necessary to monitor infrastructure initiatives and navigate trade regulations resulting from international agreements.

Serbia's Economic Position and Investment Climate

The Republic of Serbia occupies a strategically significant position at the crossroads of Central and Southeast Europe, which, according to the Development Agency of Serbia (RAS), offers advantages for investors seeking entry into emerging markets. The country is gradually strengthening ties with the European Union through the Stabilization and Association Agreement (SAA), which created a free trade zone. This institutional framework provides international businesses with a familiar environment, as Serbian legal norms are increasingly converging with EU requirements.

However, the investment climate presents a complex picture that businesses must carefully evaluate. Foreign direct investment shows resilience but remains subject to global economic fluctuations. While the manufacturing sector remains strong, there is a noticeable shift toward industrial sectors with higher added value.

Some multinational manufacturers reorganized their local operations in 2024–2025, signaling that the purely low-cost investment model is evolving into a more mature market.

Basic economic indicators remain positive, with GDP growing thanks to IT services, construction, and logistics. The business environment benefits from competitive operating costs compared to Central European standards, although wage pressures in technical fields are rising. For companies considering Serbia as a manufacturing hub, understanding these dynamics is crucial for setting realistic financial projections under Czech and international accounting standards.

Company Formation and Legal Entities

Entrepreneurs must first undergo a formal registration process, which has been significantly digitalized through the Business Registers Agency (Agencija za privredne registre – APR). The legal framework is governed by the Law on Business Companies, which defines entities such as the limited liability company (DOO), joint-stock company (AD), and partnerships.

For most international firms, the limited liability company (DOO) structure offers practical advantages. The registration process operates on a "one-stop-shop" principle, coordinating registration with the Statistical Office and the Tax Administration in a single filing.

Applicants are generally required to submit applications electronically via the APR digital portal using a qualified electronic signature. The statutory deadline for completing registration is five working days, although complex cases involving foreign founders may extend this period.

Founders must provide the company name and registered office, primary activity code, details of owners and their shares, the amount of share capital, and details of the directors. Foreign applicants face additional requirements, such as verification of legal status in their home country (e.g., an extract from the Czech Commercial Register) and the submission of apostilled documents.

A critical administrative step is obtaining a Tax Identification Number (PIB), which the tax authority assigns simultaneously with the company registration. The company must also register with the Central Registry of Compulsory Social Insurance (CROSO) if it plans to hire employees.

Legal Framework and Harmonization of Regulations

Serbian commercial law has undergone substantial harmonization with EU standards. The Law on Business Companies mirrors EU provisions regarding corporate governance and shareholder rights. However, investors must note that harmonization does not mean an identical legal regime, and procedural deadlines or interpretations may differ from those in the Czech Republic.

An important distinction is the mandatory registration of ultimate beneficial owners. Serbian law requires the identification and registration of natural persons who effectively control the company in the Central Records of Beneficial Owners. Failure to comply with this obligation, introduced to combat money laundering, can lead to high financial penalties and criminal liability.

Frequently Asked Questions – Registration and Legal Structure

1. Which legal form should our firm choose for operations in Serbia?
A limited liability company (DOO) is the most common choice for foreign investors as it offers limited liability, a flexible ownership structure, and straightforward legal procedures.

2. How long does company registration take and what are the costs?
Registration standardly takes five working days. The administrative fee for establishing a DOO is approximately 6,500 RSD (approx. 55 EUR) for paper filings, or 5,900 RSD (approx. 50 EUR) for electronic filings. However, total setup costs (including legal services, translations, and apostilles) typically range in the tens of thousands of CZK.

3. Do we need a physical office in Serbia or can we use a virtual address?
A virtual address is permissible for registration purposes, but the company must ensure it can receive mail. For VAT registration purposes, the tax authority may require proof of a real registered office and actual business activity (so-called "substance").

Tax System and Fiscal Obligations

The Serbian tax system presents both an opportunity and an administrative burden for international companies. The corporate income tax (CIT) rate of 15% is favorable compared to the current rate in the Czech Republic. However, this rate is applied to a tax base adjusted for non-taxable expenses, and transfer pricing rules are strictly enforced.

Basic tax liability applies to resident legal entities, i.e., companies incorporated in Serbia or managed from Serbian territory. A Czech company with a Serbian subsidiary pays tax only on the profits of that subsidiary, while a branch office is taxable in Serbia on profits attributable to that branch under Serbian tax law.

Tax Incentives and Conditional Benefits

The Serbian government actively supports foreign investment through a system of tax relief. The most significant incentive is a ten-year tax holiday for investors who invest at least one billion dinars (approx. EUR 8.5 million) and create at least 100 permanent jobs. This incentive, managed by the Development Agency of Serbia, requires an application to be submitted before the investment begins.

Additional benefits relate to research and development (R&D). Companies conducting research in Serbia can apply a deduction of double the actual R&D costs, effectively reducing the tax base. Furthermore, the "IP Box" regime allows for preferential taxation of income from intellectual property registered in Serbia at an effective rate of 3%.

Employment-related incentives provide relief on taxes and social security contributions when hiring specific categories of workers, such as the long-term unemployed or qualified returnees from abroad.

VAT and Procedural Complexities

The Value Added Tax (VAT) system operates on principles aligned with EU standards. The standard VAT rate is 20%, while a reduced rate of 10% applies to basic foodstuffs and services. VAT registration is mandatory when turnover exceeds eight million dinars over the last 12 months.

The VAT refund process is crucial for foreign investors. Although regulations set a refund deadline of 45 days (15 days for exporters), delays can occur in practice. The tax authority often uses refund requests as a trigger to initiate a partial tax audit.

Since 2023, Serbia has fully implemented a mandatory electronic invoicing system (SEF). All transactions between businesses (B2B) and with the state (B2G) must be reported in real-time; therefore, integrating accounting software with this system is essential.

Related Inquiries – Tax Obligations and Tax Incentives

1. What tax obligations does a Czech branch or subsidiary have in Serbia?
A branch of a Czech company is considered a tax resident and must file tax returns for income attributable to that branch. The corporate structure (branch vs. subsidiary) has significant tax implications, including withholding tax issues during profit repatriation.

2. How can income tax deductions for research and development be obtained?
Qualified R&D expenditures can be claimed at double the amount in the tax return. However, clear project documentation, separate cost accounting, and compliance with the legal definition of R&D under Serbian legislation are required.

3. How long does a VAT refund take and what documents are necessary?
The statutory period is 45 days (15 days for predominant exporters). In practice, the period may be extended by the duration of a tax audit if the authority initiates one. Flawless records in the SEF system are a prerequisite.

Who can you contact?

JUDr. Jakub Dohnal, Ph.D., LL.M.

associate, managing partner

• dohnal@arws.cz

Mgr. Vojtěch Sucharda

associate, partner

• sucharda@arws.cz

Employment Law and Hiring Foreigners

The labor market in Serbia is undergoing a transformation. While general unemployment has fallen, the country faces a shortage of skilled labor in IT and engineering. For Czech companies, understanding the requirements of Serbian employment law is vital.

The employment of foreigners (including Czech citizens) is subject to the Law on Employment of Foreigners. The standard is now a unified residence and work permit, issued by the Ministry of Interior in cooperation with the National Employment Service.

The basic principle is the "labor market test," through which the employer proves that no Serbian citizen is available for the position. This test is conducted by the National Employment Service and takes approximately 10 days. Exceptions exist for executive directors registered in the APR or for seconded employees under specific conditions.

While labor costs are lower than in the Czech Republic, they are rising. The minimum wage for the 2024/2025 period is around 53,000 RSD net (approx. 450 EUR), but market wages for skilled workers are significantly higher.

The total tax burden on the employer, including income tax and social security contributions, represents approximately 60–65% of the net wage.

Trade Agreements and Market Access

The cornerstone of the Serbian trade regime is the Stabilization and Association Agreement (SAA) with the European Union. Industrial products originating in Serbia can be exported to EU countries duty-free, making Serbia an advantageous production base for supplying the European market.

A significant development is the Free Trade Agreement between Serbia and China, which entered into force in July 2024. This agreement allows for the duty-free export of a wide range of Serbian products to China and vice versa. For Czech companies, this opens a unique gateway to the Chinese market or the possibility of importing components for production in Serbia.

Serbia is also a member of CEFTA, which ensures duty-free trade with neighboring countries such as Bosnia and Herzegovina or Montenegro. This membership facilitates regional supply chains and logistics within the Western Balkans.

Related Inquiries – Trade Access and Goods Classification

1. What customs duties apply to products manufactured in Serbia and exported to the EU?
Products meeting the rules of preferential origin (usually requiring sufficient processing or a certain share of local added value) are exported to the EU with 0% duty.

2. How does the CEFTA system help in the region?
CEFTA allows for the duty-free movement of goods within the Western Balkans region, which is key for logistics and distribution.

3. What documents must be attached to the customs declaration for export to the EU?
The key document is the certificate of origin (EUR.1) or an invoice declaration (for approved exporters or shipments up to EUR 6,000), proving compliance with the rules of origin.

Intellectual Property Protection and Competition Law

Serbia has gradually harmonized its intellectual property laws with EU standards. Rights are managed by the Intellectual Property Office. Trademarks are created by registration, and Czech investors should extend their international trademarks to Serbia via the Madrid System.

The Law on Protection of Competition prohibits cartels and the abuse of a dominant position. Czech investors acquiring Serbian companies must check whether the thresholds for mandatory merger notification are met, as penalties for non-compliance can reach up to 10% of annual turnover.

Market Entry Strategy and Timeline

Successful investors focus on higher value-added production or services for export. Czech entrepreneurs should view Serbia not as a destination for cheap labor, but as a location with a competitive, skilled workforce.

Market entry can be divided into three phases:

• Phase 1 (Weeks 1–4): Market research and identification of licensing requirements (e.g., construction or energy permits).
• Phase 2 (Weeks 4–8): Entity formation, preparation of apostilled documents from the Czech Republic, and opening bank accounts, which are subject to strict "Know Your Customer" checks.
• Phase 3 (Weeks 8–16): Registration of ultimate beneficial owners, setting up the e-invoicing system (SEF), and processing work permits for Czech personnel.

Conclusion

Establishing business operations in Serbia represents a real opportunity for Czech companies in terms of nearshoring and expansion into new markets. The legal and regulatory framework is largely harmonized with EU standards; however, administrative complexities and specific tax rules require careful preparation.

Czech companies must develop realistic strategies based on genuine competitive advantages. The regulatory environment, although undergoing digitalization, contains procedures that differ from Czech practices, requiring a professional approach.

ARROWS law firm in Prague has extensive experience in assisting Czech companies with entry into the Serbian market. Whether you are considering market entry, negotiating a partnership, or addressing regulatory compliance, we are ready to discuss your specific situation at office@arws.cz.

FAQ – Most Frequent Legal Questions Regarding Czech Businesses in Serbia

1. What is the most common reason for complications for Czech companies in Serbia?
Underestimating administrative processes and specific local regulations (e.g., ultimate beneficial owner registration, foreign exchange law rules, transfer pricing). Companies that prepare with professional assistance show significantly better stability. If you are facing a similar issue, contact us at office@arws.cz.

2. How long does it take and how much does it cost to register a Czech company in Serbia?
Registration with the APR standardly takes five working days. The fee for electronic incorporation of a limited liability company (DOO) is approximately 5,900 RSD (approx. 50 EUR). However, it is necessary to account for costs related to translations, notarization of documents, and legal services, which are essential for a flawless process.

3. Can I operate in Serbia through a Czech company without creating a local entity?
Only to a very limited extent. If you perform continuous activity in Serbia, you create a "permanent establishment" for tax purposes, which carries the obligation of registration and paying taxes. It is often more transparent and secure to establish a subsidiary.

4. How can I protect myself against problematic business partners in Serbia?
Thorough due diligence in the commercial register and the register of debtors (NBS) is essential. High-quality contracts and security instruments (promissory notes, bank guarantees), which are common and effective in Serbian commercial relations, are a necessity.

5. What are the options for resolving tax disputes in Serbia?
Tax disputes are first resolved by an appeal within the tax administration and subsequently by a lawsuit at the Administrative Court. Our Czech legal team at ARROWS has experience representing clients in these proceedings. If you are dealing with a similar problem, contact us at office@arws.cz.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we ensure maximum accuracy of the content, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS law firm in Prague directly (office@arws.cz).

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