Frequently Asked Questions (FAQ)

What is the best bank in Serbia for companies with foreign ownership?

After we register you the company in Serbia, we will help you in choosing the best bank for your business in Serbia. If needed, we can help you to apply for bank account opening too. In order to help you with choosing the best bank for your business in Serbia, we need to have your order for company or entrepreneur registration in Serbia. You can make the order by choosing the service on next page.

Some banks open accounts fast, some have good currency exchange rates, some banks have bad exchange rate, some banks are denying foreigners a lot, some banks do not work with Americans, some banks do not work with Russians and similar. We have experience with all of these things and we offer you support in the best possible way regarding choosing bank in Serbia.

Do you provide bank account opening in Serbia for foreign firms (on example firm registered in UK)?

For opening bank account in Serbia for non-resident firms (firms registered in foreign country, in example UK, Russia and similar), banks will ask you to provide the contract with certain Serbian company in order to see real business connection with Serbia.

If you can provide such contract we can help you regarding opening bank account in Serbia for your non-resident firm.

If you can not provide such contract, we prefer not to accept the case, because bank will probably deny application.

We admit we are not guaranteeing that bank account will be opened and in case that bank denies bank account opening. We are only providing help in the process of application.

We admit that we can help you only to open foreign currency bank account. We can not help you to open dinars bank account for your non-resident firm, because in that case, your company would need to obtain Serbian Tax ID number and the procedure of getting Tax ID number for non-resident company is very complicated.

For fees for bank account opening for foreign companies, contact us on our email info@companyregistrationserbia.com

What is specific for company formation in Serbia for Indian citizens?

Indian citizens sometimes open a firm in Serbia in order to get a temporary residence permit, but it is not a good idea

In our practice, the most questions about company formation in Serbia comes from Indian citizens. For more than 10 years since we started providing company formation for non-residents, we did not see a single company with Indian citizen as owner who opened a company, got residence permit and work permit, and continued working with the company. In most cases, such companies simply be abandoned, financial statements never be delivered. You probably want to avoid it.

We admit we are not provoding services regarding temporary residence permit application.

In past we always suggested through the email that it is pretty hard that temporary residence permit will be approved, but sometimes Indian citizens insisted we to open them a firm or to use our virtual office, and then they tried to get temporary residence permit in Serbia with help of the firm or advocate who is providing such services. As we wrote above, we did not see a single successful case in 10 years, so if you want to try, our suggestion is to find someone from your country who had success in it.

If you still want to try, our warm advice is to register entrepreneur, because you can put it on hold if your plan later change because on example you do not get temporary residence permit. If you open LLC and later want to close it, it lasts 4 months minimum and costs a lot more than putting entrepreneur on hold.

Procedure of registration of the company in Serbia with Indian ownership

When speaking about opening a firm in Serbia for Indian citizens, the procedure of registration is the same as for citizens of every other country.

Taxation for company (LLC) in Serbia with Indian ownership

Social security payments

When speaking about taxation, it is important to know that Serbia and India do not have social security agreement signed, which means that if owner/director of Serbian firm is Indian citizen, then company in Serbia is obligated to pay social contributions in Serbia for its owner/director, which means cost for it will be at least around 80 EUR/month. It is in case owner/director is not employed in the company and it is lowest cost option in cases when Indian citizen is owner/director of the LLC in Serbia.

Dividend tax

India  and Serbia have signed agreement about avoidance of double taxation.

In that agreement, dividend tax rate is defined on next way:

1) 5 percent of the gross amount of dividends if the beneficial owner is a company (excluding a partnership) that directly has at least 25 percent of the capital of the company that pays dividends;

2) 15 percent of the gross amount of dividends in all other cases.

Bank account opening for Serbian company when Indian individual or legal entity is owner of the company

Bank account opening in general is a little bit harder for companies with foreign ownership than for companies with domestic ownership, but in practice there were no problems to open bank account when owner is from India.

Our firm helps clients in bank account opening procedures and has a lot of expirience with bank account opening for companies with Indian ownership in Serbia.

What is specific for company registration in Serbia for American (USA) citizens?

Procedure of registration of the company in Serbia with American (USA) ownership

When speaking about opening a firm in Serbia for USA citizens, the procedure of registration is the same as for citizens of every other country.

Taxation for company (LLC) in Serbia with American ownership

Social security payments

When speaking about taxation, it is important to know that Serbia and USA do not have social security agreement signed, which means that if owner/director of Serbian firm is American citizen, then company in Serbia is obligated to pay social contributions in Serbia for its owner/director, which means cost for it will be at least around 80 EUR/month. It is in case owner/director is not employed in the company and it is lowest cost option in cases when American citizen is owner/director of the LLC in Serbia.

Dividend tax

USA  and Serbia have not signed agreement about avoidance of double taxation.

If owner is individual from USA, dividend tax rate is 15% . If owner is firm from USA, dividend tax rate is 20%.

Bank account opening for Serbian company when American individual or legal entity is owner of the company

Bank account opening is a little harder than usual, and it is important to know banks market and apply in right bank, but there are no guarantees bank account opening application will be approved. In some banks there is no sense to apply, since some banks unofficially deny applications from citizens of certain country, or with certain business activities. Some banks do not work at all with American citizens, because of compressive reporting requests which they need to fulfil when having Americans as clients.

Our firm helps clients in bank account opening procedures and has a big expirience with bank account opening for companies with American ownership in Serbia.

Can I register a company with headquarter in any city in Serbia with your help or only with headquarter in Belgrade?

Yes, you can register a company with headquarter in any city in Serbia with our help.

When doing company registration, after company is registered in 15 days deadline, director of your firm must obtain digital signature. He can take it only personally and its a lot faster to do it in Belgrade than in other cities.

If you are doing registration in Belgrade, you can obtain digital signature in 1 hour, because there is only one digital signature provider in whole country which issues digital signature so fast, and they have office only in Belgrade. If you are making digital signature in another city, you will need to wait for 5 days or more to get your digital signature.

Beside companies in Belgrade, we have registered a lot of firms with headquarter in different Serbian cities, as on example in Bor, Čačak, Jagodina, Kikinda, Kragujevac, Kraljevo, Kruševac, Lazarevac, Leskovac, Loznica, Mladenovac, Niš, Novi Pazar, Novi Sad, Obrenovac, Pančevo, Pirot, Požarevac, Prokuplje, Šabac, Smederevo, Sombor, Sopot, Sremska Mitrovica, Subotica, Užice, Valjevo, Vranje, Vršac, Zaječar, Zrenjanin.

What is specific for company registration in Serbia for Chinese citizens?

Procedure of registration of the company in Serbia with Chinese ownership

When speaking about opening a firm in Serbia for Chinese citizens, the procedure of registration is the same as for citizens of every other country.

Taxation for company in Serbia with Chinese ownership

Social security payments

When speaking about taxation, it is important to know that Serbia and China have social security agreement signed, which means that if owner/director of Serbian firm is employed in China, he is not obligated to pay social contributions in Serbia.

Dividend tax

China  and Serbia have signed avoidance of double taxation agreement.

In that agreement, dividend tax is defined for cases when Chinese resident – individual or legal entity is owner of Serbian company.

Dividend tax rate in that case is 5%.

Bank account opening for Serbian company when Chinese individual or legal entity is owner of the company

Bank account opening in general is a little bit harder with foreign ownership than for companies with domestic ownership, but in practice there were no problems to open bank account when owner is from China.

Our firm helps clients in bank account opening procedures and has a lot of expirience with bank account opening for companies with Chinese ownership in Serbia.

What is specific for company registration in Serbia for Russian citizens?

Procedure of registration of the company in Serbia with Russian ownership

When speaking about opening a firm in Serbia for Russian citizens, the procedure of registration is the same as for citizens of every other country.

Taxation for company in Serbia with Russian ownership

Social security payments

When speaking about taxation, it is important to know that Serbia and Russia have social security agreement signed, which means that if owner/director of Serbian firm is employed in Russia, he is not obligated to pay social contributions in Serbia.

Dividend tax

Russia and Serbia have signed avoidance of double taxation agreement.

In that agreement, dividend tax is defined for cases when Russian resident – individual or legal entity is owner of Serbian company.

Dividend tax rate is:

1) 5 percent of the gross amount of dividends if the end user is a company (excluding partnership) which directly has at least 25 percent of the capital of the dividends paying company and which has invested in it at least $ 100,000 or the corresponding amount in the national currency of the Contracting State;
2) 15 percent of the gross amount of dividends in all other cases.

Bank account opening for Serbian company when Russian individual or legal entity is owner of the company

Bank account opening is a little bit harder than usual and it is important to know banks market and apply in right bank, but there are no guarantees bank account opening application will be approved. In some banks there is no sense to apply, since some banks unofficially deny applications from citizens of certain country, or with certain business activities.

We admit that it is not impossible to open a bank account for a firm when owner is Russian, but banks are denying to open bank account more often, because of sanctions between EU and Russia.

When the firm is exporting something from Serbia to Russia, or importing from Russia to Serbia, it should not be impossible to open bank account for the company. On example, we opened a firm for one Russian citizen and opened bank account in January 2021, with the main activity – import of certain goods to Serbia and selling in Serbian market (this text is written in February 2021).

In cases when reexport is main activity, banks are more likely to deny bank account opening.

Our firm helps clients in bank account opening procedures and has a big expirience with bank account opening for companies with Russian ownership in Serbia.

How can I do VAT registration in Serbia for new Serbian LLC or entrepreneur? VAT registration in Serbia explained!

VAT registration in Serbia we do as integral part of company registration procedure. When registering a firm in Serbia, you can decide to register your firm in VAT system or you can decide not to register a firm in VAT system.

If you enter VAT system when registering a firm, you will not be able to get out of VAT system for 2 years.

If you not enter VAT system when registering a firm, you will be able to enter VAT system after the firm is registered, in any moment, very easy – by submitting one form through the official Tax administration of Serbia portal.

Registration in VAT system can’t be completed before bank account of the company is opened.

Any company can enter VAT system. Companies which have revenue more than 8 million dinars in last 12 months must enter VAT system.

What is company registration number in Serbia? Company registration number Serbia explained!

When you register a company in Serbia, you will get ID number of the company and Tax ID number of the company. When somebody says company registration number Serbia, he usually thinks on ID number of the company.

You can search for Serbian companies on official website of Serbian Business Registers Agency (SBRA) or on some pages as Bisnode Search.

On SBRA website, you can search for companies in Serbia using ID number or using name of the company. On Bisnode website, you can search by multiple criteria, even using Tax ID number.

On example, our company registration number is 20242728.

 

Do ABC lux llc provide help with application for temporary residence permit?

We are not providing temporary residence permit services, but we will connect you with the company which can help you regarding preparing the documents for temporary residence permits, or we can connect you with an advocate who can help you both with getting temporary residence permit and work permit. First you are applying for temporary residence permit, and when you get it, you can apply for work permit. Both temporary residence and work permit, you need to renew on certain period of time.

Do I need to have temporary residence permit if I want to be owner and director of the company in Serbia?

No.

Will I get temporary residence permit if I open company in Serbia?

You can apply for temporary residence permit, but nobody can guarantee you that you will get temporary residence permit. More information about getting temporary residence permit in Serbia, you can find on website of Ministry of Interior on next link. You can open the company without having temporary residence permit in Serbia. It is not obligatory.

If I employ person in my Serbian firm, how much will I need to pay for social tax on salary and social contributions?

Between 59-67% of net salary you will need to pay for tax on salary and social contributions. Social contributions means pension insurance, health insurance and insurance in case of unemployment.

We admit that there are a lot of state programs which can lower the tax and contributions on salary for 56-75%. On example, if you employ person who is unemployed and registered as unemployed in National Employment Service for 6 months, you can save 65% of tax and social contribution, which means you would pay for tax and social contributions just around 21-24% of net salary of the mentioned employee.

Do the company need to have Serbian citizens as director, or it is allowed that company has just 1 non-resident director?

It is allowed that company has just 1 non-resident director.

Will I get online banking after I open company or entrepreneur bank account in Serbia?

Yes, all banks in Serbia provide their clients with online banking. Banks usually need 7-10 days in order to make ebanking card after the bank account is opened. In most banks, you do not need to come to Serbia to pick up ebanking. We can pick it up for you and send to your address in your country by Fedex/TNT.

Do I need to pay online when submitting order?

No, you can submit order and pay later – when you arrive to Belgrade, or if you are using remotely registration option, you can do the payment based on proinvoice before company registration.

How long will I need to stay in Belgrade in order to sign all documents for company registration and related procedures (digital signature, bank account opening etc)?

This depends from many details, but in most common case, if you will be both owner and director of new Serbian company or if you want to register entrepreneur (sole proprietor), you will need to stay just 5 working day in Belgrade in order to sign everything for company registration/entrepreneur registration procedure and related procedures as bank account opening, get digital signature etc.

What are the steps and how long does it take to open a company (LLC) in Serbia, open bank account and do all obligatory procedures related to company formation in Serbia?

Steps required before coming to Serbia

Before coming to Serbia, we usually agree all details with the client. It means, client should fill the form for LLC registration in Serbia. You can see the form here.

After that, we confirm you availability of the name of the company which you proposed.

After that, you can come to Serbia in order to register a firm. Below you can see the activities which will be done in process of company formation in Serbia.

1st day of company formation process in Serbia

2 working day usually lasts company registration in Serbian Business Registers Agency (SBRA). It means that from day when documents are delivered to the Serbian Business Registers Agency (SBRA) to day when SBRA publish decision about company registration, it usually pass 2 working days.

On the 1st day, in the morning, we meet you at notary where you are signing documents for company registration in Serbia. Court translator comes to the notary too. Court translator will translate documents to the owner and director, and court translator will confirm that owner and director understood the documents which they are signing.

After owner and director signed documents, we bring the documents to the Serbian Business Registers Agency.

On website of Serbian Business Registers Agency we are following the status of the case and how it is processed.

Optional – Registration without owners presence with Power of Attorney

If procedure of company registration in Serbian Business Registers Agency is done by Power of Attorney, it means that we register the firm for you by Power of attorney. It means this step (day 1) we do without your presence. On another hand, it means that we first need to make Power of Attorney, send to you by email, you verify it in your country and send to us by DHL/Fedex/post, we translate it in Serbia and we sign documents at notary instead of you.

In that case, owner of the company does not need to come to Serbia at all. Director of the company needs to come at least for bank account opening and taking the digital signature. Digital signature can be taken only personally, it can not be taken by somebody else with any kind of Power of Attorney.

3rd day – Firm is registered. We make stamp, apply for bank account opening, get digital signature, make headquarter rental agreement, sign documents for Tax administration and Local tax administration

On third day, Serbian Business Registers Agency will publish on its website that company is registered. After that, we will make stamp of the company, director of your company will take over digital signature, he will sign documents for Tax administration and Local tax administration, and he needs to sign rental agreement for headquarter of the company. We can provide you with heardquarter of the company (virtual office).

4th or 5th day – Bank makes decision do they accept to open bank account

Depending on the speed of the bank in processing the documentation, the bank informs you if they accepted to open the bank account. If they accepted, director of the firm should go to the bank to sign the documentation.

At some banks, it is possible to complete everything on the 3rd day and it is not necessary to go to the bank after that. When the bank opens an account for your company, the Tax Administration completes the registration in the VAT system if you decided to register the company in the VAT system.

The registration of real owners is also done with the help of a digital signature. We perform activities related to the submission of applications to the Tax Administration and the Local Tax Administration.

14th day of LLC formation process in Serbia – Ebanking is made. You take it, or we take it and send it to you via Fedex

The bank has made ebanking for your company and you can go to the bank to pick it up. If you are not present in Serbia to pick up ebanking, in most banks we can pick up ebanking for you and send it to your address abroad. Some banks allow us to pick up your ebanking by Power of Attorney which is not notarized, while other banks ask for notarized Power of Attorney for picking up ebanking.

If you have any questions, don’t hesitate to contact us.

5 reasons to start a business in Serbia

Why to start a business in Serbia?

  • The labour market

Most people in Serbia speaks English, which helped Serbia to be a country of choose for many international firms who are able to provide services remotely.

If you are operating an IT business, then you will have access to a pool of young and talented employees with relatively low wages when compared to other countries in the EU or USA.

Serbian labour market is attractive for many manufacturing firms too. Many firms from all around Europe do their manufacturing operations in Serbia.

Below you can see average gross salary (gross 1, not total cost) in Serbia, compared with other countries. Gross salary of 638 EUR is the same as net salary of 432 EUR. Average total cost (gross 2 salary) is 701 EUR.

Source: The Vienna Institute for International Economic Studies, 2020   

  • Tax reliefs

There are many tax reliefs for employing certain categories of people, as on example 65%-75% reduction for tax and contributions on salary for people who are unemployed more than 6 months.

There are many tax reliefs for big investors too.  A 10-year Corporate Profit Tax Holiday is available for investors who hire more than 100 employees and invest more than 8.5 million euros (1 billion RSD). Tax holiday begins once the company starts making a profit.

  • Free trade agreement with many countries

Serbia has trading agreements with many countries. You can check more about these trading agreement on Development agency of Serbia website.

  • It is easy to start a business in Serbia

Registering your business is quite easy and minimum capital is just 1 EUR. Getting your business registered in Serbia with bank account opening requires you to visit a Belgrade for just 1 day visit to Belgrade. You can order company registration online in just 10 minutes.

  • Strategic geographical location

Serbia is a perfect place for the location of the company’s business if it wants to thoroughly and most efficiently serve its clients in the European Union, Southeast Europe and the Middle East. Serbia borders the European Union and yet offers the opportunity to enjoy all the benefits of working outside the European Union, and at the same time is able to provide services and transport goods in a projected and flexible time frame.

Differences between representative office of foreign legal entity, branch of foreign legal entity and limited liability company in Serbia

Representative office of foreign legal entity (company) in Serbia

It is registered based on decision of the competent authority of a foreign company

Representative office doesn’t have status of legal entity, but represents a separate organizational unit of a foreign legal entity (company). It may provide only preliminary and preparatory actions in order to conclude a legal transaction of foreign legal entity (mainly marketing activities, preparation of contracts for foreign company etc). While a representative office may only perform tasks related to its current operations, foreign company is responsible for obligations to third parties which originates from representative office operations. Representative office has a registered representative person and address.
Representative office can not perform activity, neither to receive its own revenues.
Representative office has Tax ID number (PIB – poreski identifikacioni broj on Serbian), because when paying salaries to employees, tax forms must be filled and Tax ID number is necessary.
Regarding VAT (PDV on Serbian), representative office is not VAT taxpayer. Having in mind representative office activity – preparatory and previous actions, representative office for its work use goods and services that are produced in Serbia, as end-user, and pays VAT through those purchases basicaly.

Our short conclusion:
Activities that representative office has a right to perform are statutory quite closely placed. Preparatory works that representative office performs doesn’t involve the conclusion of the business, but contractor would always be a foreign company. Responsbility is also on foreign company.

Branch of a foreign legal entity (company) in Serbia

Branck of a foreign legal entity (company) is also a separate organizational unit of a foreign company, through which the foreign legal entity performs the activity in Republic of Serbia. Branch in terms of tax has a resident status, and in legal terms it acts in the name and on behalf of the legal entity (company). A company has unlimited liability for the obligations to the third parties, which occurs as result of activities of its branch.

Branch has a main activity which performs in Republic of Serbia (as opposed to representative office), and branch can perform any other activity which are not prohibited.
Regarding VAT, branch is considered a VAT taxpayer and has an obligation to be recorded in the VAT system.

Our short conclusion:
Foreign legal entity (company) has unlimited liability for the obligations which occurs as result of branch activities. Also, contractor of all jobs in Republic of Serbia would be foreign legal entity (company).

Limited liability company (LLC) in Serbia

1. performs on the market as resident legal entity
2. you limits your responsibility as the founder
3. you can as the founder, using corporate guarantees from the banks as a related entity, help your Serbian LLC to obtain loans, leases etc
4. you can register yourself as director, and to organize LLC in Serbia as you like, to set person just as legal representative, proxy or authorized representative.
5. Tax status is similar to the branch tax status

Note:
The list of the documents necessary for the registration and decisions are different depending from the form of the legal entity.

Differences between company (LLC = DOO in Serbian) and entrepreneur (sole proprietor = sole trader = preduzetnik) in Serbia

What are differences between LLC and entrepreneur (sole proprietor) in Serbia?

1. Responsibility for obligations

Entrepreneur guarantees for  entrepreneurs obligations (possible debts) with whole his property, unlimited. He is also responsible for tax liabilities with the property of household members.

The LLC does not guarantee for LLC’s obligations with the personal property of the owner, but exclusively with the property of the company (LLC) itself. In case the founder uses the funds of the LLC company for his personal needs, then he guarantees with his personal property in amount of the funds he used LLC’s funds for his personal needs.

The minimum founding contribution when founding a limited liability company is 100 dinars, while when founding an entrepreneur there is no need to register the founding share.

2. Independence test for entrepreneurs

LLCs does not need to pass independence test, while it is very important test for entrepreneurs.

Independence test is a set of questions based on which it is possible to conclude if the entrepreneur is dependent or independent from his clients.

If entrepreneur is independent, then he is taxed as usual.

If independence test shows entrepreneur is not independent from his clients, then additional taxes would apply to transactions between clients and entrepreneur. It means – if clients are domestic firms, they should pay tax and social contributions to the amount which they paid to the entrepreneur. If clients are foreign companies, additional tax should be paid by entrepreneur.

If 5 out of 9 statements below are true, entrepreneurs fails independence test:

  1. the principal (client) or a person related to the principal determines the working hours of the entrepreneur or flat rate entrepreneur or the rest and absences of the flat rate entrepreneur or entrepreneur depend on the decision of the principal or the person related to the principal and the flat rate entrepreneur’s compensation is not reduced in proportion to vacation time;
  2. the entrepreneur or flat-rate entrepreneur normally uses the premises provided or performed by the place designated by the principal or a person related to the principal for the purposes of performing the tasks entrusted to him;
  3. the principal or a person related to the principal performs or organizes professional training or advanced training of the entrepreneur or flat-rate entrepreneur;
  4. the client has hired an entrepreneur or flat-rate entrepreneur after advertising in the media the need to hire natural persons or by hiring a third person who is usually engaged in finding persons suitable for employment, and whose service resulted in hiring that entrepreneur or flat-rate entrepreneur;
  5. the principal or a person related to the principal provides its own basic tools, equipment or other basic tangible or intangible assets necessary for the regular operation of the entrepreneur or lump sum entrepreneur or finances their procurement, except for specialized tools, equipment or other specialized tangible or intangible assets that may be necessary for the execution of a specific job or order, or the principal or a person related to the principal usually manages the work process of the entrepreneur or flat-rate entrepreneur, except for such management which involves giving a basic order in connection with the ordered work and reasonable control of the results of work. , over the performance of the work ordered by him;
  6. at least 70% of the total realized income of the entrepreneur or flat-rate entrepreneur in the period of 12 months beginning or ending in the respective tax year was realized by one principal or by a person related to the principal;
  7. the entrepreneur or flat-rate entrepreneur performs activities from the activity of the principal or a related person with the principal, and for such performed his engagement contract does not contain a clause according to which the entrepreneur or flat-rate entrepreneur bears the usual business risk for the work delivered to the client’s client. , if such a client exists;
  8. the contract on the engagement of entrepreneur or a flat-rate entrepreneur contains a partial or complete ban on entrepreneur or flat-rate entrepreneur to provide services under contracts with other clients, except for a partial ban covering the provision of services to a limited number of direct competitors;
  9. the entrepreneur or flat-rate entrepreneur performs activities for a fee for the same principal or for a person related to the principal, continuously or intermittently for 130 or more working days in a period of 12 months beginning or ending in the respective tax year. in one working day is considered to be performing activities in any period during that working day between 00 and 24 hours.

If entrepreneur fails independence test, general solution is to register his own LLC or to get employed by his client (if there is actually just 1 client).

3. Taxation and the need for an accountant

Flat rate taxation is possible only for entrepreneurs and not for all entrepreneur activities

Entrepreneurs can be taxed at a flat rate, while LLCs cannot. Flat-rate taxation means that the tax administration prescribes you a fixed amount of taxes and contributions that you pay, in which case you essentially do not need an accountant, unless you have employees. Certain activities cannot be taxed at a flat rate. Entrepreneurs with a turnover of less than six million dinars a year can be taxed at a fixed rate. Entrepreneurs with flat rates cannot be in the VAT system.

Flat-rate entrepreneurs do not pay tax on profit, as they do not need to do bookkeeping and not calculate profit.

Entrepreneur can keep books according to the double bookkeeping system (from 1.1.2019. simple bookkeeping is not possible any more)

An entrepreneur can keep books according to the system of double bookkeeping.

An LLC must keep books according to a double-entry bookkeeping system.

VAT (Value Added Tax) system

Both the entrepreneur and the LLC can be in the VAT system or outside the VAT system. If the LLC or entrepreneur realizes a turnover of more than 8 million dinars in last 12 months, then it must register itself to the VAT system. Otherwise it may or may not be in the VAT system.

When starting a business, you must state whether your business will be in the VAT system. Important is that, if you decide to enter VAT system when registering LLC or entrepreneur, you can not leave VAT system for at least 2 years. As pointed out earlier, entrepreneurs who have a flat tax cannot be in the VAT system.

Standard VAT rate is 20% and lower VAT rate is 10%.

4. Income tax (Tax on profit)

Income tax for an LLC is 15%, and for entrepreneurs it is 10%. Flat-rate entrepreneurs do not pay tax on profit, as they do not need to do bookkeeping and not calculate profit.

When an LLC owner wants to collect a profit, he must pay dividend tax. An entrepreneur does not pay this additional tax when he wants to make a profit.

Dividend tax depends from who is the owner of LLC

How dividend tax in Serbia depends from who is the owner of the Serbian company (LLC=DOO), you can see below:

Dividend tax is 20% if the owner is non-resident from the country with which Serbia does not have agreement about avoiding double taxation.

When owner is from the country with which Serbia has agreement about avoiding double taxation, dividend tax is according to that agreement. List of countries  with which Serbia has agreements about avoiding double taxation with dividend tax rates, you can find on next link.

Dividend tax is 25% if offshore entity is owner of Serbian company.

Dividend tax is 15% if owner is Serbian resident.

Personal income tax

An entrepreneur as person must pay 10% personal income tax if his personal income, from sources like salary, entrepreneurship, property rental and similar, is more than approximately 23,000 € in last calendar year, and he must pay 15% on a part over 46,000 €. The realized profit of the LLC is not included in the base for the annual personal income tax.

5. Change of legal form

An entrepreneur can make a transition to an LLC company, while an LLC cannot change its legal form to an entrepreneur.

An entrepreneur cannot merge, divide or change ownership, while an LLC can.

6. Temporary interruption of work

An entrepreneur may temporarily pause to operate for a limited or unlimited period of time, while an LLC can’t.

7. Liquidation

Liquidation of a limited liability company is significantly more expensive, longer and more complex than deleting an entrepreneur.

8. Cheaper and simpler procedures in the Business Registers Agency

The costs of registration, possible changes and liquidation in the Serbian Business Registers Agency are lower for entrepreneurs than for LLCs, and the procedures are simpler.

In the case of LLCs, the acts drawn up on that occasion must be certified, which requires additional costs. In the case of entrepreneurs, such acts need not be drawn up or certified.

Fees to the Business Registers Agency are lower for entrepreneurs than for LLCs.

An LLC can have multiple owners, and an entrepreneur can’t.

9. Penalties for misdemeanors

Penalties for violations are generally 2 to 10 times lower for entrepreneurs than for LLCs.

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