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Home » Countries » Europe » Serbia

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as Serbia – which is characterized by a diverse and dynamic workforce, strong employment and tax laws, a robust infrastructure network linking to both Europe and Asia, and leading sectors in energy, automotive industry, machinery, mining, and agriculture – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Serbia – The Economy

Serbia is located in the heart of Southeast Europe (SEE) – which is at the crossroads of Europe, the Middle East, and Africa. In this region, there are a number of emerging markets of varying sizes, all of which have economic development plans focusing on bringing their laws, educational and medical systems, infrastructures, and security/defense frameworks up to European standards.

In terms of market opportunity, Serbia combined with Bulgaria, Romania, Croatia, Hungary, North Macedonia, Moldova, Montenegro, Bosnia and Herzegovina, and Slovenia represent a market the size of Texas, with 60 million inhabitants and a GDP of around $500 billion. 

Despite its relatively small size, Serbia’s emerging economy creates significant opportunities for exports and investments across a wide range of sectors, particularly infrastructure, ICT, healthcare, agribusiness, energy, and environmental technologies.

Serbia is the largest and most prosperous economy in the Western Balkans, serving as a regional hub and springboard for companies to access the larger regional market. 

The economy of Serbia is a service-based, upper middle economy, which functions on the principals of the free market. The strongest sectors of Serbia’s economy are energy, manufacturing (most popular in the automotive and machinery industries), mining, and agriculture.

Trade plays a major role in Serbian economic output, with its main trading partners being Germany, Italy, Russia, China, and the neighboring Balkan countries. The country’s leading trade exports are automobiles, base metals, furniture, food processing, machinery, chemicals, sugar, tires, clothes, and pharmaceuticals.

Neighboring Balkan countries are highly active in Serbia, focusing on procurements, investments, trade liberalization, and infrastructure. Serbia is also Europe’s fourth-biggest recipient of Chinese investment, particularly in greenfield projects, and participates in China’s Belt & Road Initiative. U.S. firms have invested around $4 billion into Serbia and continue to play an active role in the Serbian economy. Certain segments of the Serbian economy remain highly price-sensitive, but rising prosperity among business and government presents a window in which they can afford Western brands of high quality, to modernize and focus on purchases with the best return on investment. Key challenges remain in public procurement, bureaucratic burden, corruption, and inefficient commercial courts.

Small and Medium-Sized Companies

In Serbia, SMEs have a considerable impact on the country’s economy. SMEs currently make up 99.8% of the number of businesses in the country. They generate about 2/3 of employment, a turnover of 54.1% of GDP and account for 43.2% of total exports.

80% of the total workforce in Serbia works in the SME sector. Concerning market innovation, 83% of Serbian entrepreneurs are highly educated, 97% of them implemented some kind of innovation in their business.

SMEs businesses are primarily in the sectors of agribusiness, production, and IT.

No. of States/Provinces2 – Vojvodina (North), Kosovo and Metohija (South)
Principal CitiesBelgrade, Novi Sad, Niš, Kragujevac, and Novi Pazar
Local CurrencySerbian dinar (DIN)
Major ReligionOrthodox Christian
Date Formatdd/mm/yyyy
Time ZoneCentral European Standard Time (GMT+1)
Country Dial Code+381
Border CountriesHungary (North), Romania and Bulgaria (East), North Macedonia and Kosovo (South), Croatia, Bosnia and Herzegovina, and Montenegro (West)
Tax YearJanuary – December (calendar year)
VAT %20%
Minimum WageDIN 47,193.0 ($454.1, €401.4)
Taxpayer Identification NumbersTax Identification Number (TIN)
Unique Master Citizen Number 
Leading Sectorsenergy, automotive industry, machinery, mining, and agriculture
Main importschemicals and chemical product, general purpose machinery, petroleum and natural gas, motor vehicles, basic metals
Main exportsmotor vehicles, electrical machines, non-ferrous metals, rubber and plastics products, chemicals, and chemical products
Main trading partnersGermany, Italy, Bosnia and Herzegovina, Romania, Russian Federation, China, and Hungary
Government TypeUnitary parliamentary republic
Current Prime MinisterAna Brnabić (Prime Minister), Aleksandar Vučić (President)

The Main Sectors of the Serbian Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

  1. Agriculture – The agricultural industry tends to perform well in Serbia due to its favorable weather conditions and large amount of available land – about 5 million hectares, of which 3.3 million is arable land.

    Agricultural exports contribute one-fifth of all Serbia’s sales on the world market. Serbia is among the largest provider of fruits to the EU market, with Germany and France constituting the larger portion of the market.

    Agricultural production is allocated between crop cultivation and livestock (and poultry) at a ratio of 70% and 30% respectively. Animal products that are exported include pork meat, dairy, poultry, and beef.
  2. Tourism – Whilst Serbia is not a mass-tourism destination, it nevertheless has a diverse range of touristic products. In 2019, there was a total of over 3.6 million tourists recorded in accommodations, with half being foreign. Foreign exchange earnings from tourism were also estimated at $1.5 billion.

    Tourism is mainly focused on the mountains and spas of the country, which are mostly visited by domestic tourists, as well as Belgrade Novi Sad, which are preferred choices of foreign tourists (almost two-thirds of all foreign visits are made to these two cities).
  3. Manufacturing – This industry is dominated by mining, food processing, automotive, base metals, pharmaceuticals chemicals, textiles, and chemicals. The country is also popular for its manufacture of the famous Tesla smartphones.

    The automotive sector provides employment for over 40,000 people, accounts for 10% of exports and 14% of foreign investments in Serbia.
  4. Energy & Mining – Serbia is a country that is rich in mineral resources such as coal and gold. Since mining is a capital-intensive venture, the country has opened its doors to foreign investors. Many foreign companies engaged in mining come from Canada and the USA.

    There are also over 100 exploration fields in Serbia, with foreign companies investing USD10-100 million every year for geological exploration. Serbia is the 18th largest producer of coal in the world, as well as the 23rd largest producer of copper in the world.

    Serbia is believed to own mineral resources worth USD 263 billion. However, only USD 3.7 billion is mined.
  5. Construction – This industry is primarily located in the country’s capital and has grown rapidly due to the modernization of Serbia’s three major cities (Novi Sad, Belgrade, and Niš). Between 2016 and 2020, the levels of output in building construction almost doubled. The total amount grew from €900 million in 2016 to €1.7 billion in 2020, with a strong contribution of residential, commercial, and industrial sub-segments.
  6. Transport – Serbia has a strategic transportation location since the country’s backbone, Morava Valley, represents by far the easiest route of land travel from continental Europe to Asia Minor and the Near East.

    Serbian road network carries the bulk of traffic in the country. Total length of roads is 45,419 km of which 782 km are motorways; 4,481 km are national roads; 10,941 km are regional roads; and 23,780 km are municipal roads.

Compliance Highlights

  • The Serbian Tax Administration – Forming part of the Ministry of Finance of The Republic of Serbia, the Tax Administration is the government administration authority, which carries out the assessment, audit, and collection of public revenues.
  • The Ministry of Labor, Employment, Veterans’ Affairs and Social Affairs – this government entity performs state administrative tasks that are related the system in the field of labor relations and labor rights in all forms of work except in state bodies and bodies of local self-government and autonomous provinces, public agencies, and public services.

    They also work on Safety and Health issues at work, carry out inspection supervision in the field of labor relations and safety and health at work, and trade union organization – amongst other projects including labor and employment.

Labor Contracts Law

In Serbia, general considerations applying to all contracts include:

  • The Labor Law (2005) stipulates that an agreed contract must be concluded in writing before the employee starts work.
  • The contract must give full names and addresses of both parties; place of work, job title and description of role; start date of employment; salary and payment schedule; working hours; whether the contract is indefinite or fixed-term, with end date for fixed-term; any benefits.
  • If the contract does not specify either indefinite / open-ended or fixed term it is automatically deemed open-ended. Where an employee is asked to work for more than five days after the end of a fixed-term contract, the contract becomes indefinite.
  • Unless covered by contract, notice periods range between eight and 30 days, depending on the employee’s contributions to the pension insurance fund.
  • Employees should ask for the contract to be translated into their native language so they can fully understand the terms.
  • Apart from the specific terms, employees must be given their formal written contract no later than the first day of employment.
  • The contract should be in a language fully understood by all involved parties, whatever their nationality, although it may be drawn up in the local language. English is frequently used in employment contracts. 
  • Mandatory information required for all contracts includes identities and addresses of all parties, employment start date, place, and type of work, working hours, annual leave, notice periods, type of contract and any trial period contract.

The main types of employment contracts are:

  1. Open-ended, Permanent, Indefinite Employment Contracts: The typical contract form that can be terminated mutually, or by either party with or without notice by following the correct procedures prescribed by the Labor Law and the Employment Rights Act.
  2. Fixed-term Employment Contracts: The fixed-term agreement specifies an end date or a specific project or set of circumstances. Generally, they cannot exceed 24 months, although in certain circumstances can be extended to 36 months, for example if it is tied to the duration of a foreign employee’s work permit. If a contract does not specify fixed-term it is automatically indefinite; if an employee is asked to work more than five days after completing the fixed-term agreement, the contract becomes indefinite. If an employer fails to sign a fixed-term contract it is deemed to be indefinite.
  3. Probation Periods: These cannot exceed six months and either party can terminate during the trial period with five days’ notice.
  4. Other Employment Contracts: The Labor Law allows for contracts for temporary or occasional work and for service contracts. Temporary contracts cannot exceed 120 days in a calendar year and are aimed primarily at the unemployed, part-time workers or individuals drawing a pension. Service contracts are to provide services not covered by the employer’s usual activities.
  5. Collective Bargaining Agreements (CBAs): In Serbia these are individual, industrial, or general agreements. Individual agreements are between employers and relevant trade unions; industrial agreements apply to all employers and employees in a particular sector; general agreements would be applied at state level, although these are rarely in place.

Payroll – Tax Contributions and Benefits

Income Tax: Liability depends on residence and types of income. Persons are considered tax residents if Serbia is their place of economic and personal interest, and they live there for at least 183 days in a 12-month period. They are taxed on their worldwide income. Non-residents are those who do not fit those criteria and they are taxed on income earned in Serbia.

A flat rate of 10% applies to taxable income from employment and fringe benefits. Rates between 10% and 20% apply to income from business, investments, property, and capital gains. There is a tax-free allowance of RSD 19,300 (€164, US$186) as of January 2022.

Health and Social Insurance: Serbia’s Social Insurance Institute (Zavod za Socijalno Osiguranje, ZSO) is responsible for the regulations, laws and by-laws covering such as social insurance contributions, retirement, disability, maternity, health and unemployment insurance and benefits.

Serbia’s health programs focus on screening to prevent disease; family planning and maternity care up to 12 months after birth; medical examinations following illness or injury; dental and mouth care; rehabilitation; medications and medical supplies, vision and hearing care; walking and mobility aids.

Employers and employees each contribute 5.15% towards health insurance. The employer withholds the employees’ contribution from their gross salary and forwards to the ZSO, while also contributing 5.15% of the employees’ salary, which the employer can treat as an operating cost.

Sick Leave and Benefit:  Employees receive up to 30 days paid sick leave from their employer at 65% of the average salary over the previous 12 months if the incapacity or illness did not happen at work. For injury or illness suffered due to work the benefit is 100%. The employer must supply a medical certificate within three days of stopping work. Under employment legislation, the employer can claim reimbursement from the relevant fund if incapacity lasts longer than 30 days.

Paid Vacations:  Employees are entitled to a minimum of 20 days paid vacation annually, plus a vacation allowance paid by the employer. The allowance is not covered by the Labor Law but governed by the size of the company and any workplace or collective agreements. Holidays can be used in one or two sections or, if agreed with their employer, more than two. The first part should be for two working weeks and the balance can be taken up to June 30 of the following year. Employees unable to use their entitlement due to maternity, child or carers’ leave can postpone taking the balance until June 30 the next year.

Paternity and Parental Leave: Paid paternity leave is for seven working days in one calendar year. The father can share the mother’s childcare leave if she is unable to care for the child.


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