Entering the Serbian Market
Foreign companies who wish to expand into the USA will be met with an attractive business hub that includes a highly educated workforce, attractive tax rates and incentives, as well as low labor and administration costs. However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Work alongside our Professional Employer Organization (PEO) recruitment specialists, then our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of the US, its work culture and business practices. Here we have written out some basic summaries of what you need to make the transition into America’s market, no matter the industry you are in.
Starting a Business in Serbia
International companies wanting to hire staff and run their payroll must set up a legal entity subsidiary. The typical choice is to establish a limited liability company known as a Društvo sa Ograničenom Odgovornošću, abbreviated to DOO. This type of entity requires minimum share capital of €1 and it must be registered with the Business Registers Agency(BRA), following the regulations of the Law on Procedure for Registration. The subsidiary operates under Serbian Companies Law in the same way as local entities.
Requirements and procedures include:
- Obtain company eight-digit registration number (matični broj, MB) and the nine-digit company tax number (poreski identififikacioni broj, PIB or TIN) from the BRA
- Register with the Serbian Statistical Office to receive official registration
- Register with the Tax Administration (Poreska Uprava)
- Register with the Social Insurance Institute (Zavod za Socijalno Osiguranje, ZSO) for mandatory health insurance for employees with the Fund for Disability and Pension Insurance
- Provide Articles of Association of the parent company with full names, addresses, country of residence and nationality of the owners, initial contribution by shareholders
- Open a business bank account and provide proof that minimum share capital of €1 has been deposited
- Register at least one Serbian citizen as representative to deal with the local authorities
- Appoint a company secretary
Expanding Business into Serbia
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?
Drawing up an international expansion blueprint is not enough. Your business plan will have to answer all these questions.
Serbia is increasingly welcoming foreign investment. However, the employment market is complicated by its mix of regulations and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Serbia.
Serbian Business Facts
- Capital – Belgrade
- Population – 8.68 million
- Regions – Belgrade, Vojvodina, Sumadija and Western Serbia, Southern and Eastern Serbia, Kosovo and Metohija
- Official language – Serbian
- Economy – GDP US$60.7 billion
- Leading sectors by GDP – Service 51.5%, industry 25%, and agriculture 6.5% end of 2020. Largest industries include agriculture, mining, food processing, cars, base metals, pharmaceutical industry, refined petroleum
- Main exports include – Insulated cables, optical cables; rubber (tires); maize; electric motors; fruit and nuts; motor cars
- Main imports include – packaged medicines; crude petroleum oil, and gases; broadcasting, TV, and sound equipment; cars and vehicle parts
- Main trading partners – Germany, Italy, Balkan countries, Russia, China, Hungary
- Government – Unitary, parliamentary, constitutional republic
- Currency – Serbian dinar (RSD)
Advantages and Challenges of the Serbia Market
Advantages of expanding into the Serbian market include:
- Trade: Interim free trade agreements with the European Union, the European Free Trade Association plus with other nations giving tariff-free export of Serbian goods to 800 million consumers
- Politics: Stable government committed to European integration
- Taxation: Below European average for personal and corporate income tax rates
- Workforce: Well qualified with competitive wage rates
- Doing Business: The World Bank ranked Serbia 44th out of 190 nations for ‘ease of doing business’ in its most recent report
- Investment: Foreign Direct Investment attracts nations such as US, Italy, Germany, and Scandinavia, with manufacturing investment from blue chip companies including Fiat, Michelin, Panasonic, PepsiCo, and Carlsberg
- Banking: International presence from such as Crédit Agricole.
- Infrastructure: Functional road and rail system with access to eight surrounding countries
Challenges of expanding into the Serbian market include:
- Starting Up: The World Bank ranked Serbia 73rd out of 190 nations for ‘ease of starting a business’ in its most recent report, 94th for obtaining an electricity supply and 65th for enforcing contracts
- Taxation: Twelve payments required annually for personal and corporate taxes, which can total nearly 300 hours of office work
- Red Tape: Bureaucracy lacks transparency and is subject to delays and state interference, according to the International Trade Administration of the US
Culture: Serbs are welcoming, friendly, and generally respond warmly to western European business interests, although the mix of cultures and languages in the region can take some adjustment
Limited / Company Subsidiary or Branch in Serbia
The usual choice for international companies establishing an entity in Serbia is the limited liability company, known as a Društvo sa Ograničenom Odgovornošću, abbreviated to DOO. The subsidiary is a legal entity, entirely independent of the parent company and is incorporated under the regulations of the Serbian Companies Act and is registered with the Business Registers Agency (BRA). Another option is to open a branch, known in Serbia as a podružnica.
Subsidiaries have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities. Subsidiaries can have a different name from the parent company, pursue different business activities and form their own contracts.
Branches in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate.