Doing Business And Investing In Serbia - PwC
www.pwc.rsDoing Businessand Investing inSerbia2013 Edition
Contents1. Serbia: Country Profile . 11.1 Introduction . 21.2 Government structure . 21.3 Legal system . 31.4 People . 31.5 Economy . 42. Business Environment . 52.1. Business climate . 62.2. International Agreements . 62.3. Regulations for Businesses. 63. Foreign Investment. 113.1 Foreign investment . 123.2 Regulatory legislation . 133.3 Law on Foreign Investments. 133.4 Foreign Exchange Regime . 153.5 Public-Private Partnership and Concessions. 164. Banking, Finance and Insurance .184.1. Banking System . 194.2. Insurance . 214.3. Leasing . 224.4. Protection of ‘users of financial services' . 224.5. Capital Market. 235. Importing and Exporting . 255.1 Trends in customs policy . 265.2 Import restrictions . 275.3 Customs duties . 275.4 Temporary importation relief . 295.5 Customs duties incentives . 305.6 Documentation and procedures . 315.8 Re-exports . 31
6. Business Entities . 326.1 Legal Framework . 336.2 Choice of entity . 336.3 Joint Stock Company (a.d.) . 336.4 Limited Liability Company (d.o.o.) . 336.5 Partnerships and Joint Ventures . 346.6 Branches . 356.7 Representative Office . 357. Labour Relations and Social Security . 367.1 Labour Market . 377.2 Labour Relations . 377.3. Working Conditions . 377.4. Social security system . 397.5. Foreign personnel . 398. Accounting and Audit Requirements . 408.1 Accounting . 418.2 Chart of accounts . 438.3 Audit requirements . 459. Tax System and Administration . 479.1 Tax system . 489.2 Direct and indirect tax burden . 489.3 Principal taxes . 499.4 Legislative framework . 499.5 Tax treaties . 509.6 Tax returns and payments. 539.7 Assessments . 549.8 Appeals . 549.9 Withholding Taxes . 549.10 Tax Audits . 569.11 Penalties. 56
10. Taxation of Corporations .5710.1 Corporate Tax System . 5810.2 Tax Incentives . 5810.3 Taxable income . 5910.4 Deductibility of expenses . 6010.5 Related party transactions. 6210.6 Foreign exchange gains and losses . 6310.7 Tax computations . 6310.8 Other taxes . 6310.9 Branch versus subsidiary . 6510.10 Holding companies . 6511. Taxation of Individuals . 6611.1 Territoriality and residence . 6811.2. Taxable Income . 6811.3. Non-taxable Income . 6911.4. Taxation of non-residents . 6911.5. Tax compliance . 7012. Value Added Tax . 7012.1 Introduction . 7112.2 Scope of VAT. 7112.3 Zero-rating supplies (exemptions with credit) . 7212.4 Exempt supplies (exemptions without credit). 7212.5 Supplies to Kosovo and Metohija . 7312.6 Taxable amount (base) . 7312.7 Non-deductible input VAT. 7312.8 VAT compliance . 74Introduction to PwC . 76Contacts . 82
Guide to Doing Business andInvesting in Serbia2013 EditionThe information in this book is based on taxation law, legislative proposals and currentpractice, up to and including measures passed into law as of 31 December2012. It is intended to provide a general guide only on the subject matter and isnecessarily in a condensed form. It should not be regarded as a basis for ascertainingthe tax liability in specific circumstances. Professional advice should always be takenbefore acting on any information in the booklet.
1. Serbia: Country ProfilePwC1
1.1 IntroductionHistorySerbia has a long and turbulent historywrought with conflict and struggle forindependence. The most recent example wasthe war-torn 1990’s which saw the collapseof communist Yugoslavia and the emergenceof its former republics as independentstates. The conflicts ended in 1999 withNATO led air strikes which resulted inSerbia agreeing to the introduction of UNadministration in Kosovo and Metohijaprovince in accordance with the UN SecurityCouncil Resolution 1244.October 2000 saw Serbia defeat SlobodanMilosevic’s regime and establishment of ademocratic government led by PrimeMinister Zoran Djindjic that set a firmreformist course geared towardsprivatization and free market economy.Following a referendum held in Montenegroin 2006 (which signalled the dissolving ofthe State Union of Serbia and Montenegro)and the adoption of a new constitution in thesame year, Serbia has re-established itsstatus as an independent state.In February 2008 Kosovo unilaterallydeclared independence from Serbia, whichSerbia vehemently opposes. The issue hasbeen brought before the International Courtof Justice in an effort to determine thelegality of such an action. In July 2010 theInternational Court of Justice issued itsadvisory ruling stating that “the adoption ofthe declaration of independence of17 February 2008 did not violate generalinternational law”.At the elections held in May 2012, TomislavNikolic was elected as a new president ofSerbia and Ivica Dacic as a new primeminister.priority for Serbian administration. Effortstowards realising this goal are made throughadopting new legislation as well as throughbilateral application of the Interim TradeAgreement (which is a part of theStabilisation and Association Agreementsigned with the EU) as of February 2010. InMarch 2012 Serbia was awarded with anofficial EU candidate status.Geography and climateThe Republic of Serbia is located in SouthEast Europe, central part of the BalkanPeninsula and covers 77,474 km2 (excludingKosovo and Metohija). It is situated at theintersection of Pan European Corridors Nr.10 and Nr. 7 linking Europe and Asia. RiverDanube runs through Serbia (588 km).The climate is temperate continental, withgradual transition between the four seasonsof the year, warm summers and snowywinters. The average annual temperature isaround 12oC. The temperatures in Januaryand June average 0oC and 22-23oCrespectively.The average annual precipitation rangesfrom 660 mm to 800 mm in the plains tobetween 800 mm and 1,200 mm in themountains.Major cities are, the capital Belgrade(population around 1.6 million), Novi Sad(popn. 300,000), Nis (popn. 250,000),Kragujevac (popn. 175,000).1.2 GovernmentstructureThe national legislature of Serbia is aunicameral assembly of 250 deputies chosenin direct general elections for a period offour years.The current government follows the path ofeconomic and social reform centred ontransition to free market economy andprivatisation of the public sector. Ascensionto the European Union remains a topPwC2
The deputies in the National Parliamentelect the Government of the Republic ofSerbia, which, together with the President ofthe Republic, represents the country'sexecutive authority. The judiciary isindependent.1.3 Legal systemLegislative frameworkSerbia has a civil law system, meaning thecourts interpret legislation rather than beingbound by preceding rulings on the issue.The Parliament is the supreme legislator.Certain bodies with executive powers, suchas the government and ministries, arecompetent to pass decrees and by-laws inspecific areas. Decrees and by-laws must bein compliance with parliamentarylegislation. Legislative acts, decrees and bylaws come into force after publication in theOfficial Gazette of Serbia.CourtsThe organisation of the court system inSerbia and jurisdiction of courts is regulatedby the Law on Organisation of Courts,applicable as of 1 January 2010.The court system consists of theConstitutional Court, courts of generaljurisdiction and courts of specialjurisdiction. The courts of generaljurisdiction are the following: basic courts,higher courts, appeal courts, and theSupreme Cassation Court. The courts ofspecific jurisdiction are the following:commercial courts, Commercial AppealCourt, misdemeanour courts, HigherMisdemeanour Court, and AdministrativeCourt.Constitutional Court decides onconstitutionality and legality of laws andbylaws, and protects human and minorityrights and freedoms.Basic courts are courts of first instance andare established to cover one or morePwCmunicipalities. Higher courts are establishedto cover the territory of one or more basiccourts and are also courts of first instance,while in limited numbers of cases they act ascourts of second instance to basic courts.Commercial courts adjudicate commercialmatters, with the Commercial Appeal Courtbeing the second instance court for thesematters. Appeal courts are second instancecourts to both basic and higher courts(except in limited number of cases whenhigher courts act as second instance courtsto basic courts), Supreme Cassation Court isthe highest court in Serbia and is competentto decide on extraordinary judiciaryremedies and conflicts of jurisdiction.Misdemeanour courts are second instancecourts for misdemeanours ruled by stateauthorities in first instance, as well as firstinstance courts for misdemeanours forwhich state authorities are not competent inthe first instance. Administrative Court iscompetent for adjudicating in administrativedisputes.Since in certain cases it may take severalyears to receive a final judgement, manybusiness entities opt for arbitration,providing for it in their contracts. There is aForeign Trade Court of Arbitration at theSerbian Chamber of Commerce in Belgrade.It is international, general (all conflictsarising from international business relationsare considered), open (domestic and foreigncitizens are on its list), independent andautonomous. Its judgments are final.Specific rules of procedure can be agreedbetween the parties and specialistarbitrators can be chosen. The UnitedNations Commission on International TradeLaw (UNICITRAL) book of rules may beapplied.1.4 PeoplePopulationAccording to the recent data the populationof Serbia (not including Kosovo andMetohija) is approximately 7.2 million,around 69% of which is of working age.3
Statistics show that Serbia has, on average,an old population (the average year of agebeing cca. 41.3 according to recentinformation) which has been identified as aleading concern and is attributed mainly toemigration.The country’s population is mostly Serbian(83.3%) with the most significant ethnicminorities being Hungarian (3.5%), Bosnian(2%) and Roma (2%).LanguageSerbian is the only official language whilemembers of ethnic minorities are entitled touse their own language. English is taught asa compulsory foreign language, while inmany areas students choose an additionallanguage from German, French or Russian.ReligionReligion is practiced freely. OrthodoxChristianity is the dominant religion(85%),while other prominent religions are RomanCatholic 5.5%, Islam 3.2% and Protestant1.1%. Most Catholics reside in Vojvodina,Serbia’s northern province, while Muslimsare predominant in the region of Raska tothe south of the country.EducationElementary and high school education inSerbia is free with eight years elementaryschooling being compulsory. Around 78% ofthe population completes elementaryschooling while 11% achieves highereducation.Living standardsThe total percentage of the population livingbelow the poverty line is 8.8%, according to2010 estimates. The distribution of povertyis uneven with the gross average incomePwCbeing significantly higher in cities (Belgradein particular) than in rural areas.According to the recent data averagemonthly gross salary in Serbia in 2012amounts to RSD 58 thousand, while inBelgrade amounts to RSD 72 thousand.1.5 EconomyGeneral descriptionSerbia is considered an upper-middleincome economy by the World Bank, with aestimate of GDP for 2012 at 79.7bn( 10,528 per capita PPP). Since the politicalreforms of 2000, the country hasexperienced fast economic growth and hasbeen preparing for membership in theEuropean Union.CurrencySerbian official currency is Dinar (RSD). On31 December 2012 the exchange rates were 1EUR 113.7183 RSD and 1 USD 86,1763RSD, according to the National Bank ofSerbia (NBS).TransportIn Serbia all means of transportation arepresent. The total length of roads is 41,913km. Railway network enables cost effectivetransportation thanks to good connectionswith all major European destinationsthrough the Pan European Corridor 10.There are 3 major airports in Serbia:Belgrade Nikola Tesla Airport, Nis Airportand the Vrsac international airport. Serbianrivers belong to the basins of the Black,Adriatic and Aegean Seas. Three of them,the Danube, Sava and Tisa, are navigable.The longest river is the Danube, which flowsfor 588 of its 2,857 kilometre course throughSerbia. Serbia does not have access to sea.4
2. Business EnvironmentPwC5
2.1. Business climatethe countries of the South East Europe,thus creating a possibility for companiesto place their goods customs free to amarket of close to 30 million people,Aims of government policyThe key goals and instruments of theeconomic policy are: Maintaining exchange rate stability andcurbing domestic aggregate demandthrough restrictive monetary policy, Further reduction of public spendi
Feb 17, 2008 · Guide to Doing Business and Investing in Serbia . PwC 1 1. Serbia: Country Profile . PwC 2 1.1 Introduction History Serbia has a long and turbulent history wrought with conflict and struggle for independence. The most rece
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