GUIDE FOR INVESTORS

BELGRADE CHAMBER OF COMMERCE

Belgrade, May 2015

 SERBIA– Balkan's gate and
the bridge to other markets

BELGRADE – City of the future of the central part

of Southeast Europe (“Financial times”)

Facts about Serbia:

• Location: Southeast Europe
• Area: 88.361 km2
• Population: 7.186.862 citizens - According to the
2011 Census (http://popis2011.stat.rs/)
• Capital city population: 1.639.121 citizens
• Crossroad of European corridors VII i X
• Link between Southeast, Central and Western
Europe
• Navigable length of Danube in Serbia - 580 km
• Status: Republic
• National Day: February 15th
• President: Tomislav Nikolić
• Prime Minister: Aleksandar Vučić
• GDP per capita: 4. 626 EUR (2014.)
• Labor force: 3.17 million (2012)
• GDP – composition by sector (2013.):
 - agriculture 12.7%
- industry: 23.5 %
- services: 63.8 %

WHY INVEST IN SERBIA?

A wide range of possibilities makes Serbia attractive for
investors:
Competitive cost for well educated working force
Good educational system
Favorable tax system with the corporate tax among the
lowest in Europe 15%.
Tax-free export to the SEE countries, Russia, Belarus,
K a z a k h s ta n
Loans and incentives for Green field investments
Incentives for job creators

Advantageous geographical position in the center of

Southeast Europe, which provides favorable environment for
production and export of goods on well developed markets
such as Russia, Turkey, Belarus, as well as for the export to
ex-Yu countries, due to free trade agreements.

FAST REGISTRATION OF COMPANY

One stop shop

Where: Serbian B us i nes s Registers A genc y
(www.apr.gov.rs)
Founding capital: 1 euro
Number of days needed for registration of company: 5 days
 FINANCIAL INCENTIVES

State Grants

A new investment package has been prepared for investors

into Serbia. The funds may be awarded for financing
investment projects in the manufacturing sector and the
services sector which may be subject to international trade.
Investment projects in the sector of primary agricultural
production, fishery and aquaculture, transportation,
hospitality, lotteries, trade, the production of synthetic fibers,
coal and steel, tobacco and tobacco products, weapons and
ammunition, ship building (construction of naval vessels on
its own drive - at least 100 gross registered tons - at least
100 gross registered tons), airports, energy industry,
broadband networks, and companies in difficulties (in more
details defined in the Decree) are not eligible to receive
funding.
The following investors, i.e. Beneficiaries, are excluded from
the right to be awarded funds:
1. Companies in difficulties;
2. Those with outstanding obligations towards the
Republic of Serbia;
3. Those that significantly reduced the number of
employees in the last 12 months preceding the
application submittal;
4. Those that are partly owned by the Republic of Serbia,
autonomous province or local government.
The level of funds which may be awarded are determined in
accordance with the criteria set forth by the Decree on
Terms and Conditions for Attracting Direct Investment in
relation to the eligible investment costs (investment into
material and non-material assets) or in relation to the eligible
costs of the gross salaries for new employed during a two-
year period after the investment project’s implementation.
The amount of funds which can be awarded to large
enterprises is determined up to 50% of the eligible costs for
the implementation of the investment project. The amount of
funds may be increased by up to 20 percentage points for
small-sized companies and up to 10 percentage points for
medium-sized companies.
For eligible costs over 50 million EUR, amount of awarded
funds for investments may not exceed 25% of the total value
of the eligible costs. For eligible costs greater than 100
million EUR, this percentage may not be greater than 17% of
the investment’s eligible costs, and shall be determined as
follows:
1. For eligible costs up to 50 million EUR – up to 50% of
these costs;
2. The part of the eligible costs from 50 million EUR to
100 million EUR – up to 25% of these costs;
3. The part of the eligible costs greater than 100 million
EUR – up to 17% of these costs.
The main rules are also given in the graphs below:

The National Employment Service Grants

The National Employment Service (NES) grants include:
1. the Employment Subsidies Program,
2. the Apprentice Program, and
3. the Re-Training Program.

Source: National Employment Service

For further information on the NES programs, log on to:

www.nsz.gov.rs.
TAX INCENTIVES

Corporate Profit Tax Holiday

Companies are exempt from Corporate Profit Tax for a
period of 10 years starting from the first year in which they
report taxable profit if they invest an amount exceeding
approximately €9 million in fixed assets, and employ at least
100 additional employees throughout the investment period.

Carrying Forward of Losses

The tax loss stated in the tax return can be carried forward
and offset against future profits over a period up to 5 years.

Avoiding Double Taxation

If a taxpayer already paid tax on the profit generated abroad,
he is entitled to a Corporate Profit Tax credit in Serbia to the
already paid amount. The same right is enjoyed by a
taxpayer who earns revenue and pays Personal Income Tax
in another country, provided there is a Double Taxation
Treaty with that country.

Reduced Salary Load

Starting from July 1st, 2014 new employment entitles
employers to a sizable relief of taxes and contributions paid
on net salary from the moment of employment until June 30,
2016.
1-9 new jobs: 65% reduction;
10-99 new jobs: 70% reduction;
100+ new jobs: 75% reduction.
This reduces the total salary load to very competitive 20%*
*an estimate for an average salary in Serbia

Annual Income Tax Deductions

For non-Serbian citizens, the annual income is taxed if
exceeding the amount of threefold the average annual salary
in Serbia. The tax rate is 10% for the annual income below
the amount of 6 times average annual salary in Serbia, and
15% for the annual income above the amount of 6 times
average annual salary in Serbia. The taxable income is
further reduced by 40% of an average annual salary for the
taxpayer and by 15% of an average annual salary for each
dependent member of the family. The total amount of
deductions cannot exceed 50% of the taxable income.

Value Added Tax Exemptions in Free Zones

Income generated through commercial activities in the Free
Zones in Serbia is exempted from Value Added Tax. There
are six Free Zones, currently operating in the country:
Subotica, Novi Sad, Zrenjanin, Sabac, Kragujevac, and
Pirot. Three more zones are being prepared in Nis,
Smederevo and Uzice. Foreign companies can establish a
privately-owned Free Zone based on the project approved
by the government.

OTHER INCENTIVES

Customs-Free Imports of Raw Materials and Semi

Finished Goods
Foreign investors in Serbia can enjoy the benefit of customs
free import of raw material and semi-finished goods for
export oriented production. This benefit can either be
achieved by operating in one of the free zones in Serbia or
by a permit from custom office for outward processing
production. In both cases finished products must be 100%
designated for export.

Customs-Free Imports of Machinery and Equipment

Foreign investors are exempt from paying customs duty on
imported equipment and machinery which represents the
share of a foreign investor in a capital of a company in
Serbia.

Local Incentives
A wide array of incentives is also available at the local level,
varying in scope and size from one city to another. The
major ones comprise the following:
City construction land lease fee exemptions or
deductions, including the option of paying in
installments, with the prior consent of the Serbian
Government;
City construction land development fee relief such as
fee exemptions or discounts for one-off payments;
Other local fees exemptions or deductions (e.g. the fee
for displaying the company’s name).

FREE ZONES

As an additional benefit for companies to streamline their

operations, many municipalities offer the possibility of
operating within designated industrial zones. Such zones
offer advantages such as a streamlined process for
obtaining land, favorable geographic locations and ready-to-
use infrastructure. Currently, twelve of those industrial zones
are also licensed free customs zones: Pirot, Subotica,
Zrenjanin, FAS Kragujevac, Sabac, Novi Sad, Uzice,
Smederevo, Svilajnac, Krusevac, Apatin and Vranje.
Import into and export from these zones is free of VAT,
customs and clearance. If goods are produced within zone
using a minimum of 50% of domestic components, they are
considered to be of Serbian origin and are therefore eligible
to be imported into Serbian territory or exported without
customs, pursuant to free trade agreements. When doing
business in free zones, investors are granted special
benefits:
Fiscal benefits – exemptions from tax burdens for
foreign direct investments, VAT, and specific local taxes
Free customs duties on import of goods, equipment
and raw material used in exporting production and
construction material for the building of infrastructure
Financial benefits – free cash flow
Efficient administration
Simple and fast customs procedures
Local subsidies for using free zone infrastructure
Offering a set of services to users under
preferential terms – transportation, freight forwarding
services, insurance and banking services
 FREE TRADE AGREEMENTS
Liberalized Trade
Logistics and FTAs are only some of the reasons to locate
business in Serbia.

Global Market
Externally, Serbia can serve as a manufacturing hub for
duty-free exports to a market of almost 800 million people
that includes the European Union, the Russian Federation,
Kazakhstan, Turkey, South East Europe, the European Free
Trade Agreement members, and Belarus.

This customs-free regime covers most key industrial

products, with only a few exceptions and annual quotas for a
limited number of goods.

European Union
Exports to the European Union market are free-of-customs
according to the Stabilization and Association Agreement.
For several food products (baby beef, sugar, and wine)
export quantities are limited by annual quotas. Imports from
the E.U. are pursued based on the Interim Trade Agreement,
as part of the Stabilization and Association Agreement,
providing for progressive abolishment of import customs
duties for industrial and certain agricultural products from
E.U. countries by 2014.
Russian Federation
The Free Trade Agreement with Russian Federation, signed
in August 2000, makes Serbia particularly attractive to
foreign investors in the manufacturing sector. The
Agreement stipulates that goods produced in Serbia, i.e.
which have at least 51% value added in the country, are
considered of Serbian origin and exported to Russian
Federation customs free. For exports to Russian Federation,
the FORM CT2 Certificate is required as a proof of goods
origin. The only tariff charged is the customs record keeping
tariff, amounting to a 1% value. The list of products,
excluded from the Free Trade Agreement, is revised
annually. In 2011, the list of excluded products was
extended to the following goods: poultry and edible waste,
some sorts of cheese, white sugar, sparkling wine, ethyl-
alcohol, cigars and cigarettes, cotton yarn and fabric, special
woven fabrics, some types of compressors, tractors and new
and used passenger cars.

CEFTA
The Central European Free Trade Agreement (CEFTA) is
the trade agreement between the following countries in
South East Europe: Albania, Bosnia and Herzegovina, FYR
Macedonia, Moldova, Montenegro, Serbia, and the United
Nations Interim Administration Mission (UNMIK) in Kosovo.
The Agreement has been in effect as of July 2007, providing
companies in Serbia with an opportunity to reach the 22
million people market free-of-customs. CEFTA envisages the
abolishment of customs restrictions for industrial and
agricultural products in the CEE countries by 2010. In
addition, the Agreement stipulates accumulation of products
origin, meaning that products exported from Serbia are
considered of the Serbian origin if integrated materials
originate from any other CEFTA country, the European
Union, Iceland, Norway, Switzerland (including
Liechtenstein) or Turkey, provided that such products have
undergone sufficient processing (if the value added there is
greater than the value of the materials used in Serbia). For
exports to the member countries of CEFTA, the EUR 1
Certificate is required as a proof of goods origin.

Turkey
Trade between Serbia and Turkey is regulated upon the
model implemented in trade with the European Union.
Industrial products originating in Serbia can be exported to
Turkey without paying customs duties. Imports of industrial
products into Serbia are generally customs-free, but for a
large number of goods customs duties will be progressively
abolished over a six-year period, ending in 2015.
For trade in agricultural products customs duties remain in
effect, with certain Most Favored Nation reductions for a
number of products.

EFTA
Industrial products exported from Serbia to EFTA member
states (Switzerland, Norway, Iceland, and Liechtenstein) are
exempted from paying customs duties, except for a very
limited number of goods, including fish and other marine
products. Customs duties for imports of industrial products
originating in EFTA states will be gradually abolished by
2014.
Trade in agricultural products is regulated by separate
agreements with each of EFTA members, providing for
mutual concessions for specified products. These
agreements will enable the export of Serbian products
customs free to a market of 13 million people and will be
active within the next couple of months.
Belarus
The Free Trade Agreement with Belarus envisages the
mutual abolishment of customs and non-customs duties in
trade between the two countries. There are only a few
exceptions to the Agreement, including sugar, alcohol, and
cigarettes, as well as used cars, buses, and tires.

Local Market
Internally, with 7.5 million people, the Serbian market is the
2nd largest in South East Europe. The average net monthly
salary rose from merely €194 in 2004 to €537 in 2013.
Coupled with rapid consumer loan expansion, this fueled a
sharp increase in local demand that was particularly
reflected in a double-digit surge in retail trade turnover on an
annual basis.
In response to expanding local demand, international retail
chains have opened up dozens of new stores across the
country. By illustration, from 2004 to 2009 total retail and
wholesale foreign investment reached more than €1.6 billion.

Kazakhstan
A Free Trade Agreement between the Republic of Serbia
and Kazakhstan was signed on the 7th of October 2010 and
came into force in January 2011. The FTA states that the
parties will not charge customs duties, fees and charges with
equivalent effect for products originating in one party and
intended for the market of the other party. Exceptions were
made for the products listed in the annexes, which are an
integral part of the agreements. The products listed in
annexes are subject to customs duties, fees and charges
with equivalent effect in accordance with the parties’ national
legislations (at the rates specified by national customs
tariffs). For the rules of FTA to be applied, it is necessary to
submit the original certificate determining the country of
origin of the product (Form CT-2) to the Customs of the
importing country.
This Free Trade Agreement was concluded in order to
improve and deepen mutual trade and economic ties
between the two countries. Due to its positive effects,
Serbian goods attract more buyers not only from
Kazakhstan, but also from the Russian Federation and
Belarus, as well as potential investors who are interested in
opening their production in Serbia.
Source: SIEPA

APPENDIX 1

Source: Statistical Office of the Republic of Serbia

 C o n t a c t

BELGRADE CHAMBER OF COMMERCE

Kneza Miloša 12, 11000 Belgrade, Serbia
Phone: + 381 (0) 11 / 2642 088
E-mail: centareoi@kombeg.org.rs
www.kombeg.org.rs