Serbia is an upper middle-income country with a GDP per capita of US$ 5,080 in 2016.

Main exports are from

automotive, agricultural, food processing, metal and chemical sectors. Foreign Direct Investments (FDI) are

increasing, building on FDI in the agri-food (11.6%), telecommunications, retail, real estate, pharmaceutical,

automotive (15.9%) and banking sectors

Serbia has been advancing towards a free market economy for over a decade even though the global

financial crisis and frequent elections have slowed down the reforms in the country. Some areas that require attention

are rounding off the transition to a market economy by reducing the state presence in the economy and tackling

structural rigidities and obstacles to growth.

Government is offering range of different packages to foreign investors which are planning to open new job

positions, from tax reduction to non-return funds to the investors.

Geographic position:

Serbia has favorable geographic position and geo politically important territory - As a logistics base, Serbia

is the perfect location for a company to efficiently serve its EU, SEE or Middle Eastern customers.

Foreign Trade Agreements:

Serbia became an EU candidate member state in 2012 and began accession talks in January 2014 and ready

for accession by 2020. This allows nearly all exports to enter the EU without customs duties or limits on quantities.

Also FTA with Russia, Belarus and Kazakhstan, provides Serbia access to a market of 170 million people.

Goods produced in Serbia that have a least 51% value added in Serbia, are considered of Serbian origin and exported

to these markets customs-free.

The EFTA (European Free Trade Association) states include Iceland, Liechtenstein, Norway and

Switzerland and a free trade agreement with Serbia came into force in 2009. Industrial products originating in Serbia

can be exported to Turkey without paying custom duties.

It is therefore especially interesting for investors in the manufacturing sector Through several FTA’s and

other bilateral and multilateral trade agreements Serbia has broad market access and is able to export duty free to

almost 1.1 billion people in total.

Competitive Operation Cost:

The Serbian labour force is generally very skilled, highly qualified, well trained and management usually

speaks English well, it is considered to be strong business performance driver. The Labour Law, amended in 2014,

regulates rights, obligations and liabilities of employers with additional flexibility in regards to hiring and other

benefits to employer. The national minimum net salary is 130 RSD net per working hour.

In terms of cost of utilities, Serbian office rental spaces are competitive. The prices of electricity (0.0112-

0.0336 EUR/KWh), gas (0.3057 EUR/m3) and other fuels, postal services, landline telephony, fax service and

maintenance of motor vehicles are low.

Cost of land is very low compared to other European countries and varies from 4.000-6.000EUR/ha, renting

the land the land is more common in price range of 50-100EUR/ha/year.

Taxes:

Extremely competitive environment provides second lowest corporate income tax in Europe, together with

other favorable taxes and costs. The corporate profit tax rate is set at 15%, standard VAT rate is 20%, salary Tax

amount is roughly 65% of the net salary but the tax burden for employers can be reduced through a variety of

financial and tax incentives.

Tax system does not always function in a transparent and consistent manner. There is a lack of certainty and

uniformity in working with administrative government institutions. Therefore it is highly recommended to hire a tax

consultant with experience in Serbia prior to entering the market.

Recommendation:

There are numerous advantages to doing business in Serbia. Serbia’s focus on EU accession, access to

significant markets through free trade agreements, competitive operating costs, and financing resources are all key to

consider.