RELEVANT LAWS, REGULATIONS AND LEGISLATION *

• In 2005, Serbia has adopted over 80 system-based laws, an important prerequisite to start EU stabilization and association negotiations;
• Adoption of an additional 40 system-based laws is expected by the end of the year, which will bring Serbia closer to European legislation, and shall essentially enhance the business and investment environment;
• Of special benefit to the business environment: set of tax laws; law on privatization, labor; set of laws governing the judiciary; law on foreign investments; law on public procurement; law on planning and construction; law on telecommunications; law on concessions; law on financial leasing; customs law; law on VAT, law on bankruptcy; law on business associations; law on litigations; law enforcement; law on the registration of business entities; set of laws on intellectual property; set of laws on environmental protection; law on competition; law on foreign trade operations; law on mortgage;
• Laws yet to be adopted: law on arbitration, law on investment funds, law on industrial parks, law on denationalization, law on factoring, which shall substantially contribute to rounding-up the economic-legal system.   The adoption of the new legislation is in compliance with international standards, envisaging the procedures with clearly set deadlines and implications, as well as having a sufficiently flexible and efficient restructuring mechanism;
• Particularly noteworthy is the law on bankruptcy, which sets clear rules for the settlement of business failures in a predictable and fair way, defines the responsibility of the trustees, and clearly defines the division of the proceeds and claims, considerably shortening the bankruptcy procedure;
• The law on business association, developed using the OECD model (Organization for Economic Cooperation and Development) envisages several types of legal entities: joint stock company, limited liability company; ensuring improvement in overall company management, protection of minority share holders and procedures for the increase of equities;
• The new law on the registration of a business association makes possible the independent registration of enterprises within 10 days;
• The law on enforcement introduces accelerated collection procedures and an efficient mechanism for debt collection, accelerates the issuance of court decisions and strengthens financial discipline;
• The new law on foreign operations fully affirms the freedom of foreign trade operations according to WTO and EU regulations;
• The law on competition protection prevents the misuse of market dominance, various forms of association and market power concentration which violates the competitiveness of the market structure.

HOW FOREIGN PARTNERS CAN INVEST IN SERBIA,

LEGISLATION AND THE LEGAL STATUS OF FOREIGN INVESTMENTS

• Special legislation which provides the legal framework for the protection of foreign investments includes: Law on foreign investments, Law on business associations, Law on foreign trade operations, Law on bankruptcy, and Law on enforcement;
• Law on foreign investments:
• assigns national status to foreign investors;
• allows free and unlimited disposition of profit and dividends;
• allows the right to transfer profits and assets upon obligations being met in compliance with the domestic regulations;
• guarantees against expropriation;
• allows the freedom of foreign investment into all types of activities, excluding arms production and sale, and the operation in banned zones where it is not possible to acquire the right of majority management participation;
• allows several investment forms: the establishment of own enterprise, the acquisition of shares in an existing enterprise, concessions (licenses) for the utilization of natural resources or assets for common use of up to 30 years, and B.O.T. (build-operate-transfer) as a special form of concession;
• the foreign investor’s stake can be in foreign currency, goods, intellectual property rights, securities and other property rights in the local currency - CSD, which can be transferred abroad;
• allows for customs-free imports, except passengers motor cars and entertainment and lottery machines.

• The foreign investor enjoys full legal security and legal protection once the enterprise is registered with the Agency for Business Registers.

Foreign investment incentives

• Free import of commodities envisaged by the foreign investors subject to compliance with environmental protection regulations; 
• The enterprise with foreign shareholders enjoys relief from taxes and customs duties; 
• The law on income tax allows certain incentives to the enterprise, including specifically:
  • tax incentives for concession investments;
  • incentives for investments in under-developed areas;
  • incentives for new employment;
  • incentives for large-scale investments;
  • incentives for investments in territories of special importance; 
• Specific incentives for investments:
  • company income tax of 10% is among the lowest;
  • large investment projects worth 600 M CSD, which create 100 new jobs enjoy a 10-year tax relief;
  • projects worth 6 M CSD in under-developed areas that create 5 new jobs enjoy a 5-year tax relief;
  • the employment of persons 50 years of age and above would free the company from tax contributions;
  • tax credits are approved in value up to 80% of the investment;
  • in case of concession investments in fixed assets, tax relief is granted for 5 years;
  • income tax in a newly built unit in an under-developed area is reduced over a 2-year period;
  • equipment import is free from customs duty, and subject to VAT;
  • VAT is reimbursable subject to the export of finished products.

Taxes and contributions  

• Value added tax: 18% and 8% rate.   The 8% rate is applied on the following 13 products: honey, frozen products, grains, sunflower, soya, sugar beets, oil beets, all types of medicines including veterinary, livestock, services related to ticket sales, natural gas, the first transfer of housing ownership;
• Company income tax is 10%;
• Salaries are taxed at the rate of 12%;
• Contributions for social insurance:
  • retirement and disability        11%,
  • health insurance                  6.15%,
  • unemployment                     0.75%;

 

* See Legislation of Foreign Investments on the following web sites :

The offical herald of the Republic of Serbia www.glasnik.com

The official gazette of SaM www.službenilist.co.yu

Intermex www.intermex.co.yu

RS Ministry for foreign economic relations www.umier.gov.yu

RS Ministry for economic relations www.mier.sr.gov.yu

Customs authority www.fcs.yu

Agency for foreign investments and export promotions www.siepa.sr.gov.yu