IBDE

SERBIA is a potential candidate for EU membership. In 2008, Serbia signed the Stabilization and Association Agreement (SAA) and an Interim Agreement on trade-related measures with the EU. The Interim Agreement entered into force on 1 February 2010. On 14 June 2010, the Council agreed to launch the ratification process for the SAA. On 22 December 2009, Serbia handed over the country’s application for EU membership. Visa liberalisation for Serbian citizens was granted by the Council in 19 December 2009. Serbia is also negotiating to join the WTO.

Serbia is located in the South Eastern Europe, in the center of the Balkan Peninsula. It borders Hungary, Romania, Bulgaria, Macedonia, Kosovo, Croatia, Montenegro and Bosnia and Herzegovina. Serbia sits astride two of Europe’s strategic transport “corridors”; the corridor 10 which runs through the center of the country and links Hungary in the north with Greece in the south and Corridor 7 which is a major transport link from Germany to the Black Sea. Serbia has a population of 7.4 million. Serbs make up 82.86% of the population, Hungarians 3.91%, Bosnians 1.81%, Roma 1.44%, Yugoslavs 1.08%, Croats 0.94%, Montenegrins 0.92%, Albanians 0.82%, Slovaks 0.79%,  Vlachs 0.53%, other (in total) 4.9%.

The country has access to European corridors, 7-the River Danube and 10-the international highway and railroad which provides transportation connections with Western Europe and the Middle East. 

Serbia offers the following attractive investment incentives to foreign investors:

·         highly educated and skilled work-force

·         attractive tax system

·         macroeconomic stability

·         free trade

·         quick and simple business registration

 Highly educated and skilled work force

Serbia offers a skilled and educated labour force. According to the Serbia Investment and Export Promotion Agency (SIEPA), every year thousands of graduated young people enter the market. Labour supply is yearly increased by approximately 27,000 university and 2-year college graduates and 75,000 high school graduates (SIEPA). The people in Serbia speak Serbian (official language) but other languages are widely spoken such as Hungarian, Albanian and Bosnian. English is also widely spoken in Serbia.

Macroeconomic stability

Serbia is the largest market in the Western Balkans in terms of size, with a population of 7.4 million.  Since 2000, Serbia has experienced economic growth averaged 6%, while GDP per capita almost doubled. In the period 2000-2008 Serbia has made significant strides in transforming itself into a modern, market-based economy. According to SIEPA strong GDP performance was largely driven by services sectors such as telecommunications, retail, and banking. However, Serbia’s economy was severely hit by global financial crisis in 2009. According to the 2010 EU Progress Report on Serbia, its GDP shrank by 3% in real terms as a consequence of the global economic crisis, but is projected to have a positive growth in 2010 and in 2011. 

Attractive tax system

Corporate profit tax is set at 10% (one of the lowest in Europe) while salary tax and social insurance contributions are competitive in comparison to other eastern European countries. Serbia’s VAT tax rate stands at only 18% which makes Serbia an attractive country to invest.  18% VAT rate is applicable to most taxable goods whereas 8% lower rate is applicable for certain goods such as basic food products, medicines and medical aids, communal services, hotel accommodation, daily newspapers, textbooks, natural gas, cinema & museum tickets, etc. Moreover Serbia offers VAT exemptions in Serbian Free Zones in order to avoid double taxation of foreign companies.

Free Trade

Serbia offers free trade zones meaning that when doing business in free zones, investors are provided special benefits and a favourable tax regime that includes exclusion from VAT and custom duties for raw material import for export goods production, machinery, equipment, and building materials. Currently, there are six free zones which are currently operating in Serbia: Pirot, Subotica, Zrenjanin, Kragujevac, Sabac, and Novi Sad. Two more free zones are currently being prepared: Smederevo and Uzice. Additionally, imports and exports within free zones are unlimited. Goods that are imported from free zones into the domestic market are subject to foreign trade regime.

Serbia has signed free trade agreement with the European Union, the United States of America, the Russian Federation, Kazakhstan, Turkey, South East Europe, the European Free Trade Agreement members, and Belarus.

Foreign Direct Investments

During the 2007 Serbia recorded strong foreign direct investment (FDI) of $2.2 billion and in 2008, FDI reached to $2.3 billion whereas the country saw a decline of FDI in 2009 which decline to $1.9 billion. According to the 2010 EU Progress Report in 2009 as a result of global financial crisis, foreign direct investment (FDI) in Serbia fell by a quarter compared to a year earlier, to €1.37 billion, accounting for 4.3% of GDP. The following are some international businesses that operated successfully in Serbia; Fiat, Telenor, AB InBev, Kronospan, Henkel, Intesa  Sanpaolo.

Quick and Simple business registration

The business registration procedure in Serbia, according to the Doing Business Report 2011, typically takes 13 days and 7 procedures. The business registration process is simplified and  tailored to meet the requirements of the type of a company one wishes to establish. Transparency and low registration costs add to the efficient institutional and legal frameworks for business registration. The minimum capital required is €10,000 or €25,000 for a Joint Stock Company, and €500 for a Limited Liability Company (SIEPA).

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