Serbia’s investment climate has been modestly improving in recent years, driven by macroeconomic reforms, greater financial stability, improved fiscal discipline, and a European Union (EU) accession process that provides impetus for legal changes that improve the business environment. The government successfully completed a three-year Stand-by Arrangement with the International Monetary Fund (IMF), with the government exceeding all its fiscal targets in 2018. The government signed a new 30-month Policy Coordination Instrument with the IMF in mid-2018. Serbia improved four places in 2020 on the World Bank’s Doing Business Index and is now ranked 44th globally in ease of doing business. Attracting foreign investment remains an important priority for the Serbian government. U.S. investors in Serbia are generally positive, highlighting the country’s strategic location, well-educated and affordable labor force, excellent English language skills, investment incentives, and free-trade arrangements with key markets, particularly the EU. Generally, U.S. investors enjoy a level playing field with their Serbian and foreign competitors. The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to our concerns.
Despite notable progress in Serbia, challenges remain, particularly with regard to bureaucratic delays and corruption. Other risks to the investment climate include unresolved loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the decisions of nominally independent regulatory agencies is also a concern.
Serbian companies faced temporary export restrictions on certain agricultural products and on all medicines in March and April 2020 due to the COVID-19 pandemic. The Serbian government lifted the export restriction on medicines on April 24 and lifted restrictions on all other affected goods on May 7.
The Serbian government has identified economic growth and job creation as its top economic priorities and has committed itself to resolving several long-standing issues related to the country’s slow transition to market-driven capitalism. On the legislative front, the government has passed significant reforms to labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. Both companies and officials have noted that the adoption of reforms has sometimes outpaced thorough implementation of these reforms. Digitizing certain functions (e.g., construction permitting, tax administration, e-signatures, and removing the previously ubiquitous requirement for ink stamps) has not yet brought a dramatic improvement in processing times and may not be consistently implemented.
The government is slowly making progress on resolving the fate of troubled SOEs. Where possible, this has been achieved through bankruptcy or privatization actions. For example, bankruptcy protections were removed for 17 SOEs in May 2016, and the situation of most of these companies has been resolved. The government is also slowly decreasing Serbia’s bloated public-sector workforce, mainly through attrition and hiring freezes, which continued through 2018.
If the government delivers on promised reforms during its EU accession process, business opportunities could continue to grow in the coming years. Sectors that stand to benefit include agriculture and agro-processing, solid waste management, sewage, environmental protection, information and communications technology (ICT), renewable energy, health care, mining, and manufacturing.
Women in Serbia generally enjoy equal treatment in business, and the government offers various programs to support women’s businesses. One program that started in 2017 provides approximately USD 1 million from the Serbian government budget to support women’s innovative entrepreneurship in the form of small grants.
Investors should monitor the government’s implementation of reforms as well as the government’s changing investment incentive programs.
|TI Corruption Perceptions Index||2019||91 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2020||44 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||57 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD 145 million||http://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||USD 7,234||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Serbia is open to FDI, and attracting FDI is a priority for the government. Even during its socialist past, Serbia prioritized international commerce and attracted a sizeable international business community. This trend continues, and the Law on Investments extends national treatment to and eliminates discriminatory practices against foreign investors. The law also allows the repatriation of profits and dividends, provides guarantees against expropriation, allows customs duty waivers for equipment imported as capital in kind, and enables foreign investors to qualify for government incentives.
The Government’s investment promotion authority is the Development Agency of Serbia (Razvojna agencija Srbije – RAS: ). RAS offers a wide range of services, including support of direct investments, export promotion, and coordinating the implementation of investment projects. RAS serves as a one-stop-shop for both domestic and international companies. The government maintains a dialogue with businesses through associations such as the Serbian Chamber of Commerce, American Chamber of Commerce in Serbia, Foreign Investors’ Council (FIC), and Serbian Association of Managers (SAM).
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own businesses, and to engage in all forms of remunerative activity.
For some business activities, licenses are required, e.g., financial institutions must be licensed by the National Bank of Serbia prior to registration. Licensing limitations apply to both domestic and foreign companies active in finance, energy, mining, pharmaceuticals, medical devices, tobacco, arms and military equipment, road transportation, customs processing, land development, electronic communications, auditing, waste management, and production and trade of hazardous chemicals.
Serbian citizens and foreign investors enjoy full private-property ownership rights. Private entities can freely establish, acquire, and dispose of interests in business enterprises. By law, private companies compete equally with public enterprises in the market and for access to credit, supplies, licenses, and other aspects of doing business. Serbia does not maintain investment screening or approval mechanisms for inbound foreign investment. U.S. investors are not disadvantaged or singled out by any rules or regulations.
Agribusiness: Foreign citizens and foreign companies are prohibited from owning agricultural land in Serbia. However, foreign ownership restrictions on farmland do not apply to companies registered in Serbia, even if the company is foreign-owned. Unofficial estimates suggest that Serbian subsidiaries of foreign companies own some 20,000 hectares of farmland in the country. EU citizens are exempt from this ban, as of 2017, although they may only buy up to two hectares of agricultural land under certain conditions. They must permanently reside in the municipality where the land is located for at least 10 years, practice farming on the land in question for at least three years, and own adequate agriculture machinery and equipment.
Defense: The Law on Investments adopted in 2015 ended discriminatory practices that prevented foreign companies from establishing companies in the production and trade of arms (for example, the defense industry) or in specific areas of the country. Further liberalization of investment in the defense industry continued via a new Law on the Production and Trade of Arms and Ammunition, adopted in May 2018. The law enables total foreign ownership of up to 49 percent in seven SOEs, collectively referred to as the “Defense Industry of Serbia,” so long as no single foreign shareholder exceeds 15 percent ownership. The law also cancels limitations on foreign ownership for arms and ammunition manufacturers.
Other Investment Policy Reviews
Serbia underwent formal reviews by the Organization for Economic Cooperation and Development (OECD) on Labour Market and Social Policies in 2008 and by the United Nations Conference on Trade and Development (UNCTAD) on competition policy in 2011.
According to the World Bank’s 2020 Doing Business Index, it takes seven procedures and seven days to establish a foreign-owned limited liability company in Serbia. This is fewer days but more procedures than the average for Europe and Central Asia. In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Serbia must translate its corporate documents into Serbian.
Under the Business Registration Law, the Serbian Business Registers Agency (SBRA) oversees company registration. SBRA’s website is available in English at . All entities applying for incorporation with SBRA can use a single application form and are not required to have signatures notarized.
Companies in Serbia can open and maintain bank accounts in foreign currency, although they must also have an account in Serbian dinars (RSD). The minimum capital requirement is symbolic at RSD 100 (less than USD 1) for limited liability companies, rising to RSD 3 million (approximately USD 27,500) for a joint stock company. A single-window registration process enables companies that register with SBRA to obtain a tax registration number (poreski identifikacioni broj – PIB) and health insurance number concurrently with registration. In addition, companies must register employees with the Pension Fund at the Fund’s premises. Since December 2017, the Labor Law requires employers to register new employees before they start their first day at work; previously, the deadline was registration within 15 days of employment. These amendments represent an attempt by the government to decrease the grey labor market by allowing labor inspectors to penalize employers if they find unregistered workers.
Pursuant to the Law on Accounting, companies in Serbia are classified as micro, small, medium, and large, depending on the number of employees, operating revenues, and value of assets.
RAS supports direct investment and promotes exports. It also implements projects aimed at improving competitiveness, supporting economic development, and supporting small-and medium-sized enterprises (SMEs) and entrepreneurs. More information is available at .
Serbia’s business-facilitation mechanisms provide for equitable treatment of both men and women when a registering company, according to the World Bank’s 2020 Doing Business Index. The government has declared 2017-2027 a Decade of Entrepreneurship, with special programs to support entrepreneurship by women.
The Serbian government neither promotes nor restricts outward direct investment. Restrictions on short-term capital transactions—i.e., portfolio investments—were lifted in April 2018 through amendments to the Law on Foreign Exchange Operations. Prior to this, residents of Serbia were not allowed to purchase foreign short-term securities, and foreigners were not allowed to purchase short-term securities in Serbia. There are no restrictions on payments related to long-term securities.
Capital markets are not fully liberalized for individuals. Citizens of Serbia are not allowed to have currency accounts abroad, or to keep accounts abroad, except in exceptional situations listed in the Law on Foreign Exchange Operations (such situations may include work or study abroad).
3. Legal Regime
Transparency of the Regulatory System
Serbia is undertaking an extensive legislative amendment process aimed at harmonizing its laws with those of the European Union’s acquis communautaire. Harmonization of Serbian law with the acquis has created a legal and regulatory environment more consistent with international norms.
The government, ministries, and regulatory agencies develop, maintain, and publish a plan online of all anticipated legislation and regulations, as well as deadlines for their enactment. Serbian law requires that the text of proposed legislation and regulations be made available for public comment and debate if the law would significantly affect the legal regime in a specific field, or if the subject matter is an issue of a particular interest to the public. The website of Serbia’s unicameral legislature, called the National Assembly ( ), provides a list of both proposed and adopted legislation. There is no minimum period of time set by law for the text of proposed legislation or regulations to be publicly available.
In recent years, Serbia’s National Assembly has adopted many laws through an “urgent procedure”. By law, an urgent procedure can be used only “under unforeseeable circumstances,” to protect human life and health, and to harmonize legislation with the EU acquis. Bills proposed under an urgent procedure may be introduced with less than 24 hours’ notice, thus limiting public consideration and parliamentary debate. The European Commission’s 2019 Staff Working Document for Serbia stated that “continued frequent use of the urgent procedure for the adoption of laws limits the effective inclusion of civil society in the law-making process” and that such parliamentary practices have also “led to a deterioration in legislative debate and scrutiny[.]” The Council of Europe’s Group of States against Corruption (GRECO) echoed concerns regarding the lack of transparency in the legislative process.
International Financial Reporting Standards (IFRS) are required for publicly listed companies and financial institutions, as well as for the following large legal entities, regardless of whether their securities trade in a public market: insurance companies, financial leasing lessors, voluntary pension funds and their management companies, investment funds and their management companies, stock exchanges, securities brokerages, and factoring companies. Additionally, IFRS standards are required for all foreign companies whose securities trade is in any public market.
Although there are no informal regulatory processes managed by NGOs or the private sector, several Serbian organizations publish recommendations for government action to improve the transparency and efficiency of business regulations. The Foreign Investors Council publishes an annual White Book ( ), the National Alliance for Local Economic Development (NALED) publishes a recommendations titled Eliminating Administrative Barriers to Doing Business in Serbia ( ), and the American Chamber of Commerce (AmCham) publishes similar materials on its website ( ).
In 2018, Serbia enacted a Law on Ultimate Beneficial Owners Central Registry (“Law”). This Law was adopted to harmonize domestic legislation with international standards and to improve the existing system of detecting and preventing money laundering and the financing of terrorism. The Law on Ultimate Beneficial Owners Central Registry introduced a single, public, online electronic database maintained by the Serbian Business Registers Agency (www.apr.gov.rs), containing information on natural persons which are the ultimate beneficial owners of the companies (“Register”). Companies incorporated before December 31, 2018, are obliged to prepare and keep documentation regarding their ultimate beneficial owners at their offices, while new companies are obliged to register this information with the Register within 15 days of their incorporation. All companies were required to be registered accordingly in 2019.
In February 2018, Serbia joined the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which aims to address tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the framework, 112 countries and jurisdictions are collaborating to implement measures against BEPS.
Regulatory inspections in Serbia are numerous and decentralized. Nationally, there are 37 different inspectorates, operating within the competence of 12 different ministries. They operate without any significant cooperation or coordination, there is overlapping and duplication of functions among inspectorates, and there is a lack of consistency even within individual inspectorates, which represents a source of additional burdens and difficulties for business operation. Administrative courts are the legal entities that consider appeals from inspection decisions.
Serbia’s public finances are relatively transparent as it regularly publishes draft and adopted budgets, as well as budget revisions. The Serbian government has also published and Parliament adopted all of the end-of-year budgets from 2002 through 2018. The Serbian government regularly publishes information related to public debt on the website . This information is updated daily and is generally considered accurate.
International Regulatory Considerations
Serbia is not a member of the World Trade Organization or the EU. Serbia obtained EU candidate country status in 2012 and opened formal accession negotiations. The WTO accepted Serbia’s application for accession on February 15, 2005, and Serbia currently has observer status. No accession dates have been set for Serbia’s membership in either the EU or WTO.
Legal System and Judicial Independence
Serbia has a civil law system. The National Assembly codifies laws; the courts have sole authority to interpret legislation. Although judicial precedent is not a source of law, written judgments have the non-binding effect of helping to harmonize court practices. Serbia has a written law on contracts and commercial law.
In general, contract enforcement is weak, and the courts responsible for enforcing property rights remain overburdened. When negotiating contracts, the parties may agree on the manner in which to resolve disputes. Most often for domestic entities, contract dispute resolution is left to the courts and can be pursued through civil litigation. Under Serbian commercial law, the Law on Obligations regulates contractual relations (also known as the Law on Contracts and Torts). Civil Procedure Law, which details the procedure in commercial disputes, governs contract-related disputes. Parties to a contract are free to decide which substantive law will govern the contract. The law of Serbia need not be the governing law of a contract entered into in Serbia. Foreign courts’ judgments are enforceable in Serbia only if Serbian courts recognize them. Jurisdiction over recognition of foreign judgments rests with the Commercial Courts and Higher Courts. The Law on Resolution of Disputes with the Regulations of Other Countries, as well as by bilateral agreements, regulates the procedures for recognition of foreign court decisions.
The organization of the court system and jurisdiction of courts in Serbia are regulated by statute. The court system consists of the Constitutional Court, courts of general jurisdiction, and courts of special jurisdiction. Basic courts are courts of first instance and cover one or more municipalities. Higher courts cover the territory of one or more basic courts and are also courts of first instance, while acting as courts of second instance over basic courts. Commercial courts adjudicate commercial matters, with the Commercial Appeal Court being the second-instance court for such matters. Appellate courts are second instance courts to both basic and higher courts, except when higher courts act as second instance courts to basic courts. The Constitutional Court decides on the constitutionality and legality of laws and bylaws, and protects human and minority rights and freedoms. The Supreme Cassation Court is the highest court in Serbia and is competent to decide on extraordinary judiciary remedies and conflicts of jurisdiction. Regulations and regulatory enforcement actions are appealable within the national court system.
There is a distinction in Serbia between Commercial Courts and courts of general jurisdiction. Commercial Courts have original jurisdiction over disputes arising from commercial activities, including disputes involving business organizations, business contracts, foreign investment, foreign trade, maritime law, aeronautical law, bankruptcy, civil economic offenses, intellectual property rights, and misdemeanors committed by commercial legal entities. Their jurisdiction extends to both legal and natural persons engaged in commercial activities, in cases where both parties are economic operators. When only one of the parties is an economic operator and the other is not, such disputes are decided by courts of general civil jurisdiction and not by Commercial Courts. As an exception, in bankruptcy and reorganization proceedings, Commercial Courts have jurisdiction over all disputes where an economic operator is in bankruptcy in relation to other economic or non-economic operators.
Jurisdiction over civil commercial disputes is organized on two levels: Commercial Courts hear first instance cases; and the Appellate Commercial Court decides on appeals against lower court decisions. Commercial courts have broad jurisdiction. There are 16 trial-level Commercial Courts in Serbia. They handle disputes between legal entities, those between domestic and foreign companies; disputes concerning intellectual property and related rights; those arising under the application of Serbia’s Company Law and its regulation; and those relating to privatization and securities; relating to foreign investments, ships and aircraft, navigation at sea and on inland waters, and involving maritime and aviation law. Commercial courts also conduct bankruptcy and reorganization proceedings.
Congestion rates in the Commercial Courts are high. The time to case disposition in commercial litigation is in line with EU averages. However, there is inconsistent application of the law across Serbia, including in Commercial Courts.
According to the Constitution, Serbia’s judicial system is legally independent of the executive branch; but in practice, significant obstacles remain to true judicial independence. The European Commission’s 2019 Staff Working Document for Serbia observes that the current constitutional and legislative framework leaves room for undue political influence over the judiciary, and that political pressure on the judiciary remains high. Serbia has proposed draft constitutional amendments aimed at strengthening the independence of the judiciary, but those amendments have not yet been adopted or ratified.
Laws and Regulations on Foreign Direct Investment
Significant laws for investment, business activities, and foreign companies in Serbia include the Law on Investments, the Law on Foreign Trade, the Law on Foreign Exchange Operations, the Law on Markets of Securities and other Financial Instruments, the Company Law, the Law on Registration of Commercial Entities, the Law on Banks and Other Financial Institutions, Regulations on Conditions for Establishing and Operation of Foreign Representative Offices in Serbia, the Law on Construction and Planning, the Law on Financial Leasing, the Law on Concessions, the Customs Law, and the Law on Privatization. These statutes set out the basic rules foreign companies must follow if they wish to establish subsidiaries in Serbia, invest in local companies, open representative offices in Serbia, enter into agency agreements for representation by local companies, acquire concessions, or participate in a privatization process in Serbia. Other relevant laws include:
- The Law on Value Added Tax, Law on Income Tax, Law on Corporate Profit Tax, Law on Real Estate Tax, and the Law on Mandatory Social Contributions. .
- Laws and regulations related to business operations can be found on the Economy Ministry’s website at .
- Laws and regulations on portfolio investments are on the Securities Commission’s website at .
- Laws and regulations related to payment operations can be found on the National Bank of Serbia’s website at
In 2019, Serbia undertook major anti-money laundering and counter-financing of terrorism regime (AML/CFT) legislative reforms, following the intergovernmental Financial Action Task Force’s (FATF) February 2018 finding that Serbia had strategic deficiencies in its AML/CFT regime. To respond to the deficiencies, twelve new laws and over 60 regulations came into force. The new legislation includes a new AML/CFT Law, as well as amendments to the Criminal Code with regard to the further criminalization of money laundering. Among other AML/CFT reforms, Serbia introduced a Law on Ultimate Beneficial Owners Central Registry. The Serbian Business Registers Agency maintains a single, public, online electronic database containing information on natural persons who are the ultimate beneficial owners of legal entities. FATF removed Serbia from its monitoring process in June 2019, but Serbia remains subject to enhanced follow-up procedures by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, known as MONEYVAL.
There is no primary or “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors. However, numerous Serbian firms that provide legal and other professional services publish comprehensive information for foreign investors, including PricewaterhouseCoopers, .
Competition and Anti-Trust Laws
The Law on Protection of Competition was enacted in 2009 and amended in 2013. The Commission for the Protection of Competition is responsible for competition-related concerns and in principle implements the law as an independent agency reporting directly to the National Assembly. In some cases, companies have reported perceptions that political factors have influenced the Commission’s decision-making. In 2018, the Commission completed seven proceedings for violations of competition rules, approved 158 mergers (and rejected six), and issued 15 opinions about potential breaches of competition rules. Annual reports of the Commission’s actions are published online at . Laws and regulations related to market competition are available at .
Expropriation and Compensation
A foreign investor is guaranteed national treatment, which means that any legal entity or natural person investing in Serbia enjoys full legal security and protection equal to those of local entities. A stake held by a foreign investor or a company with a foreign investment cannot be the subject of expropriation. The contribution of a foreign investor may be in the form of convertible foreign currency, contribution in kind, intellectual property rights, and securities.
Serbia’s Law on Expropriation authorizes expropriation (including eminent domain) for the following reasons: education, public health, social welfare, culture, water management, sports, transport, public utility infrastructure, national defense, local/national government needs, environmental protection, protection from weather-related damage, mineral exploration or exploitation, resettlement of persons holding mineral-rich lands, property required for certain joint ventures, and housing construction for the socially disadvantaged.
In the event of an expropriation, Serbian law requires compensation in the form of similar property or cash approximating the current market value of the expropriated property. The law sets forth various criteria for arriving at the amount of compensation applicable to different types of land (e.g. agricultural, vineyards or forests), or easements that affect land value. The local municipal court is authorized to intervene and decide the level of compensation if there is no mutually agreed resolution within two months of the expropriation order.
The Law on Investment provides safeguards against arbitrary government expropriation of investments. There have been no cases of expropriation of foreign investments in Serbia since the dissolution of the former Federal Republic of Yugoslavia in 2003. There are, however, outstanding claims against Serbia related to property nationalized under the Socialist Federal Republic of Yugoslavia, which was dissolved in 1992.
The 2014 Law on Restitution of Property and Compensation applies to property seized by the government since the end of World War II (March 9, 1945), and includes special coverage for victims of the Holocaust, who are authorized to reclaim property confiscated by Nazi occupation forces. Under the law, restitution should be in kind when possible, and otherwise in the form of state bonds. Many properties are exempt from in-kind restitution, including property previously owned by corporations. Heirless property left by victims of the Holocaust is subject to a separate law, which was approved in February 2016.
Serbia committed itself under its restitution law to allocate EUR 2 billion, plus interest, for financial compensation to citizens in bonds and in cash. The restitution law caps the amount of compensation that any single claimant may receive at EUR 500,000 (approximately USD 565,000). With amendments to the Law on Restitution and Compensation adopted in December 2018, the government postponed for the third time issuance of these bonds until December 2021, pending approval of necessary by-laws that would regulate bond issuance. The Law mandates that by-laws be adopted by Government of Serbia by June 2020. The bonds will be denominated in euros, carry a two-percent annual interest rate, have a maturity period of 12 years, and be tradable on securities markets. The deadline for filing restitution applications was March 1, 2014. The Agency for Restitution received 75,414 property claims, and the adjudication process is still ongoing. Information about the Agency for Restitution and the status of cases is available on its website at .
ICSID Convention and New York Convention
Serbia is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention), and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The Law on Arbitration and the Law on Management of Courts regulate proceedings and jurisdiction over the recognition of foreign arbitral awards.
Investor-State Dispute Settlement
Although Serbia is a signatory to many international treaties regarding international arbitration, enforcement of an arbitration award can be a slow and difficult process. Serbia’s Privatization Agency refused for five years (2007-2012) to recognize an International Chamber of Commerce/International Court of Arbitration award in favor of a U.S. investor. The dispute caused the U.S. Overseas Private Investment Corporation (OPIC), which had insured a portion of the investment, to severely restrict its activities in Serbia. The U.S. Embassy facilitated a settlement agreement between the Serbian government and the investor, and OPIC reinstated its programs for Serbia in February 2012, but in 2015 and early 2016 both a first instance and appellate Serbian court dismissed OPIC’s request for enforcement action to collect damages awarded to it by an international arbitration board in the same case. Serbia has no Bilateral Investment Treaty (BIT) with the United States. In the past 10 years, three publicly-known investment disputes have involved U.S. citizens. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
The Law on Arbitration authorizes the use of institutional and ad hoc arbitration in all disputes, and regulates the enforcement of arbitration awards. The law is modeled after the United Nations Commission on International Trade Law (UNICTRAL Model Law).
Commercial contracts, in which at least one contracting party is a foreign legal or natural person, may incorporate arbitration clauses, invoking the jurisdiction of the Foreign Trade Court of Arbitration of the Serbian Chamber of Commerce, or any other foreign institutional arbitration body, including ad hoc arbitration bodies. International arbitration is an accepted means for settling disputes between foreign investors and the state.
Serbia is a signatory to the following international conventions regulating the mutual acceptance and enforcement of foreign arbitration:
- 1923 Geneva Protocol on Arbitration Clauses
- 1927 Geneva Convention on the Execution of Foreign Arbitration Decisions
- 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)
- 1961 European Convention on International Business Arbitration
- 1965 International Centre for the Settlement of Investment Disputes (ICSID)
Serbia allows for mediation to resolve disputes between private parties. Mediation is a voluntary process and is conducted only when both parties agree. The Law on Mediation regulates mediation procedures in disputes in the following areas of law: property, commercial, family, labor, civil, administrative and in criminal procedures where the parties act freely, unless the law stipulates exclusive authority of a court or other relevant authority.
Mediators can be chosen from the list of the Serbian National Association of Mediators, or from an official registry within the Ministry of Justice. There are two types of mediation: court-annexed and private mediation. A person can also be referred to mediation by a court, advocate, local ombudsman, employees of municipal or state authorities, an employer, or the other party to the conflict.
Serbia’s bankruptcy law is in line with international standards. According to the bankruptcy law, the goal is to provide compensation to creditors via the sale of the assets of a debtor company. The law stipulates automatic bankruptcy for legal entities whose accounts have been blocked for more than three years, and allows debtors and creditors to initiate bankruptcy proceedings. The law ensures a faster and more equitable settlement of creditors’ claims, lowers costs, and clarifies rules regarding the role of bankruptcy trustees and creditors’ councils. Parliament adopted new amendments to the Bankruptcy Law in December 2017. These amendments enable better collection and reduced costs for creditors; provide shorter deadlines for action by bankruptcy trustees and judges; improve the position of secured creditors; anticipate new ways of assessing debtors’ assets by licensed appraisers; and introduce a special rule to lift bans on the execution of debtor assets that are under mortgage, giving rights to the secured creditor to sell such assets under rules that apply to mortgage sales.
Foreign creditors have the same rights as Serbian creditors with respect to initiating or participating in bankruptcy proceedings. Claims in foreign currency are calculated in dinars at the dinar exchange rate on the date the bankruptcy proceeding commenced. Serbia’s Criminal Code criminalizes intentionally causing bankruptcy, and fraud in relation to a bankruptcy proceeding. The 2020 World Bank Doing Business Index ranked Serbia 41 out of 190 economies with regards to resolving insolvency, with an average time of two years needed to resolve insolvency and average cost of 20 percent of the estate. The recovery rate was estimated at 34.5 cents on the dollar ( ).
4. Industrial Policies
The 2015 Law on Investment defines Serbia’s investment incentives program. Incentives are available to both domestic and foreign investors. The law established a Council for Economic Development and the Development Agency of Serbia (RAS). The Council has oversight responsibility for the investment incentives program, while RAS plays a more operational role.
The level of available subsidies for investment projects is determined under the Decree on Defining Conditions for Approving Incentives in Attracting Direct Investments, approved for the current year in January 2019. Investors are obliged to provide 25 percent of eligible costs from their own resources. For investment projects valued at EUR 50-100 million, subsidies are limited to 25 percent of the total investment, falling to 17 percent for projects over EUR 100 million. Under certain conditions, large companies can gain support for up to 50 percent of eligible costs for investment projects, medium-sized companies up to 60 percent, and small companies up to 70 percent.
The Decree makes available funds for investment projects in manufacturing and customer service centers. For manufacturing investments, state subsidies are available for any company that invests the equivalent of EUR 100,000 and employs at least 10 persons in a “devastated area.” For service center investments, subsidies are available for companies investing the equivalent of EUR 150,000 and creating at least 15 new jobs anywhere in the country. The required minimum investment and employment levels for subsidies increase on a sliding scale according to the level of development of the investment location. For each investment project in a devastated area, the state will pay the investor 40 percent of the eligible gross salary costs for newly employed people in the two-year period after reaching employment commitments, up to the equivalent of EUR 7,000 per new job; the subsidy declines to 20 percent of eligible costs up to EUR 3,000 per job in the most developed regions. For labor-intensive projects that create more than 200 new jobs, the government can approve additional incentives. The state will also provide subsidies for the purchase of fixed assets, again on a sliding scale based on the level of development at the investment location. The subsidy reaches 30 percent of eligible asset costs in a devastated area and declines to 10 percent in the most developed areas of Serbia. The total amount of subsidies granted cannot exceed the amount allowed under Serbia’s EU-compliant state aid regulations. The Serbian government may sell land for construction at a below-market price in support of an investment project that is of national importance.
There is a separate Decree on Defining Conditions for Approving Incentives in Attracting Direct Investments in Production of Food Products also approved in January 2019 with almost identical conditions to those mentioned above. The only difference is that state subsidies are available for any company that invests the equivalent of the minimum EUR 2 million and employs at least 30 new employees regardless of the level of the municipality development. For projects investing over EUR 20 million in the fixed assets the government will approve additional incentives.
The government also approved a Decree on Conditions and Methods of Attracting Direct Investments in the Hotel Accommodation Service Sector in May 2019, making similar state subsidies available for any company that invests the equivalent of the minimum EUR 2 million and employs at least 70 new employees in the sector. For investment projects valued at up to EUR 30 million, subsidies are limited to 20 percent of the of the eligible costs of investment in fixed assets, falling to 10 percent for projects over EUR 30 million. Details on all three decrees are available at: and .
The decrees on Attracting Direct Investments also establish criteria for granting local incentives to investments of importance for local development.
At the provincial level, the government of the Vojvodina region offers investment incentives, which are very similar to those described above. The main difference is that the program is implemented by the Development Agency of Vojvodina, which was established in February 2017 as the successor to the Vojvodina Investment Promotion Agency (VIP) ( ).
Local municipalities may sell land for construction at below-market rates for investments that promote local economic development. Other major incentives at the local level include exemptions or deductions on land-related fees and other local fees.
Serbia’s tax laws offer several incentives to new investors. The corporate profit tax rate is a flat 15 percent, one of the lowest in the region. Non-resident investors are taxed only on income earned in Serbia. A ten-year tax holiday on corporate profits is available for investors who hire more than 100 workers and invest more than RSD 1 billion (USD 10.5 million). The tax holiday begins once the company starts making a profit.
According to the December 2019 Decree on Film Incentives, both domestic and foreign filmmakers are eligible to apply for a refund of 25 percent of qualifying costs. For film projects over EUR 5 million, the government offers a refund of up to 30 percent of qualifying costs. The 2020 budget for film incentives is $7 million.
Employment incentives allow payroll tax deductions for persons registered with the National Employment Service for at least six months continuously. The incentives currently in place are valid from the moment of employment until December 31, 2020:
- 1-9 new jobs: 65 percent deduction
- 10-99 new jobs: 70 percent deduction
- 100+ new jobs: 75 percent deduction
The Serbian Innovation Fund provides various granting opportunities for young entrepreneurs and start-ups, including mini grants for development of technological innovation, matching grants for commercialization of research and development, and a collaborative grant scheme for joint R&D projects creating new products and services. These grants are mainly available for companies established in Serbia with majority private Serbian ownership. For more details visit:
Some subsidized loans for start-ups, entrepreneurs and SMEs are available through the state-owned Fund for Development and various ministries, and part are issued through RAS. Detailed information is available at (Serbian only). These loans are available to foreign-owned companies registered in Serbia, provided the Serbian registered company has not recorded losses in the previous two years.
The government issues guarantees or jointly finances foreign direct commercial investment projects. The government participates as a minority partner in financed infrastructure projects.
Foreign Trade Zones/Free Ports/Trade Facilitation
Serbia maintains 15 designated customs-free zones: in Apatin, Belgrade, two zones in Kragujevac (the second one was established on October 1, 2019), Krusevac, Novi Sad, Pirot, Priboj, Sabac, Smederevo, Svilajnac, Subotica, Uzice, Vranje, and Zrenjanin. The zones, established under the 2006 Law on Free Zones, are intended to attract investment by providing tax-free areas for company operations. Businesses operating in the zones qualify for benefits including unlimited duty-free imports and exports, preferential customs treatment, and tax relief in the form of value-added tax (VAT) exclusions. Companies operating within a free zone are subject to the same laws and regulations as other businesses in Serbia, except for their tax privileges.
Goods entering or leaving the zones must be reported to customs authorities, and payments must be made in accordance with regulations on hard-currency payments. Goods delivered from free zones into other areas of Serbia are subject to customs duties and tax unless they contain a minimum of 50 percent Serbian inputs. Earnings and revenues generated within free zones may be transferred freely to any country, including Serbia, without prior approval, and are not subject to any taxes, duties or fees.
Performance and Data Localization Requirements
The Serbian government does not mandate local employment or have onerous visa, residence, or work permitting requirements for foreign nationals. It does not impose conditions for foreign investors to receive permission to invest.
The Serbian government does not maintain a policy of forced localization designed to oblige foreign investors to use domestic content in goods or technology. Similarly, the government does not force foreign investors to establish or maintain a specified amount of data storage within the country. There are no requirements for foreign IT providers to turn over source code or provide access to encryption.
With the Data Protection Law passed in November 2018, Serbia has implemented the requirements of the EU’s General Data Protection Regulation (GDPR). The law entered into force in August 2019 after a nine-month transition period. Some experts have criticized the law as unclear, citing provisions transcribed from EU law that include mechanisms that do not yet exist in Serbia’s domestic legal system, which leads to questions regarding the law’s implementation. Other experts have argued that with the law, Serbia has enacted a high personal data-protection standard, and that defects will be resolved over time
The Decree on Conditions for Approving Incentives in Attracting Direct Investments defines conditions and limitations for investment incentives, such as maintaining investments at a specified location for up to five years. Similarly, investors are obliged to maintain the number of newly engaged employees for up to five years. Potential investors who want to use state grants are required to provide a minimum of 25 percent of eligible costs from their own resources. The deadline for implementation of investment projects and the creation of new workplaces is three years from the date of applying for state grants. This deadline may be extended for up to five years based on a written justification. Beneficiaries are obliged to provide a bank guarantee as security for the eventual return of received funds. In case of non-fulfilment of the conditions provided for in the state grant contract, the Ministry of Economy and the Council for Economic Development may decide to terminate the contract at any time; however, authorities have generally shown great flexibility in favor of investors to succeed. Conditions are applied uniformly to both domestic and foreign investors.
5. Protection of Property Rights
Serbia has an adequate body of laws for the protection of property rights, but enforcement of property rights through the judicial system can be very slow. A multitude of factors can complicate property titles: restitution claims, unlicensed and illegal construction, limitation of property rights to rights of use, outright title fraud and other issues. Investors are cautioned to investigate thoroughly all property title issues on land intended for investment projects.
During the country’s socialist years, owners of nationalized land became users of the land and acquired rights of use that, until 2003, could not be freely sold or transferred. In July 2015, the government adopted a law that allows for property usage rights to be converted into ownership rights with payment of a market-based fee.
In March 2015, the government implemented new amendments to the Law on Planning and Construction that separated the issuance of permits from conversion issues. These amendments cut the administrative deadline for issuing construction permits for a potential investor to 30 days and introduced a one-stop shop for electronic construction permits.
Serbia’s real-property registration system is based on a municipal cadaster and land books. Serbia has the basis for an organized real estate cadaster and property-title system. However, legalizing tens of thousands of structures built over the past twenty years without proper licenses remains an enormous challenge, as an estimated two million buildings in Serbia are not registered in the cadaster, of which almost half are residential properties. According to some estimates, every third building in Serbia was not built in accordance with legal requirements. In November 2015, the government adopted a new Law on Legalization, which simplified the registration process. Since then, however, only slightly more than 230,000 decisions on legalization have been issued. The deadline set by the law for legalization of all buildings constructed without proper permits is November 2023.
The World Bank’s 2020 Doing Business Index ranks Serbia 58th of 190 countries for time required to register real property (33days).
Intellectual Property Rights
Serbia is a member of the World Intellectual Property Organization (WIPO) and party to all major WIPO treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. While Serbia is not a member of the World Trade Organization (WTO), the Serbian government has taken steps to adhere to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Serbia’s intellectual property rights (IPR) laws include TRIPS-compliant provisions and are enforced by courts and administrative authorities.
For the most part, Serbia’s IPR legislation is modern and compliant with both the EU acquis communautaire and international standards. According to the EU’s 2019 Progress Report, Serbia has generally aligned its IPR legislation with the acquis.
Procedures for registration of industrial property rights and deposit of works and authorship with the Serbian Intellectual Property Office are straightforward and similar to procedures in most European countries. Relevant information is available at: .
Enforcement of IPR remains haphazard but is roughly consistent with levels in neighboring countries. The government has a Permanent Coordination Body for IPR enforcement activities with participation from the tax administration, police, customs, and several state inspection services. Cooperation with the Special Department for High-Technology Crime has already resulted in court decisions to impose penalties in test cases against online traders and counterfeits. The Public Procurement Law requires bidders to affirm that they have ownership of any IPR utilized in fulfilling a public procurement contract. Although still present, trade in counterfeit goods—particularly athletic footwear and clothing—is declining in volume as the government has increased its enforcement efforts, including at the border. Upon seizure, however, authorities cannot destroy the goods unless they receive formal instructions from the rights holders who are billed for the storage and destruction of the counterfeit goods.
Inspectorates and customs authorities’ actions against IPR violations are relatively fast. However, enforcement of IPR in the court system often lasts up to two years. Proceedings improved after the creation of semi-specialized IPR courts in 2015 according to the Foreign Investors’ Council. The Serbian Intellectual Property Office continues to train judges on IPR to enable more timely court decisions.
Digital IPR theft is not common, but many digital brands are not properly protected, and there is a risk of trademark squatting.
Developments in 2019 and 2020
Patents: The Law on Patents in 2019 introduced significant changes to an employer’s ability to patent their employees’ inventions. Specifically, the amended law allows employers to file a patent application for a former employee’s innovations for up to one year after their employment ends, providing a higher level of legal certainty for corporations.
Topography of Semiconductor Products: The Law on the Legal Protection of Topography of Semiconductor Products was amended in 2019 and made fully compliant with EU legislation. There is no publicly available data indicating that anyone has ever exercised these rights in Serbia.
Copyright: Amendments made in 2019 to the Law on Protection of Copyright and Related Rights extends the definition of a work of authorship to include the technical and user documentation associated with software. The Law also addresses two additional issues: first, that multiple authors of a software product will all be deemed to be co-authors, and second, that an employee may require their employment contract to include additional remunerations for any software they create that their employer uses. However, if the employment agreement lacks such provisions , the employee is not entitled to remunerations after the fact, even if their software generates revenue for their employer. These provisions also apply to database producers. With respect to digital works, the 2019 amendments draw a clear line between digital and physical works. Owners or purchasers of a digital copy of a video game, TV show episode, or software are not entitled to further share and/or distribute copies.
Enforcement of Copyright: Court procedures for copyright infringement and related rights case are defined comprehensively, for they emphasize the need to preserve evidence and render urgent precautionary measures, including before an official claim might be submitted or the alleged infringing party is able to respond to the claim. The 2019 amendments clarify that a revision (as a legal remedy) may be filed in copyright infringement and related rights cases regardless of the claim’s value. The amendments also explicitly authorize the courts to summon any retailer or user of illegally downloaded mp3 files, software, or TV episodes.
Trademarks: Serbia recently adopted a new Law on Trademarks that came into force on February 1, 2020 and includes two major changes. The first major change is the introduction of an opposition system. As before, the Intellectual Property Office performs an official examination of the refusal grounds for a trademark application, but now the trademark applications are published before the trademark is granted so that interested parties can challenge the validity of the pending registration. Interested parties have three months to file opposition proceedings from the date of publication, and the trademark applicant must respond within another 60 days or opposition is granted and the trademark is refused. This approach is similar to other European countries. The second major change due to Serbia’s new Law is the allowance of parallel imports. Serbia’s previous national trademark exhaustion system authorized brand–holders to prevent parallel imports. In contrast, the new worldwide system means that the trademark–holder cannot prohibit others from reselling the products that are legally in circulation anywhere in the world. Serbia is now compliant with U.S. standards. The former national system was aligned with EU legislation, which differentiates between goods circulating within the single market and those that were imported from a country outside of the EU market. During their accession process to the EU, Serbia will be required to align its legislation with that of the EU.
Administrative Fees: Amendments to Serbia’s Law on Administrative Fees entered into force in December 2019 and decreases the filing fee for applications filed electronically compared to those filed on paper. The fees for electronic filing of patents and utility model appplications have been reduced by 50 percent and electronic fees for industrial design and trademark applications have been reduced by 25 percent. These measures are meant to encourage electronic filings and make the process more accessible for individuals and small companies.
Statistics: The Customs Administration and Market Inspection issue periodic reports on seizures, but there is no unified methodology. The Customs Administration publishes daily information on the significant border seizures via its official Internet presentation at: and its official Facebook page: and
The tax administration checks software legality during its regular tax controls of businesses, but it performs only 100 regular inspections per year. The estimated value of Serbia’s illegal software market is approximately USD 51 million. According to the 2018 BSA Global Software Survey, software piracy in Serbia is around 66 percent. Although this is down from 72 percent in 2011, it remains among the highest piracy rates in the Balkan region. Serbia is not included in the U. S. Trade Representative (USTR) Special 301 Report or the Notorious Markets List.
6. Financial Sector
Capital Markets and Portfolio Investment
Serbia welcomes both domestic and foreign portfolio investments and regulates them efficiently. The Government removed restrictions on short-term portfolio investments April 2018. Residents of Serbia are now allowed to purchase foreign short-term securities, and foreigners are allowed to purchase short-term securities in Serbia. Payments related to long-term securities have no restriction.
In 2019, Serbia recorded net outflows of USD 200 million in portfolio investment, according to the National Bank of Serbia (NBS). The Serbian government regularly issues bonds to finance its budget deficit, including short-term, dinar-denominated T-bills, and dinar-denominated, euro-indexed government bonds. The total value of government debt securities issued on the domestic market reached USD 10.8 billion in February 2020, with 67.3 percent in Serbian dinars, 33 percent in euros, and 0.6 percent in U.S. dollars. Serbia also issued a total value of EUR 3 billion of Eurobonds on international market.
Serbia’s international credit ratings are improving. In March 2017, Moody’s upgraded the Government of Serbia’s long-term issuer ratings to Ba3, from B1. In December 2019, Standard & Poor’s raised its ratings for Serbia from BB to BB+ with a positive outlook; it maintained the rating on May 1, 2020, while modifying the outlook to stable. Also in September 2019, Fitch raised Serbia’s credit rating from BB to BB+. The improved ratings remain below investment grade.
Serbia’s equity and bond markets are underdeveloped. Corporate securities and government bonds are traded on the Belgrade Stock Exchange (BSE) . Of 990 companies listed on the exchange, shares of fewer than 100 companies are traded regularly (more than once a week). Total annual turnover on the BSE in 2019 was USD 860 million, which represents an increase of 47 percent. However, trading volumes have declined since 2007, when the total turnover reached USD 2.7 billion.
Established in 1995, the Securities Commission regulates the Serbian securities market. The Commission also supervises investment funds in accordance with the Investment Funds Law. As of April 2020, 18 registered investment funds operate in Serbia- .
Market terms determine credit allocation. In June 2019, the total volume of issued loans in the financial sector stood at USD 23.3 billion. Average interest rates are decreasing but still higher than the EU average. The business community cites tight credit policies and expensive commercial borrowing for all but the largest corporations as impediments to business expansion. Around 67 percent of all lending is denominated in euros, an additional 0.5 percent in Swiss francs, and 0.6 percent in U.S. dollars, all of which provide lower rates, but also shift exchange-rate risk to borrowers. Foreign investors are able to obtain credit on the domestic market. The government and central bank respect IMF Article VIII, and do not place restrictions on payments or transfers for current international transactions.
Hostile takeovers are extremely rare in Serbia. The Law on Takeover of Shareholding Companies regulates defense mechanisms. Frequently after privatization, the new strategic owners of formerly state-controlled companies have sought to buy out minority shareholders.
Money and Banking System
The NBS regulates the banking sector. Foreign banks are allowed to establish operations in Serbia, and foreigners can freely open both local currency and hard currency non-resident accounts. The banking sector comprises 91 percent of the total assets of the financial sector. As of June 2019, consolidation had reduced the sector to 26 banks with total assets of USD 38 billion (about 80 percent of GDP), with 76.5 percent of the market held by foreign-owned banks. The top ten banks, with country of ownership and estimated assets, are Banca Intesa (Italy, USD 5.9 billion); UniCredit (Italy, USD 4.4 billion); Komercijalna Banka (majority Serbian government-owned, now in the process of being sold to Slovenia’s NLB Bank, USD 4.1 billion); Société Générale (France, USD 3.1 billion); Raiffeisen (Austria, USD 3.0 billion); Erste Bank (Austria, USD 2.2 billion) AIK Banka Nis (Serbia, USD 2.1 billion); Eurobank EFG (Greece, USD 1.6 billion); Vojvodjanska Banka (Hungary, USD 2.0 billion) Postanska Stedionica (Serbian government, USD 1.8 billion). See:
Four state-owned banks in Serbia went bankrupt after the global financial crisis in 2008. The state compensated the banks’ depositors with payouts of nearly USD 1 billion. A number of state-controlled banks have had financial difficulties since the crisis because of mismanagement and, in one instance, alleged corruption. The banks honored all withdrawal requests during the financial crisis and appear to have regained consumer trust, as evidenced by the gradual return of withdrawn deposits to the banking system. In June 2019, savings deposits in the banking sector reached USD 14 billion, exceeding pre-crisis levels.
The IMF assessed in their July 2019 report on Serbia that since the 2017 Article IV Consultation, the financial sector has shown improved resilience. As of February 2019, banks’ capital adequacy was stable at 22.3 percent, well above the regulatory minimum, while asset quality is improving. Banks’ profitability remains robust with return on assets and return on equity ratios of 1.9 percent and 10.6 percent respectively in February 2019. The IMF assessed in 2018 that authorities had made important progress, with the aggregate stock of non-performing loans (NPLs) falling both in nominal terms and relative to total loans. Since the adoption of an NPL resolution strategy in mid-2015, NPLs have declined from 22.2 to 4.1 percent of the total loan portfolio as of February 2020. NPLs remain fully provisioned. In addition, there are significant foreign-exchange risks, as 74 percent of all outstanding loans are indexed to foreign currencies (primarily the euro). In April 2019, the government adopted a law that protected consumers who had taken mortgage loans denominated in Swiss francs by converting them into euros. Banks and the state shared losses resulting from a reduction of outstanding principal and interest balances. This law enabled borrowers to continue servicing debt at more favorable terms.
The NBS, as chief regulator of the financial system, has announced that cryptocurrencies are not money, and thus are not regulated by law in Serbia. Cryptocurrencies are only mentioned in Serbian legislation in the Law on Preventing of Money Laundering and Terrorist Financing. NBS is not currently preparing cryptocurrency regulations. NBS said it does not have the authority to issue licenses for trading in cryptocurrencies or for setting up cryptocurrency ATMs. Nor are cryptocurrency traders or internet platforms subject to NBS oversight. NBS stressed that those engaging in cryptocurrency transactions or activities are the sole carriers of risk. However, the Serbian Administration for Prevention of Money Laundering and Terrorist Financing oversees every transaction in cryptocurrencies performed on ATMs or online in Serbia.
Despite the lack of regulation, trading in cryptocurrencies in Serbia does occur. The company ECD Group has installed an online platform for trading in cryptocurrencies (Bitcoin BTC, Litecoin LTC, Ethereum ETH, Dash, and Bitcoin Cash) at . The company claims to have over 20,000 registered users of the platform. ECD Group has also installed 10 ATMs for cryptocurrencies in Serbia, most of which are in Belgrade but also in Novi Sad, Nis, and Subotica. EDC claims that it has executed over 100,000 transactions since it was established in 2012. As of June 2019, Xcalibra established a new digital platform (Xcalibra.com) to trade cryptocurrencies in Serbian dinars without mediator currencies, which will avoid currency exchange loss. There is also a Bitcoin Association of Serbia.- .
Foreign Exchange and Remittances
Serbia’s Foreign Investment Law guarantees the right to transfer and repatriate profits from Serbia, and foreign exchange is available. Serbia permits the free flow of capital, including for investment, such as the acquisition of real estate and equipment. Non-residents may maintain both foreign-currency and dinar-denominated bank accounts without restrictions. Investors may use these accounts to make or receive payments in foreign currency. The government amended the Foreign Exchange Law in December 2014 to authorize Serbian citizens to conclude transactions abroad through internet payment systems such as PayPal.
Many companies have raised concerns that the NBS uses excessive enforcement of the Foreign Exchange Law to individually examine all cross-currency financial transactions – including intra-company transfers between foreign headquarters and local subsidiaries, as well as loan disbursements to international firms – thus raising the cost and bureaucratic burden of transactions and inhibiting the development of e-commerce within Serbia. For this reason, international financial institutions and the business community have urged revision of the law. The NBS has defended the measure as necessary to prevent money laundering and other financial crimes.
The NBS targets inflation in its monetary policy, and regularly intervenes in the foreign-exchange market to that end. In 2019, the NBS made net purchases of EUR 2.7 billion on the interbank currency market in order to prevent sharp fluctuations of the dinar. In 2019, the dinar appreciated 0.5 percent against the euro and depreciated 1.5 percent against the U.S. dollar. No evidence has been reported that Serbia engages in currency manipulation. According to the IMF, Serbia maintains a system free of restrictions on current international payments and transfers, except with respect to blocked pre-1991 foreign currency savings abroad. JP Morgan assessed in December 2019 that the Serbian dinar is one of the two most realistically valued currencies among 25 emerging markets globally.
Personal remittances constitute a significant source of income for Serbian households. In 2019, total remittances from abroad reached USD 2.7 billion, or approximately 7 percent of GDP.
The Law on Foreign Exchange Operations regulates investment remittances, which can occur freely and without limits. The Investment Law allows foreign investors to freely and without delay transfer all financial and other assets related to the investment to a foreign country, including profit, assets, dividends, royalties, interest, earnings share sales, proceeds from sale of capital and other receivables. The Foreign Investors’ Council, a business association of foreign investors, confirms that there are no limitations on investment remittances in Serbia.
Sovereign Wealth Funds
Serbia does not have a sovereign wealth fund.
7. State-Owned Enterprises
The Law on Public Enterprises, adopted in February 2016, defines a public enterprise as “an enterprise pursuing an activity of common interest, founded by the State or Autonomous Province or a local government unit.” The law also defines “strategically important companies” as those in which the state has at least a 25 percent ownership share.
The law aimed to introduce responsible corporate management in public companies and strengthen supervision over public companies’ management. The law requires that directors of public companies be selected through a public application procedure and that they not hold any political party positions while serving. The law also requires that a portion of public companies’ profits be paid directly to the state, provincial, or local government budget. However, Transparency International Serbia analyzed implementation of the law in September 2017 and concluded that almost none of these requirements have been implemented, including the professionalization and transparency of management. The full report can be seen at:
SOEs dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. According to the Agency for Business Registers, Serbia has 549 SOEs, which employ more than 115,000 people, or approximately 4 percent of the formal workforce. A list of all public enterprises is available at the Ministry of Economy’s website: In addition to these, at the beginning of 2020, 73 companies with nearly 27,000 employees had not been resolved through privatization or bankruptcy, down from 90 companies in early 2019. The Ministry of Economy is preparing these companies for divestiture (see Privatization Program, below).
A quasi-governmental watchdog agency, the Fiscal Council, assessed in September 2017 that unreformed and un-privatized SOEs represent the most significant threat to Serbia’s state budget. In December 2016, the Serbian government committed to the IMF to significantly reduce the fiscal cost of SOEs by curtailing direct and indirect subsidies, strictly limiting the issuance of new guarantees, and enhancing the accountability, transparency, and monitoring of SOEs. The Fiscal Council said in January 2019 that even when they do not require immediate budget support, as a rule, SOEs operate inefficiently and do not invest enough to keep their businesses healthy. For example, by far the largest SOE in Serbia, the power company EPS, has invested less per year than the value of the depreciation of its assets, the Fiscal Council warned. According to the Agency for Business Registration in Serbia’s annual report, public companies in Serbia generated losses of RSD 574 million (USD 5.7 million) in 2019.
In June 2017, the Fiscal Council published a separate study on state-owned local utility and service companies, and assessed that they received subsidies up to EUR 200 million (0.7 percent of GDP) annually but still generated losses of EUR 50 million. In addition, they have accumulated payment arrears totaling some EUR 150 million. At the same time, the quality of the services they provide is very low. For example, 98 percent of waste ends up at landfills without any processing, compared to 25 percent in the EU. Only 15 percent of wastewater is treated, compared to 85 percent in neighboring countries. The Council assessed that these local companies fail to collect 10 percent of their receivables, and the bulk of unpaid obligations are from SOEs.
In principle, SOEs are treated the same as private sector competitors. SOEs can purchase goods from the private sector and foreign firms under the Public Procurement Law. For example, foreign companies regularly win public tenders for the construction of roads and other infrastructure projects. Under the Public Procurement Law, a buyer must select a domestic supplier if the domestic supplier’s price is no more than five percent higher than a foreign supplier’s price. The Public Procurement Office (PPO) is an independent state body that supervises implementation of the Law on Public Procurement. Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. However, the IMF estimated that in 2014, SOEs enjoyed benefits amounting to approximately two percent of GDP.
Serbia—not yet a member of the WTO—is not a party to the WTO’s Government Procurement Agreement (GPA).
From 2001 through 2015, the Serbian government privatized 3,047 SOEs. The government cancelled 646 of these privatizations, alleging that investors did not meet contractual obligations related to employment and investment. According to the Privatization Law, the deadline for the privatization of the 646 companies in the Privatization Agency’s portfolio was December 31, 2015. However, 73 companies were still unresolved as of April 2020. Among others, these companies include ten spas, which all have unresolved property issues; 13 companies in Kosovo, three veterinary stations which were transferred to local municipalities; 15 companies in restructuring that face bankruptcy, and one company that employs disabled persons.
Most significantly, the Ministry of Economy must still resolve several large, strategically important SOEs. These include the Resavica coal mine, MSK Kikinda, Petrohemija, and others; however, there was progress in privatization in 2018. Copper mining complex RTB Bor was sold to China’s Zijin Mining, and agricultural corporation PKB to Al Dahra of the United Arab Emirates. In addition, fertilizer producer Azotara was sent to bankruptcy. In many cases, closing these companies would mean leaving whole regions of Serbia destitute, since these companies are drivers of local economies. The Serbian government continues to engage foreign investors in the privatization process, inviting them to submit bids, participate in auctions, and purchase company shares. Invitations for privatization and bidding are published on the Ministry of Economy website at .
In December 2018, the French Vinci Airports took over operations of Belgrade’s Nikola Tesla Airport under a 25-year concession agreement. According to official statements, Vinci had offered EUR 501 million to manage the airport and EUR 732 million in investment, as well as an annual fee of up to EUR 16 million. The state telecommunications company Telekom Srbija has garnered investor interest, but the Serbian government has twice canceled its privatization, most recently in December 2015. The government has also concluded the tender for privatization of the second largest bank in the country, Komercijalna Banka, and awarded the contract to Slovenian NLB bank. The sale is expected to be complete by the end of 2020.
8. Responsible Business Conduct
Responsible Business Conduct (RBC) and Corporate Social Responsibility are relatively new concepts in Serbia, and until recently many Serbian companies viewed them mainly as public relations tools.
The Serbian government has no formal mechanism in place to encourage companies to follow a due-diligence approach to RBC. A Council for Philanthropy held its first session in September 2018. Founded with grant support from USAID, the Council aims to use public policy to create a more encouraging environment for corporate giving in Serbia. Chaired by the Prime Minister, other members of the Council include ten government ministers, the Belgrade Mayor, the Director of the Tax Administration, and several NGOs. The council had 29 member companies in April 2020. Donors have pointed to issues that have a negative impact on philanthropy, including a lack of tax incentives for donors, no available exemptions from value-added tax for donations in kind, the lack of a system for monitoring donations from companies, and the absence of official data on charities. According to the 2018 World Giving Index, published by the Charities Aid Foundation, Serbia was ranked 129 out of a total of 144 countries listed.
The Law on Public Procurement allows the government to ask bidders to fulfill additional conditions, especially those related to social and environmental issues, and allows the government to consider criteria such as environmental protection and social impact when evaluating bids.
The United Nations Development Program’s Global Compact initiative has 118 participants in Serbia and has organized a number of educational events intended to strengthen RBC capacity in Serbia. The list of members is available at:
Several local organizations, such as the American Chamber of Commerce, the Foreign Investors’ Council, and the Serbian Chamber of Commerce (PKS) promote the concept of RBC among the Serbian business community and the public. PKS presents a national award to Socially Responsible Businesses. The Trag Foundation supports the Serbian Philanthropy Forum, a networking body for donors (including numerous corporate actors) to advance philanthropic concepts in Serbia. The NGO Smart Kolektiv is providing consulting services in RBC and establishing an RBC Index, which is the first national platform for assessing responsible business conduct in Serbia. Responsible Business Conduct Forum and Smart Kolektiv launched the index with USAID support in 2016. The Responsible Business Forum Serbia is a network of socially responsible companies that contribute to the development of the community, stimulating the development of corporate social responsibility and the establishment of firm and lasting socially responsible practices in the business sector. It was established in 2008 on the initiative of 14 leading companies in Serbia. More info available at:
Multinational companies often bring international best practices, with U.S. companies among the most active. For example, Molson Coors in Serbia supported Serbia’s Special Olympics team in Rio de Janeiro in September 2016. Companies such as Eaton and Ball Packaging Serbia have contributed to their communities through can recycling, public service campaigns, educational and environmental initiatives, and donations in kind. Since 2003, Phillip Morris Serbia has donated over USD 17 million to community initiatives in Serbia. During the COVID-19 pandemic, many large companies donated money and goods to help government combat the crisis; more info is available at: .
According to a 2016 OECD study on small and medium enterprises, Serbia has no national strategy that targets environmental policy toward SMEs. See . The study found no evidence of any financial or regulatory incentives to promote the greening of SMEs. Serbia’s 2011 Corporate Law introduced contemporary corporate standards, but business associations indicate that implementation is inconsistent.
The government does not maintain a national point of contact for OECD the Guidelines for Multinational Enterprises, including OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. The government does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.
Surveys show that corruption is believed to be prevalent in many areas and remains an issue of concern. Serbia was ranked 91st in Transparency International’s 2020 Corruption Perceptions Index, down from 87th in 2018. However, its score – 39 out of 100 possible points – remained unchanged.
Serbia is a signatory to the Council of Europe’s Civil Law Convention on Corruption and has ratified the Council’s Criminal Law Convention on Corruption, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Serbia also is a member of the Group of States against Corruption (GRECO), a peer-monitoring organization that provides peer-based assessments of members’ anti-corruption efforts on a continuing basis.
The Serbian government has worked to bring its legal framework for preventing and combating corruption more in line with EU norms, and a dedicated state body—the Anti-Corruption Agency (ACA) —oversees efforts in this area. The Criminal Code specifies a large number of potential offenses that can be used to prosecute corruption and economic offenses, including but not limited to giving or accepting a bribe, abuse of office, abuse of a monopoly, misfeasance in public procurement, abuse of economic authority, fraud in service, and embezzlement.
As of 2018, Serbia’s National Assembly strengthened anti-corruption laws through three pieces of legislation. The Law on Organization and Competence of State Organs in Suppressing Corruption, Organized Crime for the first time established specialized anti-corruption prosecution units and judicial departments, mandated the use of task forces, and introduced liaison officers and financial forensic experts. The Law on Asset Forfeiture was amended to expand coverage to new criminal offences, and amendments to the Criminal Code made corruption offenses easier to prosecute. Following these legal changes, specialized anti-corruption departments started operations in March 2018 in Novi Sad, Belgrade, Kraljevo, and Niš to prosecute offenders who have committed crimes of corruption valued at less than RSD 200 million (USD 2.1 million). Cases valued above this level are handled by the Organized Crime Prosecutor’s Office.
Serbian law also requires income and asset disclosure by appointed or elected officials, and regulates conflict of interest for all public officials. The disclosures cover assets of the officials, spouses, and dependent children. Declarations are publicly available on the ACA website, and failures to file or to fully disclose income and assets are subject to administrative and/or criminal sanctions. Significant changes to assets or income must be reported annually, upon departure from office, and for a period of two years after separation.
Serbian authorities do not require private companies to establish internal codes of conduct related to corruption or other matters, but some professional associations – e.g., for attorneys, engineers and doctors – enforce codes of conduct for their members. Private companies often have internal controls, ethics, or compliance programs designed to detect and prevent bribery of government officials. Large companies often have elaborate internal programs, especially in industries such as tobacco, pharmaceuticals, medical devices, and industries regularly involved in public procurement.
Serbian law does not provide protection for non-governmental organizations involved in investigating corruption. However, the criminal procedure code provides witness protection measures, and Serbia enacted a Whistleblower Protection Law in June 2015, under which individuals can report corruption in companies and government agencies and receive court protection from retaliation by their employers. In September 2019, whistleblower Aleksandar Obradovic, an IT expert at the state-owned Krusik munitions plant, was arrested and charged with revealing trade secrets after he leaked documents showing dubious deals between Krusik and private companies, including a deal with the GIM Company in which a cabinet minister’s father was involved. A judge lifted Obradovic’s house arrest and ban on internet use in December 2019. However, prosecutors continue to pursue his case, arguing that Obradovic is not covered by the Whistleblower Protection Law.
U.S. firms interested in doing business or investing in Serbia are advised to perform due diligence before concluding business deals. Legal audits generally are consistent with international standards, using information gathered from public books, the register of fixed assets, the court register, the statistical register, as well as from the firm itself, chambers, and other sources. The U.S. Commercial Service in Belgrade can provide U.S. companies with background information on companies and individuals via the International Company Profile (ICP) service. An ICP provides information about a local company or entity, its financial standing, and reputation in the business community, and includes a site visit to the local company and a confidential interview with the company management. For more information, contact the local office at email@example.com and visit . The U.S. Commercial Service also maintains lists of international consulting firms in Belgrade, local consulting firms, experienced professionals, and corporate/commercial law offices, in addition to its export promotion and advocacy services for U.S. business.
Some U.S. firms have identified corruption as an obstacle to foreign direct investment in Serbia. Corruption appears most pervasive in cases involving public procurement, natural resource extraction, government-owned property, and political influence/pressure on the judiciary and prosecutors.
Resources to Report Corruption
Serbian Anti-Corruption Agency
Carice Milice 1, 11000 Belgrade, Serbia
+381 (0) 11 4149 100
Transparency International Serbia
Palmoticeva 27, 11000 Belgrade, Serbia
+381 (0) 11 303 38 27
10. Political and Security Environment
Since October 2000, Serbia has had democratically elected governments that have committed publicly to supporting regional stability and security. Governments, however, frequently call early elections at the local and national level, which often leave politicians and elected officials focused on the next campaign. During the 2020 COVID-19 crisis, Serbia’s first regularly scheduled parliamentary elections in several cycles were postponed due to the state of emergency declared by President Vucic. Elections in Serbia are generally free and without incidents of violence, although observers have noted irregularities at polling stations and incidents of vote-buying and pressure on voters. The government has made EU membership a primary goal, but progress toward that goal is slow, with only 18 out of 35 chapters open in Serbia’s EU acquis and only two chapters provisionally closed. Corruption is widespread, and despite some anti-corruption reforms by the government, arrests and investigations generally focus on low or mid-level technocrats, and corruption-related trials are typically drawn-out and subject to a lengthy appeal process.
Protests are not uncommon, particularly in urban areas. Beginning in December 2018 and continuing through early 2020, weekly anti-government demonstrations were held across the country, attracting large crowds in major cities. The protests were broadly peaceful. There were large protests following the presidential election in April 2017 and in 2016 after the illegal demolition of residential buildings in Belgrade. Immediately following Kosovo’s February 2008 declaration of independence from Serbia, groups attacked embassies of countries that recognized Kosovo, resulting in the torching of the U.S. Embassy in Belgrade.
Organized groups of counter protesters assaulted participants at the 2010 LGBTI Pride Parade in Belgrade. The Serbian government cancelled the three subsequent Pride Parades at the last minute, ostensibly because of threats of violence by the same nationalist and extremist groups that attempted to disrupt the 2010 parade. Since 2014, the government has allowed Pride Parades to take place in central Belgrade, under heavy police protection and often sparsely attended, but without incident. Following its sixth successive incident-free parade, Serbia was selected to host EuroPride in 2022, indicating some confidence that a recurrence of wide-scale violence was unlikely.
Since 2017, there has been an increase in criminal activity linked to transnational organized crime groups. Sports hooliganism in Serbia is often associated with organized crime, and violent hooliganism remains a concern at matches of rival soccer teams within Serbia.
A number of ultra-nationalist organizations, such as Obraz and Nasi, are present in Serbia. These organizations have harassed Serbian political leaders, local NGOs, minority groups, and media outlets considered to be pro-Western, but these incidents are infrequent. Incidents include attacks on Roma settlements and anti-Roma riots in 2010, 2012, and 2013, and attacks on shops and bakeries owned by ethnic Albanians in Vojvodina in 2014. In the 2016 parliamentary elections, three far-right political parties were elected to the National Assembly: the Serbian Radical Party, the Democratic Party of Serbia, and Dveri.
11. Labor Policies and Practices
According to the Statistical Office, Serbia has a total active labor force of approximately 3.2 million people, of which 2.9 million are employed (55.7 percent men and 44.3 percent women) and 335,900 are unemployed. In 2019, the formal employment rate was 49 percent, and the informal employment rate was 18.2 percent, with two-thirds of the total informally employed in the agriculture sector. Unemployment in 2019 averaged 10.4 percent, compared to 12.7 percent a year earlier. Youth unemployment remains relatively high at 27.5 percent. Emigration of younger high-skilled working-age citizens is a serious concern, and the share of youth in the total population drops from year to year. The role of foreign or migrant workers is extremely limited. The leading sector for employment is manufacturing, followed by government and public administration, agriculture and forestry and fishery, trade, transport, construction, and hospitality services.
Demand for IT experts (web developers, programmers, designers) is significantly higher than supply. The National Employment Service (NES) administers various employment support schemes, including new employment, apprenticeship, and re-training programs. For more details see .
Labor costs are relatively low in Serbia, especially compared to European averages. In January 2020, the average net take-home salary was approximately USD 552 per month. The minimum wage is approximately USD 280 per month. Investors routinely cite favorable labor costs, as well as a highly-educated, multi-lingual workforce, as advantages to doing business in Serbia, while availability of skilled labor is limited by ongoing, large-scale emigration. Approximately 57 percent of the workforce has completed secondary education, while some 26 percent have completed higher education.
Amendments to the Labor Law in 2014 simplified procedures for hiring and dismissing workers, and changed rules for collective bargaining and the extension of collective agreements to non-negotiating parties. The law also changed severance payment requirements, so that the employer pays severance based on the years of service with that specific employer, rather than on the employee’s total years of employment, as was the case previously. Employees may be hired for up to 24 months on a provisional basis before it is required to engage them on an indefinite basis.
The official mechanism for tripartite labor dialogue is the Social and Economic Council, an independent body with representatives of the government, the Serbian Association of Employers, and trade unions. The Council is authorized to conclude an umbrella collective agreement at the national level covering basic employment conditions for all companies in Serbia. Additional information about the Council is available at .
Serbia has ratified all eight International Labor Organization core conventions including Forced Labor (No. 29), Freedom of Association and Protection of the Right to Organize (No. 87), Right to Organize and Collective Bargaining (No. 98), Equal Remuneration (No. 100), Abolition of Forced Labor (No. 105), Discrimination (No. 111), Minimum Age (No. 138), and Worst Forms of Child Labor (No. 182).
The Department of Labor’s report on the World Forms of Child Labor in Serbia can be found online at . The Human Rights Report on Serbia is available at https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/
In December 2019, a Staff Leasing Law was approved and went into force from March 2020. The law regulates leased employees’ status, the staffing agencies, and recipient employers. According to the law, employers can hire up to 10 percent of its workforce with fixed-term contracts through an agency, with no limit on those with indefinite-term employment contracts.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
USAID/Serbia launched a Development Credit Authority (DCA) loan portfolio guarantee, now supported by the U.S. International Development Finance Corporation (DFC, successor to former OPIC) with three commercial banks in September 2019. So far, guarantee agreements have been signed with ProCredit Bank and Addiko Bank. The purpose of the loan guarantee is to incentivize the commercial banking sector to expand lending to the agribusiness sector, particularly to the underserved SME market. Opportunities for DFC investment include Public Private Partnerships in roads, railway, green energy, natural gas interconnectors, wastewater treatment, and food processing.
The former Serbia and Montenegro signed a bilateral agreement with the U.S. Overseas Private Investment Corporation (OPIC) in 2001. Following Serbia and Montenegro’s dissolution, the agreement remained in effect for Serbia. OPIC existing agreement remains in force and allows for DFC activities.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Please note that the following tables include FDI statistics from three different sources, and therefore will not be identical. Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value). This approach tends to undervalue the present value of FDI stock because it does not account for inflation. BEA data is not available for all countries, particularly if only a few US firms have direct investments in a country. In such cases, Table 2 uses other sources that typically measure FDI stock in current value (or historical values adjusted for inflation). Even when Table 2 uses BEA data, Table 3 uses the IMF’s Coordinated Direct Investment Survey (CDIS) to determine the top five sources of FDI in the country. The CDIS measures FDI stock in current value, which means that if the U.S. is one of the top five sources of inward investment, U.S. FDI into the country will be listed in this table. That value will come from the CDIS and therefore will not match the BEA data.
*Source of GDP data: Ministry of Finance of the Republic of Serbia at https://www.mfin.gov.rs/dokumenti/makroekonomski-i-fiskalni-podaci/ https://www.mfin.gov.rs/wp-content/uploads/2020/03/Tabela-1-Osnovni-makroekonomski-indikatori-2020.xlsx
https://www.mfin.gov.rs/wp-content/uploads/2020/03/Tabela-1-Osnovni-makroekonomski-indikatori-2020.xlsx *Source of FDI data: National Bank of Serbia (NBS) at
Source for Host Country Data:
NBS data on FDI significantly differ from U.S. data. The NBS calculates FDI according to the country from which the investment arrives, rather than by the ownership of the investing company. Frequently, U.S. investments in Serbia are carried out through subsidiaries of U.S. companies located in another European country. If a U.S. company invests in Serbia through a Dutch subsidiary, for example, the NBS records the investment as coming from the Netherlands rather than from the United States.
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions) 2018|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||39,800||100%||Total Outward||$3,824||100%|
|The Netherlands||$7,378||18%||Bosnia and Herzegovina||$981||26%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Bulevar kneza Aleksandra Karadjordjevica 92
11040 Belgrade, Serbia