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: http://ras.gov.rs/ ). 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 www.apr.gov.rs/home.1435.html . 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 http://ras.gov.rs .
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).
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.
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) (M USD )||2019||$51,421||2018||$50,597||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country (M USD , stock positions)||2019||$206||2018||$145||BEA data available at
|Host country’s FDI in the United States (M USD , stock positions)||2019||$1.2||2018||$3||BEA data available at
|Total inbound stock of FDI as % host GDP||2019||0.4%||2018||0.3%|
*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 http://www.nbs.rs/internet/cirilica/80/platni_bilans.html
*Source of FDI data: National Bank of Serbia (NBS) at http://www.nbs.rs/internet/cirilica/80/platni_bilans.html
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.