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Executive Summary

Serbia’s investment climate is slowly improving, driven by important macroeconomic reforms, greater political and 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’s three-year Stand-by Arrangement with the International Monetary Fund (IMF) is also an important impetus for reform, with the government exceeding all of its fiscal targets in 2016. On the World Bank’s Doing Business list, which included new methodology, Serbia moved up 12 places in 2016, and is now ranked 47th globally in terms of 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, 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 assists investors when issues arise, and Serbian leaders are responsive to our concerns.

Despite notable progress in Serbia, however, challenges remain – for example with regard to bureaucratic delays and corruption. Significant risks to the investment climate include unresolved loss-making state-owned enterprises (SOEs), a large informal economy, corruption, and an inefficient judiciary.

The Serbian government has identified economic growth and job creation as its top concerns, and has committed itself to resolving a number of long-standing issues related to the country’s slow transition to market-driven capitalism. On the legislative front, the government has passed significant reforms including: to the labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. The government also is making progress on resolving state-owned enterprises. Where possible, this has been done through bankruptcy or privatization. However, problems surrounding more than a dozen strategic state-owned firms remain. The government is also slowly decreasing Serbia’s bloated public sector workforce, mainly through attrition and hiring freezes – although layoffs may also be an option as the government implements more strategic reforms expected in 2017 and 2018.

If the government delivers on promised reforms, business opportunities could grow significantly in the coming years. The sectors poised for growth include agriculture and agro-processing, information and communications technology (ICT), renewable energy, health care, mining, and manufacturing.

Investors should monitor the government’s implementation of reforms as well as the government’s changing investment incentive programs.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 72 of 175
World Bank’s Doing Business Report “Ease of Doing Business” 2017 47 of 190
Global Innovation Index 2016 65 of 128
U.S. FDI in partner country ($M USD, stock positions) 2015 $117 million
World Bank GNI per capita 2015 $5,540

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 communist past, Serbia prioritized international commerce and attracted a sizeable international business community. This trend continues, as a new Law on Investments passed in October 2015 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 (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.

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. The Law on Investments 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. However, foreign citizens and companies are prohibited from owning agricultural land in Serbia. The government must lift the ban on foreign agricultural land ownership by September 1, 2017 as part of its EU accession commitments. Serbia had not requested an extension of the ban as of March 2017, but Minister of Agriculture and Environmental Protection Nedimovic has said publicly that Serbia may continue to limit the sale of farmland to foreigners. Foreign companies have overcome the prohibition by establishing a company in Serbia to buy agricultural land. Unofficial estimates indicate that Serbian subsidiaries of foreign companies own some 20,000 hectares of farmland.

For some business activities, licenses are required – for example, financial institutions must be licensed by the National Bank of Serbia prior to registration. This limitation applies 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.

Other Investment Policy Reviews

Serbia has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

According to the World Bank’s 2017 “Doing Business” report, it takes five procedures and seven days to establish a foreign-owned limited liability company in Serbia. This is faster 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 no longer need signatures on applications 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 $1) for limited liability companies, rising to RSD 3 million (approximately $26,000) for a joint stock company. A single-window registration process enables companies which register with SBRA to obtain a tax registration number (PIB) and health insurance number concurrently with registration. In addition, companies should register employees with the Pension Fund at the Fund’s premises.

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 investments 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 .

Outward Investment

The Serbian government neither promotes nor restricts outward direct investment. However, there are restrictions regarding short-term capital transactions – i.e. portfolio investments. Residents of Serbia are not allowed to purchase foreign short-term securities, and foreigners are 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 (exceptional situations may include work or study abroad).

2. Bilateral Investment Agreements and Taxation Treaties

Serbia does not have a bilateral investment agreement with the United States. Serbia has bilateral investment treaties in force with Albania, Algeria, Austria, Azerbaijan, Belarus, Belgium-Luxembourg Economic Union, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, the Czech Republic, the Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Ghana, Greece, Guinea, Hungary, India, Iran, Israel, Kazakhstan, Kuwait, Libya, Lithuania, Macedonia, Malta, Montenegro, Morocco, the Netherlands, Nigeria, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Arab Emirates, United Kingdom and Zimbabwe.

Serbia does not have a bilateral taxation treaty with the United States. Serbia has signed and implemented Bilateral Taxation Treaties with Albania, Armenia, Austria, Azerbaijan, Belgium, Belarus, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, the Democratic People’s Republic of Korea, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, India, Iran, Ireland, Italy, Kazakhstan, Kuwait, Latvia, Lithuania, Libya, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Montenegro, the Netherlands, Norway, Pakistan, Poland, Qatar, the Republic of Korea, Romania, Russia, Slovakia, Slovenia, Spain, Sri Lanka, Switzerland, Sweden, Tunisia, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, and Vietnam. The treaties with Armenia, Kazakhstan, South Korea and Luxemburg came into force on January 1, 2017. (See Serbian Finance Ministry website at .)

Serbia has signed and ratified Bilateral Taxation Treaties with Ghana, Guinea, Indonesia, Morocco, Palestine, the Philippines and Zimbabwe. However, foreign legislatures have not yet ratified these agreements.

Serbia is a member of the Central European Free Trade Agreement (with Albania, Bosnia and Herzegovina, Macedonia, Moldova, Montenegro, and UNMIK/Kosovo). It enjoys free trade status for almost all products exported to the European Customs Area (the EU plus the European Free Trade Association states of Iceland, Liechtenstein, Norway and Switzerland). Serbia has bilateral free trade agreements (FTAs) with Belarus, Kazakhstan, Russia, and Turkey.

As of October 2016, Serbia is in negotiations for a multilateral free trade agreement with the Eurasian Economic Union (EEU – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia), which would supersede its current bilateral FTAs with EEU member countries.

Serbia enjoys duty-free treatment of certain exports to the United States under the Generalized System of Preferences (GSP).

3. Legal Regime

Transparency of the Regulatory System

Serbia’s record on transparency of the regulatory system is mixed. Serbia is undertaking an extensive legislative amendment process aimed at domestic reforms and harmonizing its laws with those of the European Union’s acquis communautaire. As part of that process, Serbia has adopted new legislation and amended numerous existing laws and regulations. These changes have created a more favorable legal environment; however, Serbia still needs to address a number of problems with respect to transparency in the development, adoption, and implementation of regulations. The harmonization of Serbian law with the acquis communautaire has required intensive reforms and a high volume of adopted legislation, representing a challenge for the government, Parliament, the business sector, and society as whole.

Once a law has been proposed, the competent Ministry within the government establishes a working group, usually comprised of representatives of state authorities and organizations as well as experts in specific fields. These are mostly ad hoc bodies that review specific issues; provide proposals, opinions, and professional explanations.

At this stage in the legislative process, public discussion or debate is generally optional. However, if the proposed law would substantially change the legal regime in a specific field, or if the subject matter is an issue of a particular interest to the public, public debate is mandatory. In 2016, many laws were adopted through “urgent procedure,” which excludes parliamentary debate, and therefore reduces public debate.

The European Commission’s 2016 Progress Report for Serbia states that “Public and inter-ministerial consultations on proposals are often conducted formalistically and at too late a stage of the process, not enabling all interested parties to provide qualitative input.” The government’s Rulebook outlines the details and procedures regarding public debate. The government publishes laws and regulations undergoing public hearings at: .

A minimum of 126 members of the National Assembly (NA or Parliament) must vote in favor of a law for its adoption, after which the law is sent to the President of Serbia. The President may promulgate the law or return it to Parliament for reconsideration.

Serbia’s budget information is publicly available and generally transparent. Publicly listed companies apply International Financial Reporting Standards. There are no informal regulatory processes managed by NGOs or private sector associations.

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” ( ), NALED publishes a “Grey Book” ( ), and AmCham publishes similar materials on its website ( ).

Serbia’s National Assembly website ( ) provides a list of adopted laws and those that have been proposed. In addition, individual ministries generally provide access to the relevant legislative framework under which the ministry operates on the ministry’s website.

The Business Entities Register ( ) is a centralized electronic database of business entities in Serbia and contains registration data.

Serbia has a system of official inspectorates charged with regulatory enforcement. Nationally there are currently 37 different inspectorates within 12 ministries that apply over 1,000 regulations. There is no overarching law to regulate inspections and there are shortcomings with regard to the coordination of inspections. There is an analysis of inspection capacities available at . Administrative courts are the legal entities which consider appeals to inspection decisions.

International Regulatory Considerations

Serbia is not a member of the World Trade Organization or the EU. However, under the National Program for Integration into the EU, Serbia is adopting the EU’s acquis communautaire. Serbia obtained EU candidate country status in 2012 and opened formal accession negotiations in January 2014. The modernization of Serbian legislation is expected to improve the investment climate.

Legal System and Judicial Independence

The legal system of Serbia is based on principles of both Roman law and continental civil law. It is composed of the Serbian Constitution and a system of laws. Contract law in Serbia is similar to contract law in the United States.

According to the Constitution, Serbia’s judicial system is legally independent of the executive branch, but in practice experts question judicial independence. Nevertheless, significant obstacles remain in the way of true judicial independence. The High Judicial Council proposes judges, which are elected by the National Assembly. Judicial office is permanent after an initial three-year term. However, in a January 2017 survey of elected judges, approximately 40 percent of those interviewed stated that they felt exposed to political pressure.

Serbia’s main court system handles most types of civil and criminal law, with specialized departments and judges to handle different types of cases. Basic Courts and High Courts are the courts of first instance, with appeals to Appellate Courts. There are also separate systems of Commercial, Administrative, and Misdemeanor Courts to handle specialized cases in those areas. The highest court of appeal for all these systems is the Supreme Court of Cassation.

The Constitutional Court is a separate institution that may assess the constitutionality of almost all legal acts. A constitutional appeal may be lodged against individual acts or actions of state bodies or organizations entrusted with public authority.

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 acts 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.

Key tax legislation includes 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 taxes can be found on the Finance Ministry’s website at .

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 

Competition and Anti-Trust Laws

The National Assembly enacted the Law on Protection of Competition in 2009 and amended it in 2013. The Commission for the Protection of Competition is responsible for competition-related concerns and implements the law as an independent agency reporting directly to the National Assembly. In 2015, the Commission completed 76 proceedings for violations of competition rules, approved 101 mergers (and rejected two), and issued 174 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

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 2011 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.

Under the 2011 law, Serbia committed itself under its restitution law to allocate EUR 2 billion, plus interest, for financial compensation in bonds. The restitution law caps the amount of compensation that any single claimant may receive at EUR 500,000 (approximately $540,000). The government postponed the issuance of these bonds from January 2015 to December 15, 2017. 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 has received over 74,000 property claims and the adjudication process is still ongoing. Information about the Agency for Restitution is available on its website at .

Dispute Settlement

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 procedures. Under Serbian commercial law, contractual relations are regulated by the Law on Obligations (also known as the Law on Contracts and Torts). Contract-related disputes are governed by the Civil Procedure Law, Chapter 34 of which details the procedure in commercial disputes. Commercial Courts have jurisdiction over commercial disputes, and appeals are referred to the Higher Commercial Court.

Parties to a contract are free to decide which substantive law shall govern the contract, and the law of Serbia does not have to be the governing law of a contract entered into in Serbia.

Judgments of foreign courts are enforceable in Serbia only if they are recognized by Serbian courts. Jurisdiction over recognition of foreign judgments rests with the Commercial Courts and Higher Courts. Procedures for recognition of foreign court decisions are regulated by the Law on Resolution of Disputes with the Regulations of Other Countries, as well as by bilateral agreements. One condition is reciprocity.

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, which took effect in January 2012. 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. Over the past 10 years, two investment disputes have involved U.S. citizens.

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. Arbitration is voluntary. 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.

Bankruptcy Regulations

The Bankruptcy Law, amended in 2014, brings Serbian bankruptcy procedures more in line with international standards. According to the law, the goal is to provide compensation to creditors via sale of the total 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 ensured a faster and more equitable settlement of creditors’ claims, lowered costs, and clarified rules regarding the role of bankruptcy trustees and creditors’ councils.

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. In 2012, Serbia amended its Criminal Code so that causing a bankruptcy and faking a bankruptcy are criminal acts.

The 2017 World Bank Doing Business Report ranked Serbia 47 out of 190 economies with regard to resolving insolvency, with an average of two years needed resolve insolvency and a cost of 20 percent of the estate. The recovery rate was estimated at 32.5 cents on the dollar ( ).

4. Industrial Policies

Investment Incentives

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 Terms and Conditions for Attracting Direct Investments, approved in December 2016. Investors are obliged to provide 25 percent of eligible costs from their own resources. For investment projects valued between EUR 50-100 million, subsidies are limited to 25 percent of the total investment, and to 17 percent for projects over EUR 100 million. However, 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.

Under the Decree on Attracting Direct Investments, state subsidies are available for any company that invests the equivalent of EUR 100,000 and employs at least 10 persons in a “devasted area.” 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 new job created in a devastated area, the state will pay the investor the equivalent of EUR 7,000; the subsidy declines 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 Serbian government may sell land for construction at a below-market price in support of an investment project that is of national importance. For more details visit: .

The Decree on Attracting Direct Investments also establishes the 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. The maximum reimbursement level is approximately $200,000 per business entity. In addition, the Vojvodina Provincial Secretary for Work and Employment may award incentives for new employment. The Development Agency of Vojvodina was established in February 2017 as a legal successor to Vojvodina Investment Promotion (VIP). The agency is not operational as of March 2017, but the VIP website is available at .

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 ($8.7 million). The tax holiday begins once the company starts making a profit.

In August 2015, the government approved a decree on film incentives that allows both domestic and foreign filmmakers to receive a refund of 20 percent on qualified costs. The government has allotted RSD 400 million ($3.5 million) for film incentives in 2017.

Employment incentives allow payroll tax deductions for persons registered with the National Employment Service for more than six months. The incentives currently in place are valid from the moment of employment until December 31, 2017:

  • 1-9 new jobs: 65 percent deduction
  • 10-99 new jobs: 70 percent deduction
  • 100+ new jobs: 75 percent deduction

The Serbian government has declared 2016 and 2017 “Years of Entrepreneurship,” and has announced plans to declare the entire 2016-2026 period a “decade of entrepreneurship.” As part of this initiative, the government set aside the equivalent of $147 million to support entrepreneurship and assist SMEs in 2016, and a further $11 million in 2017. Part of these funds will be allocated as subsidized loans by the state-owned Fund for Development and various ministries, and part will be issued through the RAS. Detailed information is available at  and . 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

Serbia maintains 14 designated customs free zones, in Apatin, Belgrade, Kragujevac, Krusevac, Novi Sad, Pirot, Priboj, Sabac, Smederevo, Svilajnac, Subotica, Uzice, Vranje, and Zrenjanin. The free zones, established in accordance with 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. If goods produced within zone use a minimum of 50 percent of domestic components, they are considered to be of Serbian origin and are therefore eligible to be imported into Serbian territory or exported without customs pursuant to free trade agreements. Companies operating within a free zone are subject to the same laws and regulations as other businesses in Serbia, except for their tax privileges.

In 2015 there were a total of 240 companies operating in Serbia’s free zones, of which 154 were domestically owned and 86 foreign-owned. The companies employed a total of 22,242 workers. Total exports from free zones exceeded $2.3 billion, which is approximately 15 percent of Serbia’s total exports. Total imports into the zones were approximately $2.2 billion, or 11 percent of total imports.

Goods entering or leaving the free 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. 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. Additional information about Serbia’s free zones is available at: 

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 and maintain a certain amount of data storage within the country. There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

Serbia plans to approve a new Personal Data Protection Law, and currently continues to follow EU practice in implementation of data transfer rules.

5. Protection of Property Rights

Real Property

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 1.5 million buildings in Serbia are not registered in the cadaster. Of this total, only 800,000 building owners have applied for legalization. In November 2015, the government adopted a new Law on Legalization, which simplified the registration process.

The World Bank’s 2017 Doing Business Report ranks Serbia 56th of 190 countries for time required to register real property (21 days).

Intellectual Property Rights

Serbia is a World Intellectual Property Organization (WIPO) member and a signatory to all key agreements administered by WIPO. The government has taken steps to implement and enforce the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. 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 2016 Progress Report, Serbia has done a good job aligning its IP legislation with the acquis. Serbian laws extend legal protections to all major forms of IPR (including patents, trademarks, copyrights, industrial designs, geographic indicators, and semiconductor products). Serbia’s goal is to adopt amendments to the Law on Trademarks, the Law on Patents, the Law on Semiconductor Circuits, and the Law on Copyright and Related Rights by 2018 to bring these pieces of legislation fully in line with the acquis. In addition, amendments to the Law on Special Competence for Efficient Protection of Intellectual Property Rights are also expected, which will reorganize enforcement responsibilities among inspectorates responsible for IPR protection.

The level of IPR protection in Serbia is still improving. Enforcement remains haphazard, but is roughly consistent with levels in neighboring countries. The government has a Permanent Coordination Body for IPR enforcement activities with participation of the tax administration, police, customs, and a number of state inspection services. The Public Procurement Law requires bidders to affirm that they have ownership rights to any IPR utilized in fulfilling a public procurement contract.

On enforcement, the number of counterfeit and pirated goods confiscated in 2015 was only about half the number confiscated in 2014. Counterfeit trademarked goods, particularly athletic footwear and clothing, are available, although the government has stepped up its actions to combat illegal street sales and seize pirated goods at the border. Upon seizure, authorities cannot destroy goods unless they receive formal instructions from the rights holders. Then storage and destruction of counterfeit goods is billed to the rights holders. The Customs Administration and Trade Inspection issue periodicreports on seizures, but these are segregated according to the type of goods (e.g. cigarettes or apparel), rather than type of infringement (e.g. IPR or tax payments). Data on seizures is not publicly available.

The tax administration checks software legality during its regular tax controls of businesses, but seeks to cease its software inspection operations on the grounds that it is a non-core activity. The number of criminal charges for violations increased from 90 in 2014 to 105 in 2015. The estimated value of Serbia’s illegal software market is approximately $116 million. According to the latest International Data Corporation (IDC) study from 2015, software piracy in Serbia is around 67 percent. Although this is down from 72 percent in 2011, it remains among the highest piracy rates in the Balkan region. However, the number of legal entities using illegal software continues to drop and is estimated at 55 percent in 2016.

Procedures for registration of industrial property rights and deposition of works of authorship before the Serbian Intellectual Property Office are straightforward and similar to procedures in most European countries. Relevant information is available at .

Regarding copyright and related rights, Serbia has room to improve, particularly with regard to the digitalization of orphan works and broadcasting of audiovisual works, including cross-border, satellite, and cable broadcasting. Serbia could:

  • Amend the Criminal Procedure Code and related procedural laws, particularly in the area of cyber-crime
  • Adopt implementing regulations for various IPR laws that specify enforcement procedures and steps, currently subject to different interpretation by relevant authorities
  • Reverse Copyright Law amendments from December 2012, when the National Assembly exempted small businesses from paying royalties for copyrighted music, capped fees payable to collective rights managers, and allowed businesses to pay one collective bill for all music rights
  • Amend the Copyright Law regarding collective rights for video works
  • Align the Laws on Copyright, Topographies of Semiconductor Products, Patents and Trademarks with the EU acquis, including with the IPR Enforcement Directive
  • Amend the Law on Trademarks to enable third parties to oppose trademark registration if the submitted trademark resembles that party’s registered trademark

Enforcement of rights by state authorities, such as inspectorates or customs authorities, can be relatively fast. However, enforcement of IPR rights in the court system often lasts up to two years. With the creation of semi-specialized IP courts, which began operating fully in 2015, these proceedings could improve. The Serbian Intellectual Property Office continues to organize IPR-focused training for judges, with the expectation that more specialized understanding of IPR rights will enable more timely court decisions.

Serbia is not listed in the Special 301 Report or the Notorious Market Report. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at .

What about Post contacts on IPR issues and a list of lawyers for stakeholders to use?

6. Financial Sector

Capital Markets and Portfolio Investment

Serbia welcomes both domestic and foreign portfolio investments and regulates them efficiently. However, there are restrictions on short-term portfolio investments – residents of Serbia are not allowed to purchase foreign short-term securities, and foreigners are not allowed to purchase short-term securities in Serbia. Payments related to long-term securities have no restriction.

In 2016 Serbia recorded net outflow of $1 billion 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 $8.8 billion in January 2017, with 63 percent in RSD and 37 percent in euros.

Total Serbian government-issued debt instruments on the domestic and international markets stood at $14 billion in January 2017 (see

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 2016, Standard&Poor’s raised its outlook for Serbia from stable to positive, while keeping its rating at BB-. In June 2016, Fitch raised Serbia’s credit rating from B+ 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 2016 was $400 million, which is double the volume of 2015. However, trading volumes have declined since 2007, when the total turnover reached $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 March 2017, 13 registered investment funds operate in Serbia (see ).

Market terms determine credit allocation. In December 2016, the total volume of issued loans in the financial sector stood at $16.5 billion. Average interest rates are decreasing but still higher than the EU average. The business community cites tight credit policies and expensive commercial borrowing as impediments to business expansion. Around 69 percent of all lending is denominated in euros, which provides lower rates to borrowers and minimizes exchange-rate risks to lenders. 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.

Money and Banking System

Serbian companies often do not access credit, and look to friends, family or commercial banks when they need investment and operational funds. Only a few corporate and municipal bonds have been issued so far, and the financial market is not well developed.

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 September 2016, consolidation had reduced the sector to 30 banks with total assets of $27 billion (about 77 percent of GDP), with 76 percent of the market held by foreign-owned banks. The top ten banks, with country of ownership and estimated assets are Banca Intesa (Italy, $4.1 billion); Komercijalna Banka (Serbian government, $3.4 billion); UniCredit (Italy, $2.6 billion); Raiffeisen (Austria, $2.0 billion); Société Générale (France, $1.9 billion); AIK Banka Nis (Serbia, $1.5 billion); Eurobank EFG (Greece, $1.2 billion); Vojvodjanska Banka (Greece, $1.1 billion); Postanska Stedionica (Serbian government, $1 billion); and Erste Bank (Austria, $0.9 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 $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. By January 2017, savings deposits in the banking sector reached $9.9 billion, exceeding pre-crisis levels.

In November 2016, the IMF assessed that Serbia’s banking sector was well-capitalized and liquid, and that Serbian authorities are “making noteworthy progress in implementing financial sector reforms to enhance its resilience and maintain stability.” The IMF said it supports NBS efforts to enhance prudential policies in the context of implementing the Basel III framework. In a recent review, the IMF pointed to the “continued resilience” of the banking sector, with an average capital ratio exceeding 21 percent and a gradual improvement in asset quality. Banking sector profitability continues to improve.

A major challenge for the banking sector, however, is a high rate of non-performing loans (NPLs). The NPL rate reached 22 percent in September 2015. Banking industry representatives claimed at the time that the real figure was closer to 40 percent, as banks used creative loan classifications to conceal the true extent of the problem. In addition, there are significant foreign exchanges risks, as 74 percent of all outstanding loans are indexed to foreign currencies (primarily the euro). The government and the NBS have adopted a plan to resolve NPLs. The IMF assessed in 2016 that authorities had made important progress, with the aggregate stock of NPLs falling both in nominal terms and relative to total loans. As of January 2017, the NPL rate dropped to 17 percent. Still, “more decisive action is needed to reduce bad loans, including in state-owned banks,” concluded the IMF. With a high NPL rate and risk-averse banks, liquidity remains an issue in Serbia and companies are hungry for working capital.

Hostile takeovers are extremely rare in Serbia. The Law on Takeover of Shareholding Companies regulates defense mechanisms of companies. Frequently after privatization, the new strategic owners of formerly state-controlled companies have sought to buy out minority shareholders.

Foreign Exchange and Remittances

Foreign Exchange

Serbia’s Foreign Investment Law guarantees the right to transfer and repatriate profits from Serbia, and foreign exchange is available. Serbia permits a 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.

The NBS targets inflation in its monetary policy, and regularly intervenes in the foreign exchange market to that end. In 2016, the NBS sold a total of $1.1 billion on the interbank currency market and bought $0.9 billion to prevent sharp fluctuations of the dinar. In the one-year period ending March 2017, the dinar depreciated one percent against the euro and five percent against the U.S. dollar. There is no evidence that Serbia engages in currency manipulation.

Remittance Policies

Personal remittances constitute a significant source of income for Serbian households. In 2016, total remittances from abroad reached $3 billion, or approximately nine 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 required 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 must be paid directly to the state, provincial, or local government budget.

State-owned enterprises (SOEs) dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. According to the Ministry of Economy, Serbia has 727 SOEs, which employ more than 250,000 people, or approximately 15 percent of the formal workforce. A list of all public enterprises is available at the Ministry of Economy’s website ( ). In addition to these companies, there are around 165 companies with around 40,000 employees that were not yet resolved by the now disbanded Privatization Agency. The Ministry of Economy is preparing all 165 of these companies for divestiture (see Privatization Program).

The quasi-governmental watchdog agency, the Fiscal Council, estimated that SOEs generated losses of around three percent of GDP or $1.1 billion in 2014 – both directly and indirectly, through arrears. 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 accountability, transparency, and monitoring of SOEs. The IMF said the focus was on restructuring and reducing state aid to major companies in the electricity, mining, gas distribution, and transportation sectors.

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, which was amended in July 2015. 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. The government committed to cease these practices as a key pillar of its ongoing three-year IMF Stand-by Arrangement.

Serbia is not a party to the WTO’s Government Procurement Agreement (GPA).

Privatization Program

From 2001-2015, 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, 165 companies were still unresolved at the end as of December 2016. The 165 companies include 11 spas, which all have unresolved property issues; 19 companies in Kosovo; 15 veterinary stations which were transferred to local municipalities; and 19 companies that employ disabled persons.

Most significantly, the Ministry of Economy must resolve 17 large, strategically important SOEs. These include copper mining company RTB Bor, the Resavica coal mine, pharmaceutical company Galenika, agriculture firm PKB, several petrochemical companies, and others. 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 .

The state telecommunications company Telekom Srbija has garnered investor interest, but the Serbian government has twice canceled its privatization, most recently in December 2015. In February 2017, the government invited bids for a concession to manage Belgrade’s Nikola Tesla airport. The government is also preparing to privatize the second largest bank in the country, Komercijalna Banka.

8. Responsible Business Conduct

Responsible Business Conduct (RBC) is a relatively new concept in Serbia, and many Serbian companies view it mainly as a public relations tool. Multinational companies are more effective practitioners and often bring 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 alone has donated over $16.9 million to community initiatives in Serbia.

The government has adopted a Strategy for the Development and Promotion of Socially Responsible Business Conduct in Serbia for 2010-2015, which is available online at . 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.

Several local organizations, such as the American Chamber of Commerce, Foreign Investors’ Council (FIC), 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 measures companies’ performance in this area. The UN Development Program’s Global Compact initiative has organized a number of educational events intended to strengthen RBC capacity in Serbia.

The Serbian government has no formal mechanism in place to encourage companies to follow RBC principles. Serbia’s 2011 Corporate Law introduced contemporary corporate standards, but business associations indicate that implementation is inconsistent. The government does not maintain a national contact point for OECD guidelines, 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.

9. Corruption

Surveys show that corruption in Serbia is believed to be pervasive, but it is difficult to quantify. In Transparency International’s 2016 Corruption Perception Index (CPI), Serbia ranked 72 of 176 compared countries, nearly unchanged from its ranking of 71 in 2015. In its 2016 progress report on Serbia, the EU said corruption remained a serious problem, and anti-corruption efforts had yet to yield meaningful results.

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.

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 United Nations Convention against Transnational Organized Crime, and the United Nations 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 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.

In November 2016, Serbia’s National Assembly amended the law to establish specialized anti-corruption prosecution units and judicial courts, mandate the use of task forces, and introduce liaison officers and financial forensic experts.

In 2015, there were 1,876 judgments in cases with an element of corruption, of which 71 percent resulted in conviction. However, there have been allegations that, in some cases, criminal law was being applied in a discriminatory manner. While Serbia has begun to establish a track record in low-level corruption convictions, the EU noted in its 2016 progress report that there are still very few convictions for high-level corruption.

In 2015, 2016, and early 2017 there were a series of large scale arrests of former officials and government employees on allegations of corruption and abuse of position. In total, these actions resulted in the arrest of over 150 people. To date the arrests have resulted in approximately 40 criminal complaints, but none of the cases has concluded in either conviction or acquittal.

The law requires income and asset disclosure by appointed or elected 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. During the past year the ACA initiated 123 requests for misdemeanor proceedings related to asset disclosures and 15 criminal reports to prosecutors based on the suspicion that public officials did not disclose assets or gave false information with the intent to conceal the status of their assets. The agency also filed 19 reports to prosecutors and other state organs based on evidence of possible criminal offenses (e.g. bribes, tax evasion or money laundering) as revealed in the disclosure forms.

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.

Serbia also enacted its first 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 for doing so. In June 2016, the Higher Court in Novi Sad ruled in favor of a whistleblower who reported malfeasance in the local government. The court ruled that the whistleblower should be allowed to return to his workplace and be compensated financially.

The Regional Anti-Corruption Initiative maintains a website with updates about anti-corruption efforts in Serbia: .

Resources to Report Corruption

Serbian Anti-Corruption Agency
Carice Milice 1, 11000 Belgrade, Serbia
+381 (0) 11 4149 100

Transparency International Serbia
Transparentnost 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. The run-up to the April 2016 snap parliamentary elections did not include appreciable political tensions or threats of politically motivated violence, including in the southwest Sandzak region or south Serbia. In the Sandzak region, tensions occasionally have led to localized violence between competing political groups. This violence usually is directed at opposing party figures and has not targeted unrelated civilians or businesses. The national government has pledged to continue previous governments’ notable efforts to combat organized crime and corruption, and continues to make high-profile arrests and launch new investigations. There were large protests following the illegal demolition in April 2016 of residential buildings in Belgrade’s Savamala district, but these were not violent.

Immediately following Kosovo’s February 2008 declaration of independence from Serbia, groups twice broke away from larger demonstrations and attacked embassies of countries that had recognized Kosovo, including the U.S. Embassy in Belgrade. Since these attacks, there have been no major violent incidents in Serbia related to Kosovo.

The 2010 LGBT Pride Parade in Belgrade was marred by significant and widespread violence. The Serbian government cancelled the subsequent three 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. In 2014-2016, the government allowed Pride Parades to take place in central Belgrade, under heavy police protection but without incident.

Sports hooliganism in Serbia frequently is linked to organized crime. There has been no serious ultra-nationalist, sports-related violence since January 2012. Violent hooliganism is a concern at matches of rival soccer teams within Serbia.

A number of ultra-nationalist organizations, such as “Obraz” and “Nasi,” are active in Serbia. In 2013, these organizations continued activities targeting certain Serbian political leaders, local NGOs, and media outlets alleged to be “pro-Western.” Their calls for action against their targets, however, have not resulted in any violent incidents. While no far-right parties won seats in the 2014 parliamentary elections, two passed the five-percent threshold for parliamentary representation in 2016 – the Serbian Radical Party and Dveri.

11. Labor Policies and Practices

According to the Statistical Office, Serbia has a total labor force of approximately 3.1 million people, of which 2.7 million are employed. In the fourth quarter of 2016, the formal employment rate was 45.5 percent and the informal employment rate was 20.9 percent. The unemployment rate in the last quarter of 2016 was 13.8 percent compared to 17.7 percent in last quarter of 2015. Youth unemployment remains relatively high at 31.2 percent. The leading sector for employment is the government and public administration, followed by trade, transport, agriculture, forestry and fishery, manufacturing, and construction.

Labor costs are relatively low in Serbia, especially compared to European averages. In January 2017, the average net take-home salary was approximately $360 per month. Minimum wage is approximately $190 per month. Investors routinely cite favorable labor costs, as well as a highly educated, multi-lingual workforce as advantages to doing business in Serbia. Almost 59 percent of the workforce has completed secondary education, while 25 percent have completed higher education.

Serbia amended the Labor Law in 2014. The amendments 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.

The official mechanism for tripartite labor dialogue between government, employers and labor 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 bargaining 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), 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 .

12. OPIC and Other Investment Insurance Programs

The former Serbia and Montenegro signed a bilateral agreement with the U.S. Overseas Private Investment Corporation (OPIC) in July 2001 and became eligible for OPIC programs in November 2001. Following Serbia and Montenegro’s dissolution, the agreement remained in effect for Serbia.

However, in 2009 OPIC severely restricted its programs for Serbia over an investment dispute involving a U.S. company that held OPIC insurance policies on its Serbian investments. The Serbian government and the investor concluded a settlement agreement in 2012 that led to the reinstatement of the full range of OPIC programs for Serbia. OPIC filed an arbitration claim against the investor and was awarded damages. OPIC then sought to use the Serbian court system to enforce the arbitration decision and collect from the investor’s property in Serbia. However, both the first instance and appellate courts rejected OPIC’s request. That decision may discourage OPIC from doing business in Serbia.

Currently OPIC, the International Finance Corporation, and the European Bank for Reconstruction and Development are engaged in joint negotiations with the Serbian government related to a U.S. investor-backed, multi-million dollar wind energy project. For full information on OPIC programs, please visit .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2016 $37,520 2015 $37,160 
Foreign Direct Investment Host Country Statistical Source** USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2016 $42 2015 $117 BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) 2015 $0 2015 $2 BEA data available at
Total inbound stock of FDI as % host GDP 2015 0.1% 2015 0.3% N/A

* Source of GDP data: Ministry of Finance of the Republic of Serbia at 

** Source of FDI data: National Bank of Serbia at 

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.

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment 2015 Outward Direct Investment 2015
Total Inward 28,801 100% Total Outward 2,876 100%
Netherlands 6,169 21% BiH 752 26%
Austria 3,999 14% Montenegro 640 22%
Cyprus 3,017 10% Slovenia 380 13%
Russian Federation 1,700 6% Russian Federation 134 5%
Germany 1,324 5% Bulgaria 113 4%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

There is no data available from the IMF’s Coordinated Portfolio Investment Survey regarding sources of Portfolio Investment in Serbia.

14. Contact for More Information

Theodore Fisher
Economic Section
Bulevar kneza Aleksandra Karadordevica 92
11040 Belgrade, Serbia

2017 Investment Climate Statements: Serbia
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