EXECUTIVE SUMMARY

Serbia’s investment climate has modestly improved in recent years, driven by macroeconomic reforms, financial stability, and fiscal discipline. Attracting foreign investment is an important priority for the government. Serbia replaced its 30-month Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) with a new two-year Stand-by Arrangement in December 2022, which provides direct assistance to the Serbian budget to cover the high cost of energy imports. The Stand-by Arrangement also reassures issuers of sovereign bonds, and Serbia likely benefits by receiving more favorable rates than it might otherwise. U.S. investors are generally positive about doing business in Serbia due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets. U.S. investors generally enjoy a level playing field and can take advantage of various programs designed to attract foreign direct investment (FDI). The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to investment concerns. In 2021, the United States and Serbia signed an Investment Incentive Agreement that facilitated a guarantee scheme for banks’ lending to small and medium enterprises. Challenges remain, particularly bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.

The Serbian government has identified economic growth and job creation as top priorities and has passed significant reforms to its labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. If the government delivers on promised reforms during its EU accession process, business opportunities should continue to grow. 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. Companies and officials have noted that the adoption of reforms has sometimes outpaced implementation. Digitizing certain government functions (e.g., construction permitting, tax administration, and e-signatures) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving troubled SOEs, through bankruptcy or privatization actions where possible. The government plans to privatize 58 more companies and is also slowly reducing Serbia’s bloated public-sector workforce, mainly through attrition and hiring caps.

Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation surged, fueled by the increased import prices of energy and fuels, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities. The overall inflation in Serbia reached 16% in February 2023 y/y, fueled by food and energy prices that increased by 25% each, and newly built apartments by 18%. Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2022  101 of 180 http://www.transparency.org/research/cpi/overview  
Global Innovation Index 2022  55 of 132 https://www.globalinnovationindex.org/analysis-indicator  
U.S. FDI in partner country ($M USD, historical stock positions)  2021 USD 474 million https://apps.bea.gov/international/factsheet
World Bank GNI per capita  2021 USD 8,460 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD  

Policies Towards Foreign Direct Investment

Attracting FDI is a priority for the Serbian government. The Law on Investments extends national treatment to foreign investors and prohibits discriminatory practices against them. The Law also allows the repatriation of profits and dividends, provides guarantees against expropriation, allows waivers of customs duty 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). Serbia has attracted over $44 billion of foreign direct investment since 2007, according to RAS. Serbia’s strong FDI track-record is substantiated by international awards. Serbia was ranked at the top of the Financial Times’ FDI 2019 Europe list, based on the criteria of Greenfield investments relative to the size of economy (Financial Times, FDI Report 2020). “IBM Global Location Trends 2020” ranked Serbia first globally for the fourth consecutive year for creating the most FDI-related jobs per million inhabitants.

The government prompted concerns about its commitment to the protection of foreign investors’ rights in 2022 when it halted a lithium-borate mining project which promised to become the country’s largest-ever foreign direct investment. In July 2021, multinational mining firm Rio Tinto committed $2.4 billion to developing a mine and processing plant at the Jadar deposit in western Serbia, which could potentially supply up to 10% of global lithium demand. However, the project became a lightning rod for criticism by environmental activists, resulting in months of public protests targeting Rio Tinto in period prior to Serbia’s national elections in April 2022. The government reacted by first delaying additional permits and then, in January 2022, withdrawing the spatial plan and revoking existing licenses for the project’s development.

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. Serbia has no investment screening or approval mechanisms for inbound foreign investment. U.S. investors are not disadvantaged or singled out by any rules or regulations.

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.

Food and Agriculture: 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, although they may 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% in seven SOEs, collectively referred to as the “Defense Industry of Serbia,” so long as no single foreign shareholder exceeds 15% ownership. The law also cancels limitations on foreign ownership for arms and ammunition manufacturers.

Other Investment Policy Reviews

Serbia has not undergone any third-party investment policy reviews in the past five years.

In the past several years, the media reported on various concerns related to investment policy, including citizens’ protests against the potential opening of a lithium mine in Western Serbia, possible corruption related to Chinese projects in Serbia and lack of transparency in procurement procedures, and protests by workers at Zijin Bor Copper mine for higher wages and improved working conditions.

In addition, The Environmental Justice Atlas ( https://ejatlas.org/ ) listed several investments that resulted or could result in environmental degradation in Serbia, including investments in the city of Pancevo, relocation of Vreoci village in the Kolubara coal basin, a highway project that killed a 600-year-old oak tree, pollution of the Veliki Backi channel, municipal waste in the city of Kraljevo, the potential impact of the planned Buk Bjela hydropower plant on Tara River canyon, a proposed lithium mine in Jadar Valley, “034 Metal Recycling” polluting Kragujevac, Hydro power plants on the river Lim, Prahovo pyrite cinder dump site from Elixir company, and the remediation of Palic lake.

Business Facilitation

Establishing a foreign-owned company in Serbia is a relatively fast process because the Serbian Business Registers Agency is legally obliged to respond within five working days of the submission of the request. For the registration process to be completed, however, it is necessary to take several steps before submitting registration, such as to bring decisions on the company’s main activity, company headquarters address, number of employees, and selection of accounting agency. 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 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 $1) for limited liability companies, rising to RSD 3 million (approximately $29,900) for a joint stock company. Some foreign companies have difficulties opening bank accounts due to a provision in the Law on Prevention of Money Laundering and Terrorist Financing that requires companies to disclose their ultimate owner. 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 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 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 gray labor market by empowering 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.

The Development Agency of Serbia 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 .

The government declared 2017-2027 a “Decade of Entrepreneurship” with special programs to support women’s entrepreneurship. Since 2017, the government has provided approximately $1 million annually in grants to support women’s innovative entrepreneurship.

Outward Investment

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 for short-term securities issued or purchased by EU countries and international financial institutions. 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 keep accounts abroad except in exceptional situations (such as work or study abroad) listed in the Law on Foreign Exchange Operations.

Serbia has no bilateral investment treaty (BIT) with the United States. Serbia has 52 BITs in force, including with Albania, Algeria, Austria, Azerbaijan, Belarus, Belgium-Luxembourg Economic Union, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, Cuba (not yet ratified by the Serbian Parliament), the Czech Republic, the Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Ghana, Greece, Guinea, Hungary, Indonesia, Iran, Israel, Italy, Kazakhstan, Kuwait, Libya, Lithuania, Macedonia, Malta, Montenegro, Morocco, the Netherlands, Nigeria, Poland, Portugal, Qatar, Romania, Russia, Slovakia, Slovenia, Spain, Switzerland, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, and Zimbabwe.

Serbia does not have a bilateral taxation treaty with the United States. Serbia is a member of 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.

Serbia has signed and implemented 64 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, Hong Kong, India, Indonesia (as of January 2019), Iran, Ireland, Italy, Israel, Japan (as of July 2020), Kazakhstan, Kuwait, Latvia, Lithuania, Libya, Luxembourg, North Macedonia, Malta, Moldova, Montenegro, Morocco (as of January 1, 2023), the Netherlands, Norway, Pakistan, Poland, Qatar, the Republic of Korea, Romania, Russia, San Marino (as of January 2019), Singapore (as of February 2021), Slovakia, Slovenia, Spain, Sri Lanka, Switzerland, Sweden, Tunisia, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, and Vietnam. (See the Serbian Finance Ministry website at https://www.mfin.gov.rs/propisi/ugovori-o-izbegavanju-dvostrukog-oporezivanja/ ).
Serbia has signed and ratified bilateral taxation treaties with the following countries, which have not yet ratified those treaties: Ghana, Guinea, Palestine, the Philippines, and Zimbabwe.

Serbia is a member of the Central European Free Trade Agreement (with Albania, Bosnia and Herzegovina, North Macedonia, Moldova, Montenegro, and 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 a bilateral free trade agreement (FTA) with Turkey.

Serbia signed a multilateral free-trade agreement with the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia), which came into force on July 10, 2021, once all signatory countries ratified it. This agreement has replaced previous bilateral FTAs with Belarus, Kazakhstan, and Russia.

Duty-free treatment of certain Serbian exports to the United States under the Generalized System of Preferences (GSP) expired on December 31, 2020. Serbia has Most Favored Nation status on exports of other goods. The U.S. Congress had not re-authorized the GSP program as of mid-March 2023. As a result, imports entering the United States that were previously eligible for duty-free treatment under GSP are now subject to regular, Normal Trade Relations (MFN) rates of duty, which are shown in the U.S. tariff schedule under the “General” column heading. Congress may choose to renew the program retroactively, as it has previously. If so, duties paid on GSP-eligible items will be refunded. Importers should continue to mark GSP-eligible importations with the applicable special program indicator (SPI) for GSP (“A,”) which will allow CBP to process duty refunds automatically.

Transparency of the Regulatory System

The harmonization of Serbian with EU law in accordance with the EU’s acquis communautaire has created a more favorable legal environment; however, Serbia still needs to address problems with transparency in the development, adoption, and implementation of regulations.

The website of Serbia’s unicameral legislature, the National Assembly ( www.parlament.gov.rs ), provides a list of both proposed and adopted legislation.

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 on any public market.

On January 1, 2021, Serbia introduced environmental, social, and governance disclosure (non-financial reporting) with the new Law on Accounting (Article 37), which obliges all companies with over 500 employees in Serbia to publish non-financial reports. The choice of the framework and guidelines on which the non-financial report will be based is determined by the company itself. Some of the most widely used disclosures are the International Integrated Reporting Framework ( https://integratedreporting.org ), the GRI Standard (https://www.globalreporting.org), and SASB https://www.sasb.org .

There are no informal regulatory processes managed by NGOs or the private sector.

The Law on Ultimate Beneficial Owners Central Registry (2018) introduced a single, public, online database maintained by the Serbian Business Registers Agency (www.apr.gov.rs), which contains information on natural persons who are ultimate beneficial owners of the companies.

Nationally, there are 37 different inspectorates operating within 12 different ministries that do not significantly cooperate or coordinate with one another, despite the existence of the Coordination Commission for Inspection Supervision. The administrative court is the legal entity that considers appeals on inspection decisions.

Serbia’s public finances are relatively transparent. The government regularly publishes information related to public debt on the website www.javnidug.gov.rs . Public debt has been below 60% of GDP since January 2018.

International Regulatory Considerations

Serbia is not a member of the World Trade Organization or the EU. Serbia became an EU candidate country and opened formal accession negotiations in 2012. Details on EU-Serbia relations and the status of Serbia’s accession process are available through the EU Delegation to Serbia at https://www.eeas.europa.eu/delegations/serbia_en?s=227 . The WTO accepted Serbia’s application for accession on February 15, 2005, and Serbia currently has observer status.

Legal System and Judicial Independence

Serbia has a civil law system. The National Assembly codifies laws. The courts have sole authority to interpret legislation, with the exception of so-called “authentic interpretation” which is reserved for the legislature. Serbia undertook constitutional and legal reform to make the judiciary independent from political influence. While this new framework has the potential to bring positive change in the Serbian justice system, ultimately, it is the consistent implementation of the new laws and rules that will be decisive. Many observers believe that significant obstacles remain before the judicial system could be considered fully independent of the executive branch, as required by the Constitution.

Serbia’s judicial system distinguishes between commercial courts and courts of general jurisdiction. Commercial courts adjudicate commercial matters, 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. When only one of the parties is a business and the other is not, the courts of general civil jurisdiction decide the dispute. The Appellate Commercial Court rules on appeals of commercial courts’ decisions. The average waiting time to bring a case to trial in the Commercial Courts is high. Case processing time for commercial litigation is in line with EU averages, but the law is inconsistently applied.

In general, contract enforcement is weak, and the courts responsible for enforcing property rights are overburdened. Under Serbian commercial law, the Law on Obligations regulates contractual relations (also known as the Law on Contracts and Torts). Civil Procedure Law governs contract-related disputes. Serbian law need not be the governing law of a contract entered into in Serbia. The Law on Resolution of Disputes with the Regulations of Other Countries, as well as bilateral agreements, regulates procedures for recognition of foreign court decisions.

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 Law on Registration of Commercial Entities, the Law on Banks and Other Financial Institutions, the Law on Construction and Planning, the Company Law, the Law on Financial Leasing, the Law on Concessions, and Regulations on Conditions for Establishing and Operation of Foreign Representative Offices in Serbia. Other relevant laws include: the Law on Value Added Tax, the Law on Income Tax, the Law on Corporate Profit Tax, the Law on Real Estate Tax, and the Law on Mandatory Social Contributions. Laws and regulations on portfolio investments are on the Securities Commission’s website at https://www.sec.gov.rs/index.php/en/.  Laws and regulations related to payment operations can be found on the National Bank of Serbia’s website at https://nbs.rs/sr_RS/drugi-nivo-navigacije/propisi/ .

Serbia lacks a 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 Antitrust Laws

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. Annual reports of the Commission’s actions are published online at http://www.kzk.gov.rs/izvestaji . Laws and regulations related to market competition are available at http://www.kzk.gov.rs/en/zakon-2 .

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 expropriations that have been determined to be in the public interest and for a compensation in the form of similar property or cash approximating the current market value of the expropriated property. 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 March 9, 1945, shortly before the end of World War II, and includes special coverage for victims of the Holocaust, who are authorized to reclaim property confiscated by Nazi occupation forces. Heirless property left by victims of the Holocaust is subject to a separate law, which was approved in February 2016. 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, restitution procedures and the status of cases is available on its website at www.restitucija.gov.rs/eng/index.php .

Dispute Settlement

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. 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 on 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: the 1923 Geneva Protocol on Arbitration Clauses, the 1927 Geneva Convention on the Execution of Foreign Arbitration Decisions, the 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the 1961 European Convention on International Business Arbitration, and the 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. Mediators may 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

Serbia’s bankruptcy law is consistent with international standards. According to the Bankruptcy Law, its 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 it 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.

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, as well as fraud in relation to a bankruptcy proceeding.

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 Defining Conditions for Approving Incentives in Attracting Direct Investments, approved for the current year in January 2019. Investors are obliged to provide 25% of eligible costs from their own resources. For investment projects valued at €50-100 million, subsidies are limited to 25% of the total investment, falling to 17% for projects over €100 million. Under certain conditions, large companies can gain support for up to 50% of eligible costs for investment projects, medium-sized companies up to 60%, and small companies up to 70%.

The Decree provides 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 €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 €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 project in a devastated area, the state will pay the investor 40% of the eligible gross salary costs for newly employed people in the two-year period after reaching employment commitments, up to the equivalent of €7,000 per new job; the subsidy declines to 20% of eligible costs up to €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% of eligible asset costs in a devastated area and declines to 10% 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 government may sell land for construction at a below-market price in support of an investment project 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 €2 million and employs at least 30 new employees regardless of the level of the municipality development. For projects investing over €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 (2019, amended February 2022), making similar state subsidies available for any company that invests a minimum of €2 million equivalent and employs at least 30 new employees in the sector. For investment projects valued at up to €30 million, subsidies are limited to 20% of the of the eligible costs of investment in fixed assets, falling to 10% for projects over €30 million. Details on all three decrees are available at: http://www.ras.gov.rs/en/invest-in-serbia/why-serbia/financial-benefits-and-incentives/  and https://privreda.gov.rs/dokumenta/propisi/uredbe .

In May 2021, the government approved a Decree on Defining Conditions for Approving Incentives in Attracting Direct Investments in the Automation of Existing Capacities in the Food Processing Industry. The decree aims to improve the productivity of beneficiaries, increasing the number of domestic subcontractors and increasing the use of raw materials of domestic origin. The measure prescribes almost identical conditions to those of the decree for the hotel sector, with the difference that state subsidies are available for the investment projects in food processing automation equivalent to a minimum of €1 million.

Expanding the focus on automation, in February 2022, the government approved a Decree on Defining Conditions for Approving Incentives in Attracting Direct Investments in the Automation of Existing Capacities and Innovation, targeting high added value industries. Under this measure, funds can be allocated for the implementation of investment projects for automation and/or introduction of innovation equivalent to a minimum of €5 million. The Decree lists high value-added industries as follows:

  • chemicals and chemical products;
  • basic pharmaceutical products and medications;
  • electrical equipment;
  • computers, electronic, and optical products;
  • unmentioned machines and unmentioned equipment;
  • motor vehicles, trailers, and semi-trailers;
  • production of other means of transport; and
  • rubber and plastic products.

In addition to 25% of eligible costs in tangible and intangible assets for investments in automation, the beneficiary is eligible for an additional 5% of eligible costs of investment in tangible and intangible assets if the project forms a supply chain, and for an additional 5% of eligible costs if the project develops a new final product with a high degree of production complexity.

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 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) ( http://rav.org.rs/business-environment/incentives ).

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%, 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 ($10 million). The tax holiday begins once the company starts making a profit.

According to the January 2023 Decree on Film Incentives, both domestic and foreign filmmakers are eligible to apply for a refund of 25% of qualifying costs. For film projects over €5 million, the government offers a refund of up to 30% of qualifying costs. The 2023 budget for film incentives is $17.5 million. Details are available at https://www.filminserbia.com/incentives/.

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, 2023:

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

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 the Development Agency of Serbia. Detailed information is available at https://fondzarazvoj.gov.rs  (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. Serbia is promoting itself as an Emerging Tech Development Hub and a presentation from the Fund for Development web page is available here https://innovations.serbiacreates.rs/.

The government guarantees or jointly finances foreign direct commercial investment projects. The government participates as a minority partner in financed infrastructure projects.

Serbia adopted its first renewable energy law as part of the reform of its energy-sector legal framework in April 2021. This was a significant advance in meeting EU accession requirements related to renewable energy and should contribute to scaling up renewable-sourced capacities. The Law on the Use of Renewable Energy Sources enables a shift from the previous feed-in-tariff scheme to a market-based support scheme envisaging feed-in premiums (FiP) obtained on auctions based on quotas for projects above 500 kilowatts for solar and 3 megawatts for wind. Feed-in tariffs remain for small projects; however, their amount will be determined at auctions.

The 2021 legislation also introduced the so-called prosumer concept or self-consumption (consumers that generate their own energy), including jointly acting self-consumption and energy communities. In August 2021, Serbia adopted a decree on self-consumption, enabling a net-metering scheme for households or housing communities and a net billing scheme for all other self-consumers. In September 2021, the Ministry of Mining and Energy published a call for the program to subsidize households to install solar panels and become self-consumers.

The Government approved a draft Law on Amendments to the Law on Renewable Energy Sources in March 2023 to address concerns from public utilities about balancing the electricity grid amid higher input levels of renewable energy sources. The Amendments change the rules and responsibilities for balancing renewable energy sources on the grid. The draft limits installed production capacity of renewable sources for prosumers to 150 kilowatts instead of 10 megawatts. The Draft Law is pending Parliament approval and the first auction is expected soon.

Foreign Trade Zones/Free Ports/Trade Facilitation

Serbia maintains 15 designated customs-free zones: in Apatin, Belgrade, two zones in Kragujevac, 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 exclusions. Companies operating within a customs-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 customs-free zones into other areas of Serbia are subject to customs duties and tax unless they contain a minimum of 50% Serbian inputs. Earnings and revenues generated within customs-free zones may be transferred freely to any country, including Serbia, without prior approval, and are not subject to taxes, duties, or fees.

In 2020 (the most recent year for which complete information is available, there were a total of 215 companies operating in Serbia’s free economic zones, of which 173 were domestically owned and 42 foreign owned. The number of companies increased by 11 or by 5% compared to 2019. The companies employed a total of 40,031 workers, an increase of 6% compared to 2019. Total exports from free zones exceeded $2 billion in 2020, approximately 12% of Serbia’s total exports. Total imports into the zones were approximately $1.4 billion, or 5% of total imports. Total annual turnover in the free zones in 2020 stood at some $4.3 billion, a 14% drop compared to 2019, mostly due to the impact of COVID-19. The largest drop came in the Kragujevac zone, where total turnover fell by 30% year-on-year, mostly due to production cuts at the Fiat auto manufacturing plant. Free trade zone Subotica became the leader in turnover, accounting for 20% of overall turnover of free trade zones. Many companies operating in free zones are producers of automobile parts and other industrial goods, including large multinationals like Fiat, Michelin, Tigar Tyres, Ametek, DAD Draxlmaier Automotive, Mei Ta Europe, Sevojno Copper Mill, Continental, Yazaki, Lear, PKC, Siemens, Swarovski, and Panasonic.

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 government has no policy of forced localization 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 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. Investors are obliged to maintain newly engaged employees for up to five years. Potential investors who want to use state grants must provide a minimum of 25% 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 flexibility in favor of investors. Conditions are applied equally to both domestic and foreign investors.

Real Property

Serbia has an adequate body of laws for the protection of property rights, but enforcement 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 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 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, referred to as a “conversion fee.” In 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. The Ministry of Construction, Transport and Infrastructure is currently working on amendments to the Law on Planning and Construction that would abandon the “conversion fee” and provide greater transparency in procedures to decrease corruption and increase compliance.

The American Chamber of Commerce supported the initiative to eliminate the “conversion fee” because businesses could develop the land they have owned for decades, without the right to build.

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 is an enormous challenge. In 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 was November 2023. According to the latest “Registry of Unregulated Objects” published on the Serbian cadaster website in March 2023, there are almost 4.8 million illegally built or unlicensed objects in Serbia, nearly half of all existing building stock. The number of legally built apartments/houses is close to five million.

Intellectual Property Rights

Serbia is not included in the U.S. Trade Representative’s Special 301 Report or the Notorious Markets List.

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 WTO, the Serbian government has taken steps to adhere to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Serbia’s IPR laws include TRIPS-compliant provisions and are enforced by courts and administrative authorities.

Serbia’s IPR legislation is modern and compliant with both EU and international standards. According to the EU’s 2022 Progress Report, Serbia has a good level of preparation on intellectual property rights to align with the EU acquis, or the collection of common rights and obligations that constitute the body of EU law. The report noted that Serbia should, in the coming years, harmonize copyright and related legislation with the EU directives on collective rights management. In addition, Serbia should strengthen enforcement, by improving capacities and further increasing coordination with different stakeholders. The number of employees in the market inspectorate specializing in the field of intellectual property remained unchanged at 40 inspectors, while their area of work has expanded to include identification of infringements in computer software as of October 2022 taking over the competences from the Tax Administration, according to the EU report.

[Note: In the past, the tax administration checked software licenses during its regular tax audits of businesses. However, in December 2021, Parliament adopted legislative amendments that transferred this authority to the Market Inspection authority. End Note.]

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: http://www.zis.gov.rs/home.59.html .

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 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 trade in counterfeit goods – particularly athletic footwear and other clothing – declined in recent years as the government increased enforcement efforts, the overall amount of seized counterfeit and pirated goods increased in 2020. Upon seizure, authorities cannot destroy the goods without formal instructions from the rightsholders, who are billed for the storage and destruction of the counterfeit goods. Rightsholders are encouraged to register their IPR with the Customs Office by filling out an application for surveillance measures.

The Customs Administration and Market Inspection authority issue periodic reports on seizures, but there is no unified methodology.

As online trade increases, counterfeited goods have appeared on the Internet as well. The Serbian Ministry of Trade issued a press release on January 27, 2023, stating that the Market Inspection authority runs searches on the Internet daily via sophisticated software tools, primarily on social networks, to suppress illegal online trade. The announcement noted that the Market Inspection authority identified over 48,000 unauthorized advertising messages in 2022 and ordered online platforms to remove around 80,000 advertising messages offering counterfeit goods. In 2022 alone, the Market Inspection authority, supported by the Ministry of Interior and Prosecution, seized over 800,000 pieces of counterfeited products.

Inspectors 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 Serbia’s non-governmental Foreign Investors’ Council. The Serbian Intellectual Property Office continues to train judges on IPR to enable more timely court decisions.

Criminal protection of intellectual property rights still represents the weakest point in the system of IP protection in Serbia. To enhance this type of protection, Serbia should educate police officers, public prosecutors, and criminal judges.

Digital IPR theft is not common, but many digital brands are not properly protected, and there is a risk of trademark-squatting.

Statistics: The Customs Administration and Market Inspection authority issues periodic reports on seizures, but there is no unified methodology. The Customs Administration publishes quarterly information on significant border seizures at https://www.carina.rs/servisi/taksirani_servisi/taksirani_servisi_statistika.html  and its official Facebook page: http://www.facebook.com/upravacarina.rs/ .

Market inspectors perform regular on-demand and ex-officio inspections. Statistics are available at: https://mtt.gov.rs/tekst/963/informator-o-radu.php  / . As of March 2023, the latest report available on this link is from October 2022.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at www.wipo.int/directory/en/details.jsp?country_code=RS 

Capital Markets and Portfolio Investment

Serbia welcomes both domestic and foreign portfolio investments and regulates them efficiently. The government removed most restrictions on short-term portfolio investments in April 2018. Residents of Serbia, both companies and persons, are now allowed to purchase foreign short-term securities issued by EU residents and EU countries, and by international financial organizations who have EU countries in their membership. Banks registered in Serbia can also purchase short-term securities issued by OECD countries. Foreigners may only purchase short-term securities in Serbia if they have residency and/or headquarters in EU countries. Payments related to long-term securities have no restriction.

In 2022, Serbia recorded net inflow of $81 million in portfolio investments, compared to $1.6 billion in 2021, according to the National Bank of Serbia. Serbia issued no Eurobonds in 2022, accounting for the steep decline. Also, as interest rates rose in 2022 in the United States and Europe, Serbian securities became relatively less attractive for foreign investors. The 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 $11 billion in November 2022, with 77% in dinars and 23% in euros. In addition, Serbia issued a total value of €7.3 billion of Eurobonds on the international market. The share of dinar denominated securities held by non-residents was 14%, which was equal to $1.2 billion at the end of November 2022.

Serbia’s total public debt reached $33 billion, or 55% of GDP, at the end of December 2022. Of this amount, 58% of the debt is held in Euros, 26% in Serbian dinars, 12% in USD and the remaining 4% is in other currencies.

Serbia’s international credit ratings have improved since 2019 but remain one step below investment grade. In March 2021, Moody’s Investors Service upgraded Serbia’s long-term issuer and senior unsecured ratings from Ba3 to Ba2 while adjusting its outlook from positive to stable. In December 2022, S&P confirmed Serbia’s rating as BB+ with a stable outlook. In August 2022, Fitch confirmed Serbia’s credit as BB+ with a stable outlook.

Serbia’s equity and bond markets are underdeveloped. Corporate securities and government bonds are traded on the Belgrade Stock Exchange (BSE) ( www.belex.rs ). Of 364 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 2022 was $360 million, a decrease of 5% from the prior year. Trading volumes have declined from a peak of $2.7 billion in 2007.

On January 26, 2023, the Belgrade Stock Exchange listed a long-term government bond related to restitution of property that the Serbian government nationalized after the World War Two that could not be returned in kind. These bonds were included in the Prime Listing. The Securities Commission, established in 1995, regulates the Serbian securities market. The Commission also supervises investment funds in accordance with the Investment Funds Law. As of February 2023, 24 registered investment funds operate in Serbia: http://www.sec.gov.rs/index.php/en/public-registers-of-information/register-of-investment-funds .

Market terms determine credit allocation. In December 2022, the total volume of issued loans in the financial sector stood at $30.5 billion. After years of steady decrease, average interest rates, have started increasing, in line with global trends, and are 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 62% of all lending is denominated in euros, 0.1% in Swiss francs, and 0.2% 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

Serbian SMEs often do not have access to credit at or near the prime interest rate, instead turning to friends or family when they need investment and operational funds. Few corporations and municipalities have issued bonds, and the financial market overall is not sophisticated.

The National Bank of Serbia (NBS) regulates the banking sector. Foreign banks may establish operations in Serbia, and foreigners may freely open both local currency and hard currency non-resident accounts. The banking sector comprises 91% of financial sector assets. As of December 2022, consolidation had reduced the sector to 21 banks with total assets of $48 billion (about 75% of GDP), with 84% of the market held by foreign-owned banks. The top ten banks, with country of ownership and estimated assets, are Banca Intesa (Italy, $7.2 billion in assets); OTP (Hungary, $6.7 billion); UniCredit (Italy, $5.2 billion); NLB Bank (Slovenia, $4.9 billion); Raiffeisen (Austria, $4.8 billion); Postanska Stedionica (Serbian government, $3.5 billion); Erste Bank (Austria, $3.1 billion) Eurobank Direktna (Greece, $2.6 billion); AIK Banka Nis (Serbia, $2.2 billion); and Naša AIK Banka (Serbia – formerly Sberbank, $1.5 billion).

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions against Russian banks, including Sberbank, on February 25, 2022, due to Russian aggression in Ukraine and prohibited corresponding relations with these banks. Serbia has not joined U.S. and EU sanctions against Russia. Until the imposition of banking sanctions, Sberbank’s Serbian affiliate was the only significant Russian bank in Serbia. Its sale to Serbia’s privately owned Agroindustrial Commercial Bank (AIK Bank) was completed March 1, 2022, and it changed its name to Naša AIK Banka.  Only two Russian banks are now operating in Serbia: API Bank and Expobank, with combined assets of approximately $300 million, constituting less than one percent of Serbia’s banking-sector assets.

For more information, see:
https://www.nbs.rs/sr_RS/finansijske-institucije/banke/bilans-stanja/

The IMF assessed in its December 2022 report that the Serbian banking system was stable due to adequate capitalization, high liquidity, and profitability. As of September 2022, banks’ capital adequacy was stable at 19.5%, well above the regulatory minimum of 8%, and asset quality was improving. Bank profitability remained robust, with return-on-assets and return-on-equity ratios of 1.6% and 11.2% respectively in August 2022. As of August 2022, non-performing loans were 3.2% of total Serbian loan portfolios, and NPLs were fully provisioned. Significant foreign-exchange risks remain, as 67% of all outstanding loans are indexed to foreign currencies, primarily the euro. In 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 the accompanying reduction of outstanding principal and interest balances. This law enabled borrowers to continue servicing debt on more favorable terms.

The government adopted a new Law on Capital Markets in December 2021 (to be implemented from January 2023) to create a legal framework to allow for additional financing mechanisms for domestic private investment. Plans for 2023 include the creation of a “one-stop shop” to offer real-time information on capital markets and a new unit in the Ministry of Finance to support capital market participants.

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 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 2014 to authorize Serbian citizens to conclude transactions abroad through internet payment systems such as PayPal.

Companies that accepted direct government support to mitigate the impact of the COVID-19 pandemic in 2020 were prohibited from paying out dividends through the end of 2020.

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. International financial institutions and the business community have urged revision of the law, but NBS defends the measure as necessary to prevent money laundering and other financial crimes.

According to the law, the NBS targets inflation in its monetary policy. In practice, the NBS attempts to achieve this goal by maintaining a de facto fixed exchange rate regime, keeping the dinar stable relative to the euro, regularly intervening in the foreign-exchange market. In the first two months of 2022, the NBS sold almost 1 billion euros to support the dinar due to increased purchases of energy and short-term panic buying of euros in response to Russia’s full invasion of Ukraine. Overall, for 2022, however, the NBS was a net buyer of one billion euros. The dinar remained unchanged against the euro and depreciated 6% against the U.S. dollar in 2022.

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. In June 2021, JP Morgan included Serbian government bonds into the JP Morgan GBI-EM Index of Emerging Market bonds.

Remittance Policies

Personal remittances constitute a significant source of income for Serbian households. In 2022, total remittances from abroad reached $3.7 billion, approximately 6% 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 non-governmental Foreign Investors’ Council confirms that Serbia has no limitations on investment remittances.

Sovereign Wealth Funds

Serbia does not have a sovereign wealth fund.

State-owned enterprises (SOEs) dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. Serbia’s Agency for Business Registers (ABR) maintains a publicly available database of all SOEs on its website at apr.gov.rs. The most recent ABR report, published in mid-2022 covering 2021, recorded 575 SOEs employing a total of around 114,000 people (down by 883 persons y/y), or approximately 9% of the formal workforce and accounting for 5.5% of total business sector revenues. (SOEs’ accounted for 2% of overall profit of the entire business sector, while SOEs losses accounted for 9.7% of overall business sector losses. The full report is available at: https://www.apr.gov.rs/upload/Portals/0/GFI_2022/Publikacije/Godisnji_izvestaj_o_poslovanju_privrede_2021.pdf . At the beginning of 2023, 58 SOEs with a total of nearly 23,000 employees were slated to be privatized or were facing bankruptcy, down from 90 companies in early 2019. The government has launched a privatization tendering process for two of those companies, and the Ministry of Economy is preparing 10-15 additional companies for divestiture (see Privatization Program, below).

From January 1, 2023, all public companies were scheduled to adopt software to increase financial accountability, which was developed by the Ministry of Economy within the Project “Reform of Local Public Finances II” (RELOF 2) supported by the Government of Switzerland. The software supports precise planning and reporting on public companies’ activities and their budgets and improves visibility and availability of business information.

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% 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 an ad hoc report 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: http://transparentnost.org.rs/images/publikacije/Political_influence_on_public_enterprises_and_media.pdf

The government has prepared a new Law on Public Enterprises, currently in a public discussion process, that should enable the transformation of public companies into shareholding companies or limited liability companies. The draft law stipulates that the new law should come into force as of January 1, 2024.

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 5% higher than a foreign supplier’s price. The Public Procurement Office, an independent state body, supervises implementation of the Law on Public Procurement. Serbia, not yet a member of the WTO, is not a party to the WTO’s Government Procurement Agreement.

Serbian SOEs competing in the domestic market operate in accordance with commercial considerations on terms that other market participants would offer or accept. They provide non-discriminatory treatment in their purchase and sale of goods or services. Serbian telecommunications company Telekom Srbija acquired Telekom Republika Srpska in Bosnia and Herzegovina and MTEL in Montenegro. Telekom Srbija also provides services in Croatia, Switzerland, Germany, Austria, and North Macedonia. Media reported they plan to expand their operations to the U.S. during 2023.

Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. The IMF estimated, however, that in 2022, SOEs in Serbia enjoyed benefits amounting to approximately 2.2% of GDP (EUR 1.4 billion).

The IMF has recommended that the government phase out support for SOEs. In 2016, Serbia committed 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. This goal remains a key element of Serbia’s current IMF program. The government decreased the level of quasi-fiscal support (issuing of new guarantees) from $860 million in 2016 to $110 million in 2020. However, in 2022, due to increased global energy prices, the government provided subsidies, loans, and guarantees to support electricity company EPS and natural gas company Srbijagas in the amount of 2.2% of annual GDP (EUR 1.4 billion) as of September 2022, according to the latest IMF report available at: https://www.imf.org/-/media/Files/Publications/CR/2022/English/1SRBEA2022002.ashx.

In the latest IMF program, a new EUR 2.4 billion Stand-by Arrangement (SBA) launched in December 2022, the IMF stressed the importance of advancing the SOE reform agenda, including improving corporate governance. The IMF expressed satisfaction with the reform process thus far under the SBA in a public statement in April. Serbia, with EBRD support, adopted an action plan to implement a new ownership and governance strategy for SOEs in June 2021. The Action Plan is posted online at: https://privreda.gov.rs/lat/dokumenta/propisi/strategije/akcioni-plan-za-sprovodjenje-strategije-drzavnog-vlasnistva-i . A new law to strengthen SOE management was published for public discussion in November 2022. The new law aims to improve the oversight and governance of non-financial SOEs. It centralizes the oversight of SOEs within the Ministry of Economy, except for energy companies, and it requires SOEs to be corporatized.

Privatization Program

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, 58 companies were still unresolved as of March 2023. These companies include health spas, veterinary stations, and companies located in Kosovo, among others. Most significantly, the Ministry of Economy must still resolve several large, strategically important SOEs including the Resavica coal mine in east-central Serbia, chemical company MSK Kikinda, and others. In many cases, closing these companies would do serious damage to their local economies, where they are key employers. The 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 http://www.priv.rs/Naslovna .

In December 2018, France-based Vinci Airports took over operation of Belgrade’s Nikola Tesla Airport under a 25-year concession agreement. According to official statements, Vinci had offered €501 million to manage the airport and €732 million in investment, as well as an annual fee of up to €16 million. At the end of 2020, the government completed the sale of the country’s second largest bank, Komercijalna Banka, to Slovenia’s NLB bank. The government sold the petrochemical company Petrohemija to the Russian majority-owned petroleum company Naftna Industrija Serbije (NIS) in December 2021. The government has started the process of converting the country’s largest SOE, the power utility EPS, into a joint share-holding company as recommended by the IMF, but the IMF has not recommended fully privatizing the company, and the government has no plans to do so. The government plans to privatize three companies in 2023: river shipping company Jugoslovensko rečno brodarstvo, Hotel Slavija in Belgrade, and transport company Lasta.

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. The Council for Philanthropy held its first session in September 2018. The Council, chaired by the Prime Minister and founded with grant support from USAID, aims to use public policy to create a more encouraging environment for corporate giving in Serbia. Members of the Council include ten government ministers, the Belgrade Mayor, the Director of the Tax Administration, several NGOs, and 37 member companies as of March 2023. Donors have pointed to issues that have a negative impact on philanthropy, including a lack of tax incentives for donors, no available VAT exemptions for in-kind donations, the lack of a system for monitoring donations from companies, and the absence of official data on charities.

The USAID project “Framework for Giving Activity,” which recently ended, strengthened philanthropy and charitable giving in Serbia. The activity focused on improving the legal and policy framework related to charitable giving to make giving easier and more transparent.

According to the 2022 World Giving Index published by the Charities Aid Foundation, Serbia had the third largest rise in score, after the Czech Republic and China. Serbia made a notable leap, from a rank of 132, with a score of 18% in 2017, to 27th place in 2021, with a score of 46%. Donation volumes nearly tripled during the pandemic, according to the report. The Serbian Philanthropy Forum, an umbrella organization of foundations and donors in Serbia, reports that this growth is due in large part to Serbians increasing their donations via SMS to causes relating to healthcare and medical research, as well as natural disasters (including in response to the February 2023 earthquakes in Turkey and Syria). Serbia’s economic recovery after the first year of the pandemic, alongside significant wage growth, also likely contributed to higher rates of giving and participation. Serbia remains, however, in the bottom 10 countries for volunteering. In 2021 it ranked #116, with only 9% of people volunteering time: https://www.cafonline.org/about-us/publications/2022-publications/caf-world-giving-index-2022

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 UN Development Program’s Global Compact initiative has 122 participants in Serbia and has organized several educational events intended to strengthen RBC capacity in Serbia. The list of members is available at: http://www.ungc.rs/srb/clanovi .

Several local organizations, such as the American Chamber of Commerce (AmCham), 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). The NGO Smart Kolektiv provides consulting services in RBC and established in 2016, with USAID support, an RBC Index which is the first national platform for assessing responsible business conduct in Serbia.

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 by 14 leading companies in Serbia, and currently has 28 member companies.

Multinational companies often bring international best practices in RBC, with U.S. companies among the most active. During the COVID-19 pandemic, many large companies donated money and goods to help government combat the crisis.

Allegations of labor-rights violations are uncommon in Serbia. However, in December 2021, the European Parliament adopted a resolution calling for an investigation into forced labor at the construction site for the Chinese-owned LingLong tire-manufacturing plant in Zrenjanin, in northern Serbia. Media and anti-trafficking NGOs reported that approximately 500 Vietnamese workers were living in poor accommodations and lacked access to sufficient food and water, their passports having been confiscated upon arrival.

According to a 2022 OECD study on small and medium enterprises, Serbia has made good progress in implementing the Small Business Act since the publication of the previous OECD report – the SME Policy Index: Western Balkans and Turkey 2019. Serbia achieved its highest average scores in the following areas: operational environment for small and medium-sized enterprises (SMEs); support services for SMEs; public procurement; access to finance for SMEs; standards and technical regulations; and innovation policy for 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’s 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.

Serbia has a private sector security industry but is not a signatory of the Montreux Document on Private Military and Security Companies. Serbia is also not a supporter of the International Code of Conduct for Private Security Service Providers and is not a participant in the International Code of Conduct Association.

Additional Resources

Department of State

Department of the Treasury

Department of Labor

Climate Issues

Serbia is a signatory to the UN Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the Paris Agreement. In June 2015, Serbia submitted its intended Nationally Determined Contribution (NDC) to the UNFCCC, committing to reduce its greenhouse gas emissions 9.8% by 2030 compared to 1990. Serbia has developed a national Low-Carbon Development Strategy as part of a larger Climate Strategy and Action Plan. Although the plan has gone through the public review process, it has never been formally adopted, and the NDCs have not been ratified. On August 4, 2022, the Government adopted the revised NDCs and submitted them to the UNFCCC’s Secretariat on August 16, 2022, https://unfccc.int/NDCREG . Serbia’s updated NDCs set the goal of greenhouse gas emissions reduction by 33.3% by 2030 compared to 1990, which is equivalent to 13% by 2030 compared to 2010. Emission reduction in the NDCs covers the sectors of energy, industrial processes and product use (IPPU), agriculture, and waste. Reduction is defined without the land use, land-use change and forestry (LULUCF) sector. The reduction including this sector would amount to 40.3% by 2030 compared to 1990.

The Ministry of Mining and Energy is developing a separate National Energy and Climate Plan that will define Serbia’s 2030 goals for energy efficiency, energy security, and decarbonization, along with implementation plans. At the COP-26 climate conference in Glasgow in November 2021, Serbia joined three international agreements targeting specific high-emitting sectors: those related to clean power, road transport, and hydrogen. Serbia also joined the Declaration on Forests and Land Use, which addresses the role of forest ecosystems in mitigating and adapting to climate change, as well as the Global Methane Pledge.

Serbia adopted its first Law on Climate Change in March 2021, with the aim to establish a monitoring, reporting and verification framework, a system to inventory greenhouse gas emissions, climate policies that insert low carbon strategies into the relevant institutional and legal framework, and procedures for setting up a national system for policies, measures, and projections. The climate-change law will set up the framework for the EU’s cap-and-trade emissions-trading system. In December 2021, Serbia opened so-called Cluster 4 in the EU accession negotiations, which includes environment and climate change.

In December 2022, the Government of Serbia adopted the Air Protection Program for the period 2022 to 2030 with an action plan. For the first time, Serbia adopted a public policy document that estimated the health effects of air pollution and proposed a set of measures to bring air pollution to the legally prescribed levels by 2030. The Program was preceded by the Draft Air Protection Program, which was prepared in cooperation with the EU as part of the project for a better environment in Serbia. The implementation of the Draft Air Protection Program will require investments of EUR 2.6 billion by 2030. The objective is to reduce emissions in sectors such as energy, stationary combustion plants, transport, large industrial plants, and agriculture, through the cooperation and participation of institutions, business and citizens. Moreover, the Draft Air Protection Program defines both measures and activities that will help local self-government units in the development of air quality plans, short-term action plans, and local monitoring programs.

Serbia has adopted a National Strategy on Forest Development, under which it is planning to increase the national forest coverage from its current 30% of total area to 42% by 2050. Serbia has also adopted a National Strategy of Water Management for water conservation reform, which sets out long-term directions for water management at the national, regional, and local levels through 2034. The Ministry of Agriculture, Forestry and Water Management has an early-warning system for extreme weather events and provides rehabilitation after weather emergencies.

According to Bloomberg NEF’s Climate scope, which evaluates and ranks conditions for energy transition investment, Serbia ranks 56th among emerging markets (of 107 countries) and 85th globally (of 136 countries). ( https://global-climatescope.org/markets/rs/ ).

Surveys consistently show that corruption remains an issue of concern. According to Transparency International, in 2022 Serbia’s Corruption Perception Index (CPI) declined to a score of 36 from 38 in 2021 with a rank of 101st out of 180 ranked countries down from 96th in 2021. Serbia’s 2022 CPI is seven times lower than the world average and its worst score in 11 years. In Serbia’s EU accession process, the European Commission has repeatedly noted that Serbia must do more to fight corruption and improve transparency. Arrests and investigations for official corruption charges generally focus on low or mid-level officials, and corruption-related trials are typically drawn out and subject to lengthy appeal processes.

Serbia is a signatory to the Council of Europe’s Civil Law Convention on Corruption, and it 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.

As part of its EU accession requirements, the government has worked to bring its legal framework for preventing and combating corruption in line with EU norms. A dedicated state body, the Agency for the Prevention of Corruption, has a preventative role in fighting corruption, while dedicated Anticorruption Police and prosecutors investigate and prosecute cases of corruption. The Criminal Code specifies numerous bases for prosecution of corruption and economic offenses, including but not limited to giving or accepting a bribe, abuse of office, abuse of a monopoly, malfeasance in public procurement, abuse of economic authority, fraud in service, and embezzlement. However, a new National Strategy for Fighting Corruption to replace the expired 2013-2018 version has yet to be drafted – a concern frequently raised by the European Commission and Serbia’s Anti-Corruption Council, an advisory body to the government. Critics of the government’s anticorruption performance claim that state bodies charged with tackling corruption are negligent, ineffective, or marginalized.

In 2018, Serbia’s Parliament strengthened anti-corruption laws through three pieces of legislation: The Law on Organization and Jurisdiction of State Organs in Suppressing Organized Crime, Terrorism, and Corruption for the first time established specialized anti-corruption prosecution units and police 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 offenses, and amendments to the Criminal Code made corruption offenses easier to prosecute. Following these legal changes, specialized anti-corruption departments started operations in 2018 in Novi Sad, Belgrade, Kraljevo, and Niš to prosecute offenders who have committed crimes of corruption valued at less than RSD 200 million ($1.8 million). Cases valued above this level are handled by the Organized Crime Prosecutor’s Office.

Serbia’s Law on the Prevention of Corruption, which went into effect in 2020, requires income and asset disclosure by appointed or elected officials, and it regulates conflicts of interest for public officials. Disclosures cover assets of officials, spouses, and dependent children. Declarations should be publicly available on the website of the Agency for the Prevention of Corruption, 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. However, there have been no apparent repercussions for officials who fail to comply with mandated disclosure requirements and independent media reported several cases where high-level officials allegedly failed to report assets.

The Law on Public Procurement, adopted in 2020, introduced mandatory use of an online public-procurement portal. While the portal noticeably improved transparency and procedures, independent watchdogs reported that more than half of completed public procurement tenders since the implementation of the new law have resulted in only one offer, which indicated continued issues with transparency of public procurement procedures or the establishment of non-competitive procurement processes that favor certain vendors. Watchdogs have also pointed to the excessive or improper use of “secret tenders” applied under grounds of national security.

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 codes, or compliance programs designed to detect and prevent bribery of government officials. Large companies often have internal programs, especially in industries such as tobacco, pharmaceuticals, medical devices, and industries regularly involved in public procurement.

In 2020, the Parliament adopted a Parliamentary Code of Conduct, aimed at addressing GRECO recommendations regarding conflict of interest and other issues of ethics among parliamentarians. However, the code lacks meaningful independent enforcement mechanisms and numerous cases in which members of parliament have apparently violated this code resulted in no disciplinary action.

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 2015, under which individuals can report corruption in companies and government agencies and receive court protection from retaliation by their employers. Watchdog organizations and NGOs have reported that whistleblower protections are not adequately applied, leading potential whistleblowers to stay silent for fear of retribution. Whistleblowers in high profile cases against state-owned enterprises have claimed they do not receive adequate protections under the existing law or are subjected to retribution.

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 belgrade@trade.gov  and visit www.trade.gov/serbia . 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.

The Regional Anti-Corruption Initiative maintains a website with updates about anti-corruption efforts in Serbia and the region: http://rai-see.org/ 

Resources to Report Corruption

Corruption may be reported to officers at any police station. If dedicated anti-corruption law-enforcement personnel are not available, the officer in charge is to contact Anti-Corruption Police personnel to report to the location so that a complaint may be filed.

Serbian Corruption Prevention Agency
Carice Milice 1, 11000 Belgrade, Serbia
+381 (0) 11 4149 100
office@acas.rs 

Transparency International Serbia
Transparentnost Srbija
Palmoticeva 27, 11000 Belgrade, Serbia
+381 (0) 11 303 38 27
ts@transparentnost.org.rs 

Serbia held presidential and parliamentary elections in April 2022. President Aleksandar Vucic won a second presidential term with 58.5% of the vote, compared to only 18.5% for the runner-up.  In the parliamentary election, Vucic’s Serbian Progressive Party (SNS) received 43% of the vote, claimed 120 of 250 seats in Parliament. and remained the dominant party in the government. The Organization for Security and Cooperation in Europe’s Office for Democratic Institutions and Human Rights (ODIHR) concluded that Serbia’s “legal framework provides an adequate basis for democratic elections, but additional measures are needed to ensure a level playing field.” ODIHR recommended reforms to improve all candidates’ access to media, “enhanced transparency and accountability of campaign finance, and measures to tackle pressure on voters and misuse of administrative resources. ODIHR also noted the elections were plagued by “systematic procedural deficiencies,” which delayed certification of the parliamentary election results for several months.

The government has made EU membership a primary goal. Serbia has opened 22 of 35 chapters in the EU accession acquis and provisionally closed two. After a long delay in Serbia’s accession process the European Commission in 2021 recommended opening a new “cluster” of accession chapters, pointing to some progress in judicial and rule-of-law reform. However, EU accession progress has been complicated by Serbia’s relationship with Russia, which led to divergence between Serbian foreign policy and the EU’s, notably regarding Serbia’s decision not to join EU sanctions against Russia after its 2022 full invasion of Ukraine.

Protests are not uncommon, particularly in urban areas, and most protests are peaceful. In late 2021 and in early 2022, environmental activists staged regular nationwide protests that occasionally blocked highways or resulted in a few minor incidents of violence. Ultranationalist, pro-Russia demonstrators in a February 2023 protest made violent threats implicitly but unmistakably targeting Vucic because of his support for an EU proposal to normalize relations between Kosovo and Serbia. Protestors tore down a fence next to the Presidency building before armed police blocked them from entering the Presidency.

Discrimination and threats of physical attacks against Serbia’s LGBTQI+ community persist. Belgrade’s EuroPride parade took place in September 2022 without significant disruptions or violence, although there were scattered clashes between police and counter-protestors outside the parade route. Several EuroPride participants were attacked by a group of unknown assailants after the parade, and at least two participants were hospitalized due to the attack. There were weeks of uncertainty and confusion over whether the government would allow the EuroPride parade to be held at all, and then-Minister of Interior Aleksandar Vulin threatened to arrest parade participants the day before the parade.

Criminal activity linked to transnational organized crime groups is a regular phenomenon in Serbia. Sport hooliganism is often associated with organized crime, and violent hooliganism remains a concern at matches of rival soccer teams within Serbia. Several ultra-nationalist organizations in Serbia have harassed Serbian political leaders, local NGOs, minority groups, migrants, and media outlets considered to be pro-Western, but these incidents are infrequent.

In the last quarter of 2022, according to Serbia’s Statistics Office, the country had a total active labor force of approximately 3.18 million people, of which 2.89 million were employed (55.6% men and 44.4% women) and 291,100 were unemployed. The formal employment rate was 50.1%, and the informal employment rate was 12.8%, with most of the total informally employed in services and agriculture. Unemployment in the last quarter of 2022 stood at 9.2%. Youth unemployment remained relatively high at 24.3%. 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 leading sector for employment is manufacturing, followed by government and public administration, agriculture and forestry, fishery, trade, transport, construction, and hospitality services. The socioeconomic status of women is significantly worse than that of men. The largest number of discrimination complaints relate to disability, age, and gender. According to the Statistics Office, the wage gap between women and men is 8.8% in favor of men. Other reports showed women’s career advancement was slower, and that women were underrepresented in most professions and faced discrimination related to parental leave.

The presence of foreign workers is increasing, especially in construction. After the initial success of the 2018 Law on Simplified Work Engagement on Seasonal Jobs in Selected Areas, in the field of Agriculture, the government is considering expanding the scope of law from agriculture to other areas, including forestry and fisheries, construction, tourism and hospitality, and domestic work. NGOs and the International Labor Organization (ILO) have raised concerns that the proposed amendments could result in stripping migrant and seasonal workers of labor rights, including the right to form unions and mechanisms for redress of abuse.

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 http://www.ras.gov.rs/en/invest-in-serbia/why-serbia/financial-benefits-and-incentives/  and http://rav.org.rs/business-environment/incentives .

Serbia’s labor costs are relatively low compared to European averages. In December 2022, the average net take-home salary was approximately $769 per month, while the minimum wage was approximately $365 per month. Investors routinely cite low labor costs, as well as a highly educated, multilingual workforce, as advantages to doing business in Serbia, while availability of skilled labor is limited by large-scale emigration. Approximately 57% of the workforce has completed secondary education, while some 26% 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 permanently.

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 http://www.socijalnoekonomskisavet.rs/ .

Serbia has ratified all eight ILO 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 https://www.dol.gov/agencies/ilab/resources/reports/child-labor/serbia .

The Staff Leasing Law, which came into force in 2020, regulates leased employees’ status, the staffing agencies, and recipient employers. Under the law, employers may hire up to 10% of their workforce with fixed-term contracts through an agency, with no limit on those with indefinite-term employment contracts.

USAID/Serbia in 2019 launched a $91 million Development Credit Authority (DCA) loan portfolio guarantee, now supported by DFC, with three commercial banks: ProCredit Bank, Banca Intesa, 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 underserved small and medium-size enterprises.

The United States and Serbia signed a new bilateral Investment Incentive Agreement in January 2021 to enable DFC to deploy its full range of financial products and programs in Serbia. The agreement came into force on May 5, 2021. The agreement is a prerequisite for implementation of a DFC program for small and medium-size enterprises – a combination of loan portfolio guarantees and direct loans which could total up to $1 billion. Opportunities for DFC investment include public-private partnerships in roads, green energy, natural gas interconnectors, wastewater treatment, and food processing.

In 2022, DFC and the Serbian Ministry of Finance signed additional Loan Portfolio Agreements with four commercial banks (Addiko, Intesa, ProCredit, and Raiffeisen), for a total lending portfolio of $272 million. The guarantee will cover up to 60% of potential losses for loans issued to the SME sector over a 12-year period. DFC is negotiating guarantees with two more banks.

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) 2021 $64,454 2021 $63,080 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2021 $611 2021 $474 BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2021 $20 2021 $16 BEA data available at https://apps.bea.gov/international/factsheet/
Total inbound stock of FDI as % host GDP 2021  

77%

2021 83.7% UNCTAD data available at

https://unctad.org/topic/investment/world-investment-report  

*Source of GDP data: Ministry of Finance of the Republic of Serbia at
https://www.mfin.gov.rs//upload/media/PJ27go_6406f5fe29e76.xlsx

*Source of FDI data: National Bank of Serbia (NBS) at
https://www.nbs.rs/export/sites/NBS_site/documents/statistika/ino_ekonomski_odnosi/platni_bilans/fdi_po_zemljama_2010_2021.xls

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.

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), 2019*
Inward Direct Investment Outward Direct Investment
Total Inward $43,845 100% Total Outward $4,123 100%
The Netherlands $8,183 19% Bosnia and Herzegovina $1,027 25%
Austria $4,574 10% Montenegro $742 18%
Germany $2,919 7% Slovenia $659 16%
Cyprus $2,791 6% Switzerland $244 6%
Russia $2,664 6% Russian Federation $212 5%
“0” reflects amounts rounded to +/- $500,000.

* 2020 and 2021 data for Serbia not available from the IMF. The National Bank of Serbia lists no major tax havens as significant investors in Serbia. According to the NBS, the top five sources of investments in Serbia in 2019 included the Netherlands, Russia, Switzerland, Hungary, and China. The top five destinations for Serbia’s investments included Switzerland, Slovenia, Romania, BiH, and Montenegro. IMF data does not correspond precisely with the National Bank of Serbia data.

Data source: IMF ( https://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1482331048410 )

Tatjana Vecerka
Economic Specialist, U.S. Embassy
Bulevar kneza Aleksandra Karadjordjevica 92
11040 Belgrade, Serbia
+381-11-706-4395
SerbiaInvestment@state.gov 

On This Page

  1. EXECUTIVE SUMMARY
  2. 1. Openness To, and Restrictions Upon, Foreign Investment
    1. Policies Towards Foreign Direct Investment
    2. Limits on Foreign Control and Right to Private Ownership and Establishment
    3. Other Investment Policy Reviews
    4. Business Facilitation
    5. Outward Investment
  3. 2. Bilateral Investment and Taxation Treaties
  4. 3. Legal Regime
    1. Transparency of the Regulatory System
    2. International Regulatory Considerations
    3. Legal System and Judicial Independence
    4. Laws and Regulations on Foreign Direct Investment
    5. Competition and Antitrust Laws
    6. Expropriation and Compensation
    7. Dispute Settlement
      1. ICSID Convention and New York Convention
      2. Investor-State Dispute Settlement
      3. International Commercial Arbitration and Foreign Courts
    8. Bankruptcy Regulations
  5. 4. Industrial Policies
    1. Investment Incentives
    2. Foreign Trade Zones/Free Ports/Trade Facilitation
    3. Performance and Data Localization Requirements
  6. 5. Protection of Property Rights
    1. Real Property
    2. Intellectual Property Rights
  7. 6. Financial Sector
    1. Capital Markets and Portfolio Investment
    2. Money and Banking System
    3. Foreign Exchange and Remittances
      1. Foreign Exchange
      2. Remittance Policies
    4. Sovereign Wealth Funds
  8. 7. State-Owned Enterprises
    1. Privatization Program
  9. 8. Responsible Business Conduct
    1. Additional Resources
    2. Climate Issues
  10. 9. Corruption
    1. Resources to Report Corruption
  11. 10. Political and Security Environment
  12. 11. Labor Policies and Practices
  13. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
  14. 13. Foreign Direct Investment Statistics
  15. 14. Contact for More Information
2023 Investment Climate Statements: Serbia
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