Taxation Principles in Company Formation in Serbia

Serbia has entered the radar of entrepreneurs in recent years with its 15% corporate tax rate, low operational costs, and proximity to the EU market. However, the perception of “low tax” alone is not sufficient; the real advantage emerges when the taxation principles are structured correctly.

In this article, we address the taxation principles in company formation in Serbia with a practical framework for entrepreneurs and investors looking to grow globally. Additionally, we explain how Corpenza’s mobility, incorporation, and workforce solutions fit into this picture for companies looking to build remote teams and simplify compliance obligations, with examples.

Fundamentals of Corporate Tax in Serbia

15% flat rate and determination of the tax base

The corporate income tax (CIT) rate in Serbia is 15%, applicable to both resident companies and foreign companies earning income sourced from Serbia. This rate creates a significant cost advantage compared to rates in Western European countries like Germany and France, which range from 25% to 30%.

The tax base is formed based on the company’s annual net commercial profit. When adapting accounting profit for tax purposes:

• Deductible expenses (personnel, rent, marketing, consulting, etc.),
• Limited deductible expenses (interest, some representation expenses),
• Legally non-deductible expenses

must be classified correctly. Serbia calculates the tax base according to local accounting standards; therefore, having local expertise in accounting and tax consulting is critically important.

Carrying forward losses and planning in group structures

If a company incurs losses in its initial years, it can carry these losses forward for 5 years and deduct them from future profits. This feature provides significant flexibility in tax planning, especially for:

• Technology ventures with high initial costs for product development and market entry,
• Manufacturing companies with intensive machinery and equipment investments

Groups operating in multiple countries incorporate the possibility of carrying forward losses into their strategy when structuring the Serbian company as an R&D, logistics, regional sales, or shared-service center.

Corpenza perspective: Establishing tax structure at the time of incorporation

Corpenza offers entrepreneurs and investors wishing to establish a company in Serbia an approach that clarifies the tax dimension from the outset. Strategically:

• Aligns the choice of company type (especially limited liability company – d.o.o.) with tax obligations,
• Designs intra-group billing, service, and license agreements in compliance with transfer pricing rules,
• Analyzes the future impact of loss carryforwards and investment incentives through scenarios.

Thus, the goal is not only to “open a company” but to establish a long-term sustainable tax position.

VAT, Withholding Tax, and Double Taxation: Balancing Cross-Border Transactions

VAT obligations and cash flow impact

VAT rates in Serbia work as follows:

• Standard rate: 20% (most goods and services),
• Reduced rate: 10% (food, certain medical products, etc.),
• 0% rate: Exports and certain international transactions.

Companies exceeding a certain turnover threshold are required to register for VAT. For export-oriented technology or service companies, the most critical issue is the impact of VAT refunds on cash flow. Incorrect VAT classification and missing documents prolong refund processes and increase the company’s financing costs.

Withholding tax and double taxation treaties

Serbia applies withholding tax on certain payments made abroad. General principles:

• The standard withholding tax for dividend, interest, and royalty payments is generally around 15%.
• If there is a double taxation prevention agreement with the relevant country, the rates may be reduced under the agreement.
• Service fees, management fees, and license payments require separate evaluation.

For example, a company established in Serbia distributing dividends to a parent company based in Turkey may have the opportunity to apply a lower withholding tax rate under the Turkey-Serbia double taxation agreement. At this point, the local tax authority and the agreement text are evaluated together.

Income tax and social security in international workforce

The income tax and social security obligations for employees of the company constitute a significant portion of the total tax cost. In Serbia:

• Personal income tax is applied on employee salaries.
• The employer and employee jointly bear social security contributions.
• Double social security agreements and exceptions in temporary assignments (posted workers) may come into play.

Especially for companies employing remote workers and personnel from multiple countries, determining where each employee will be insured and where their salary will be taxed affects both tax risk and employee satisfaction.

Corpenza’s payroll and personnel leasing solution

Corpenza provides:

• Payroll services that pay remote or contracted personnel’s salaries in compliance with local legislation and allow companies to deduct these costs,
• Personnel leasing and posted worker models that simplify employer obligations in temporary employment and cross-border assignments.

Thus, companies can build teams in Serbia in a compliant manner without establishing a physical presence or creating a local HR team, minimizing tax risk.

Tax Registrations, Declarations, and Compliance Management in Serbia

Simultaneous tax registration with company formation

After the company is registered through the Serbian Business Registry (SBRA), it receives a tax number (PIB) and corporate tax liability begins. Within a short period following the incorporation, the first (advance) tax declaration must be submitted; this declaration determines the temporary tax payments for the year.

Since there are no historical data in the first year yet, this declaration must be created based on realistic projections. Incorrect estimates can lead to unnecessary cash outflows or additional burdens in year-end adjustments.

Annual corporate tax return and audit

Companies submit their annual tax return within the specified period following the end of the relevant accounting period. For companies above a certain size, independent audit requirements come into play, and audited financial statements form the basis of the tax return.

Critical headings here include:

• Transfer pricing documentation (for intra-group transactions),
• Supporting relevant documents for tax advantages such as R&D and investment incentives,
• Compliance with legal limits and criteria for interest expenses, depreciation, and doubtful receivables.

VAT and payroll declarations: Operational discipline

VAT and payroll declarations are made monthly or quarterly. Particularly:

• Late declaration and payment of VAT incur daily late fees and penalties,
• Incorrect tax and insurance premium calculations in payroll result in back assessments and penalties,
• Accounting for exchange rate differences in foreign currency payments affects the tax base.

Instead of adapting the finance team to Serbian legislation, working with a payroll and accounting team with local experience significantly reduces risks, especially in the first two years.

Corpenza’s tax compliance and accounting approach

Corpenza not only prepares the incorporation files for its clients establishing a company in Serbia; subsequently:

• Maintains local accounting records in compliance with international accounting standards,
• Prepares corporate tax, VAT, and payroll declarations accurately and on time,
• Represents the company during tax audits and official correspondence.

This model allows investors subject to different tax systems, such as Turkey, the EU, and Gulf countries, to manage the compliance process for the Serbian leg from a single source.

Investment Incentives, Golden Visa, and Tax Optimization

Tax incentives: Opportunities based on sector and scale

Serbia applies various tax incentives to attract projects based on manufacturing, technology, and exports. The prominent topics in practice include:

• Corporate tax reductions for projects providing investments and employment above a certain amount,
• Increased expense deduction opportunities for R&D and technology development activities,
• VAT and customs duty advantages in free zones.

Some of these incentives are not automatically applied; it is necessary to structure the investment plan in advance and initiate processes with the relevant institutions. Seeking incentives after announcing the investment decision often means lost opportunities.

Residence through incorporation, golden visa, and citizenship perspective

Establishing a company in Serbia is not only a commercial move for many investors and professionals but also a mobility-focused one. Through the company:

• Establishing a legal basis for residence and work permits,
• Planning residence and education for family members,
• Transitioning to residency or citizenship programs with investment in the medium term

comes into play. Serbia offers flexible solutions for foreign investors in parallel with the EU membership process; these solutions, when considered alongside programs similar to “golden visa,” turn into a mobility strategy covering multiple countries.

Integrated mobility and tax planning with Corpenza

Corpenza designs the company formation process in Serbia in an integrated manner with residence permits, work permits, and long-term mobility plans. In practice:

• Structures the company establishment with residence/work permit files aligned with the investment amount and business plan,
• Compares country and structure selections suitable for citizenship and golden visa goals with investment,
• Plans which countries and rates will tax the income from a tax optimization perspective, in light of double taxation agreements.

Thus, the company in Serbia becomes not only a commercial tool but also a cornerstone of global mobility and asset planning.

Serbia in Global Expansion Strategy: Practical Suggestions and Final Steps

Steps to take from day one to reduce risks

When planning to establish a company in Serbia and benefit from tax advantages, clarifying the following steps makes a significant difference:

• Target market map: From Serbia, to which countries will you sell products/services?
• Group structure: Are the locations of the holding, regional center, and local operations clear?
• Workforce model: How will the combination of full-time, remote, contracted, or posted workers look?
• Double taxation: Have you reviewed the agreement conditions between your home country and Serbia?
• Tax calendar: Are the corporate tax, VAT, payroll, and social security calendars clear?

Official sources and regular monitoring of legislation

Serbian tax legislation continues to be updated due to the EU compliance process. To keep track of current rates and regulations, you can utilize the following sources, for example:

• Trading Economics – Serbia Corporate Tax Rate
• PwC – Serbia Corporate Income Tax Summary
• Eurofast – Serbia Tax Card 2025 (PDF)

These resources allow you to see the general framework; however, it is essential to obtain professional consulting specific to your company for concrete investment decisions.

Building a sustainable structure with Corpenza in Serbia and beyond

Corpenza offers integrated services in company formation, tax optimization, mobility, and international workforce management across Europe and globally. Specifically in Serbia:

• Manages company establishment and residence/work permits under a single file,
• Reduces operational burden with international accounting, payroll, and personnel leasing solutions,
• Structures tax frameworks compatible with investment residency and citizenship goals.

When you consider Serbia not just as a “low tax” destination but as a solid, compliant, and scalable part of your global expansion strategy, the tax advantage transforms into sustainable competitive strength. A well-structured company setup, controlled tax burden, and a well-designed mobility plan are the foundation of this transformation.