Top 10 challenges of doing business in Serbia

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A network of trade agreements and a strategic location have propelled Serbia into becoming a manufacturing hub which has attracted world-renowned corporations, but doing business can be challenging without the right help on board.

Serbia has managed to weather the global economic recession better than most of its neighbours, highlighting the resilience of its economy. Duty-free exports to a market of almost one billion people and a highly-skilled, easily-trained and English proficient workforce have turned the country into a manufacturing hub for global businesses looking to expand in Eastern Europe and Central Asia.

The cost-effectiveness of Serbia as an investment destination is among the top appeals for expanding businesses. With a 15% flat rate of corporate tax and the lowest rate of salary tax and VAT among its East European counterparts, the cost of operating in Serbia is among the lowest in Europe. The prices of electricity, gas, postal services, landline telephony, fax service and maintenance of motor vehicles are the lowest among 37 European countries.

The government has also made significant strides in improving the business environment in the country. According to the World Bank and International Finance Corporation’s (IFC) Doing Business survey, Serbia has improved its ranking significantly on many key indicators, such as starting a business and resolving insolvency. Despite these improvements, the two organisations still rank it in 86th position in the world for ease of doing business, which is why having local help on board can be a real asset.

Starting a Business  
Serbia has significantly improved its ranking over the past year for ease of starting a business. Thanks to government reforms, it has jumped from 91st position in the world to 42nd according to the World Bank and IFC, taking less than 12 days to form a new corporate entity. After notarising the memorandum of association, businesses must pay registration fees, obtain tax certificates and register the employment contracts with the Employment Organization/Fund.

Dealing with Construction Permits
The World Bank and IFC rank Serbia in 179th position in the world  (out of 185 economies) for ease of dealing with construction permits, largely because of the many procedures it takes and the drawn-out nature of the process. There are also substantial costs associated with obtaining construction permits; more than three times the average amount in Eastern Europe and Central Asia and many times more expensive than the OECD average. 
Getting Electricity 
Elektrodistribucija Beograd d.o.o. (EDB) should be approached for electrical connections. The agency will give technical conditions, connection approval and a contract before works can be carried out, and it will also complete external connection works and install the meter.

Registering Property 
It takes less than two weeks to register property and involves six procedures. Once an extract has been obtained from the Commercial Registers Agency, the sale purchase agreement can be verified and registration at the Republic Geodesy Institute can be completed. Tax obligations must also be fulfilled to complete property registration.

Getting Credit and Protecting Investors
Although there is no public registry coverage in Serbia, there is 100% private bureau coverage which creates a transparent credit environment among the country’s corporates. Investor protection is still something which must be worked on. The World Bank and IFC rank Serbia in 82nd position in the world for strength of investor protection.

Paying Taxes
There are a massive 66 tax payments per year to make in Serbia which takes an average of 279 hours to complete. Twelve payments are to be made for social security contributions, corporate income tax, VAT, urban land usage fee and various other municipality charges which can become a drain on business processes.  

Trading Across Borders
Trading across borders is both a costly and bureaucratic process, taking almost two weeks to both import and export goods. It costs US$1,455 to export containers and requires seven documents to be prepared, in contrast to US$1,660 to import and seven documents.

Enforcing Contracts  
It takes more than two years to enforce contracts and requires navigating 36 procedures. The cost of the claim is also very high compared to other countries in Eastern Europe and Central Asia.

Resolving Insolvency
Resolving insolvency takes two years and has a low rate of recovery. Compared to the OECD average of 70.6 cents on the dollar, firms can expect to recover an average of 30 cents in Serbia.

Formal and conservative wear is a must when doing business in Serbia, and it’s important to maintain eye contact throughout the conversation as a sign of respect and sincerity. Family ties and relationships are important to Serbs, so feel free to ask questions about their personal lives.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Serbia or just want to streamline your Serbian operations, talk to us