Real Estate in Serbia: Taxes and Additional Expenses Pre and Post Purchase

Looking to purchase property in Serbia for business or personal use? In this case, you should be aware of the taxes and fees that come with buying and owning real estate in the country. It means you need to understand how much tax is owed on rental income, as well as other taxes and fees that apply to property buyers and owners. FYI: if you plan to stay in Serbia for an extended period, a residence permit is a must. Below, we will cover the above topics to help you navigate the process of buying property in Serbia.

Advantages of purchasing properties in Serbia for foreigners

Sitting on the Balkan Peninsula in Southeast Europe, Serbia is a treasure for those who choose to call it home. One of its most notable benefits is the affordable cost of living, which is substantially lower compared to many other European nations. Serbia proudly displays a rich cultural heritage, with a wealth of museums, art galleries, and historical sites that captivate and intrigue the curious explorer. Its diverse topography is equally impressive, with rolling mountains, flowing rivers, and idyllic countryside that offer endless opportunities for adventure and leisurely strolls. The Serbian people are renowned for their geniality and welcoming demeanor, adding yet another layer of charm to the already compelling package. The country’s exceptional connectivity and transportation links to the rest of Europe provide seamless travel and accessibility, further enhancing its allure. A thriving and progressive society, Serbia is continuously evolving and advancing. Its robust economy and contemporary infrastructure make the jurisdiction an enticing destination for those who pursue a dynamic and vivacious lifestyle.

Purchasing properties in Serbia comes with numerous advantages for foreign citizens:

1. Unrestricted foreign ownership: Serbia allows foreign citizens to purchase and own real estate with the same rights and obligations as Serbian citizens.
2. Affordable property prices: Serbia comes with relatively low property prices compared to other European countries, making it an attractive destination for foreign investors in search of an affordable real estate market.
3. No property tax: Unlike some other countries, Serbia does not impose property taxes on real estate owners and it brings significant savings.
4. Efficient and transparent purchasing process: The process of buying real estate in Serbia is straightforward and transparent, with no restrictions on profit repatriation.
5. Issue-free immigration. Serbia offers an easy path to immigration for foreigners, who can relocate to Belgrade or any other city in the country, and become property owners or entrepreneurs to gain residency rights. The best part is, the cost of obtaining a residence permit by investment in Serbia or setting up business ventures is significantly lower compared to other European countries. With such a favorable atmosphere, Serbia is fast emerging as a preferred destination for those seeking to move abroad and explore new opportunities.
6.  Visa-free travel: Serbia maintains a visa-free regime with many countries, making it convenient for foreign property owners to travel to Serbia and manage their real estate.
7. Thriving tourism industry: Serbia’s tourism industry is expanding quickly, providing foreign real estate owners with opportunities to generate rental income from their properties.

NB: Foreign citizens may encounter bureaucratic obstacles and language barriers when purchasing real estate in Serbia. In this situation, overseas investors should work with a local lawyer or real estate agent to ensure a smooth and hassle-free property purchase.

What fees do foreigners have to pay to buy real estate in Serbia?

If you’re planning to purchase property in Serbia, it’s important to have a clear understanding of the expenses involved. This includes fees charged by realtors and lawyers, as well as other costs related to buying residential or commercial real estate. For a comprehensive overview of the expenses associated with buying property in Serbia, please refer to the table below.

	Percentage of the transaction amount to be paid in fees and commissions	Payer
Fees and commissions of the real estate agent	3%	Buyer
Legal fees	0.05% – 1%	Buyer
Registration fee	0.01% – 0.05%	Buyer
Property transfer tax	2.5%	Seller

	Percentage of the transaction amount to be paid in fees and commissions
Expenses paid by the buyer	3.06% – 4.05%
Expenses paid by the seller	2.5%
Total transaction costs (purchase and subsequent sale)	5.56% – 6.55%

Let’s take a closer look at some taxes and fees involved:

• Real estate agent commission. The commission, which is based on the purchase price of the property, is typically paid by the buyer. In some cases, the seller may cover the cost of the real estate services.
• Registration charge. To transfer ownership, a corresponding application must be submitted to the Land Cadastre. The application processing requires payment of an administrative fee to the tune of RSD 3,120 (EUR 26).
• Property transfer tax. A tax rate of 2.5% is applied to the transfer of ownership in Serbia. When selling an asset through the transfer of shares, parties are exempt from the property transfer tax.
• VAT (not included in the table as it does not apply to the secondary market). The standard VAT rate is 20% and a reduced VAT rate makes 10%. VAT is charged for the initial transfer of ownership to newly constructed buildings and structures put into operation after January 1, 2005. Residential buildings are subject to VAT at a reduced rate, while for other buildings, the standard VAT rate applies.
• Legal fees. The fees to pay and the amounts thereof are stipulated in the official table. The maximum fee amount is limited to RSD 39,000 (EUR 325).

Cost of real estate purchased in Serbia (in RSD)	Legal fees to pay (in RSD or as a percentage of the transaction amount)
Up to 10,000 (EUR 83)	RSD 980 (EUR 8)
10,000 to 100,000 (EUR 833)	1%
100,000 to 1,000,000 (EUR 8,333)	0.50%
Over 1,000,000 (EUR 8,333)	0.25%

Purchasing real estate in Serbia: fees foreign buyers incur during acquisition

When a buyer has found the ideal property, they make an offer to the seller. If the seller agrees to the above offer, they will sign a preliminary sale and purchase contract, which is then notarized. Typically, the buyer is required to pay a deposit that makes 10% of the purchase price when signing the preliminary contract. This deposit is non-refundable if the buyer decides to back out of the transaction.

The buyer’s lawyer then proceeds with examining the corresponding property rights, history of encumbrance, and the seller’s legal rights to dispose of the property. This process usually takes up to 6 weeks. During the said time, the buyer is expected to carry out due diligence on the property to ensure that they are satisfied with the purchase.

Assuming there are no issues, a closing date is set, and both parties proceed to sign the final sale and purchase contract in the presence of a notary public. Once the contract is signed, it confirms the buyer’s legal ownership right to the property in Serbia.

After the property rights have been confirmed, a tax inspection is carried out to determine the value of the property. Property transfer tax is then charged for the transfer of ownership rights. Finally, the buyer must pay the seller the agreed price in full to complete the purchase.

How hard is it to purchase real estate in Serbia?

Provided they need the property for business purposes, foreign individuals and legal entities enjoy a relatively straightforward process of acquiring real estate in the Balkan country. Natural persons from overseas who are not doing any business in Serbia may purchase cottages and apartments in the country issue-free.

Nevertheless, certain limitations and prohibitions do exist when it comes to purchasing properties near military bases or land plots that are being developed by state institutions. Foreign nationals can avoid these limitations if they are registered as residents in Serbia.

The urban land, which includes land available for development, is solely owned by the state. Although urban land is leased for a period of 5 to 30 years, investors engaged in commercial construction have the option to acquire ownership rights to the newly built assets. Alternatively, they may use the land without ownership rights thereto. The ownership rights to standalone buildings, such as cottages and apartments inside apartment buildings, are not restricted.

Taxes and fees property owners pay in Serbia

Apart from covering the annual property tax in Serbia, this section will delve into other fiscal charges that foreign individuals who own assets in the Balkan nation and generate income from local sources may face. The information will come in handy for individuals about to acquire a residence permit in Serbia via company registration.  

Property tax in Serbia

The tax imposed on real estate is calculated based on its catalog value. It varies depending on the type and location of the property. The tax rate is progressive and falls within the range of 0.3% to 2%.

Tax residency and PIT

To calculate personal income tax (PIT) in Serbia, different rules apply to fiscal residents and non-residents. If an individual is a fiscal resident, they must pay personal income tax on all their income worldwide. However, if someone is a non-resident, they are only taxed on the income they earn from sources within Serbia. A person is considered a fiscal resident if they have a place of residence or if their center of business interests is in Serbia, or if they spend at least 183 days in the country during a 12-month period that coincides with the tax year, which is equivalent to the calendar year. Married couples are taxed separately.

When it comes to personal income tax, different categories of income are considered, such as income from employment, agriculture and forestry, entrepreneurial and professional activities, royalties, investment income (like dividends and interest), rental income, capital gains, and more. 

Net income is calculated separately for each category, and different tax rates are applied depending on the type and source of income.

Income	Tax rate
Earned or employment income	10%
Business income	10%
Dividends	20%
Interest income *	20%
Royalties *	20%
Fees for technical services *	20%
Capital gains	15%
Rental income	20%
Other income	20%

* The rate is increased up to 25% if payments are made to a resident of a jurisdiction with a preferential tax regime.

Residents of Serbia are required to pay an annual personal income tax on their net global income that exceeds a certain threshold. A progressive rate ranging from 10% to 15% is used for this purpose. The threshold is set at 3 times the average annual salary.

Tax base	Tax rate
Up to 3 average annual salaries	0%
3 to 6 average annual salaries	10%
> 6 average annual salaries	15%

Rental income

When it comes to rental income in Serbia, residents pay a withholding tax of 20% at the source. For expenses incurred in maintaining the property that generates rental income, a fixed deduction of 25% of gross income is allowed. It is considered a one-time deduction. If the rent is paid upfront for more than a year, the taxable income can be divided into equal parts over a maximum period of 5 years.

Capital gains

Individuals who sell real estate in Serbia are required to pay a certain fee. The latter includes a fixed rate tax of 15% on the capital gains earned by residents from the sale of Serbian real estate. The taxable profit is calculated as the sales price minus the acquisition price adjusted for the consumer price index and depreciation expenses.

A transfer of immovable property between relatives is not subject to capital gains tax. If the capital gains earned are reinvested in a new residential property in Serbia within 60 days of selling the previous property, the resulting capital gain is also exempt from tax. What is more, income from the sale of assets owned by the taxpayer for at least 10 years is also eligible for tax exemption.

Fees for transferring real estate in Serbia through inheritance or gift-giving

When inherited or gifted real estate is transferred, a tax is charged based on its market value minus any debts and expenses associated with the inherited property. Depending on the relationship between the inheritor, donor, and predecessor, the tax is calculated using either a 1.5% or 2.5% rate.

If the beneficiaries are related to the predecessor or donor by first-degree kinship (say, spouses, children, and parents), they are not required to pay the inheritance or gift tax. In addition, if the beneficiaries are related to the predecessor or donor by second-degree kinship and have lived in the same household with them for at least 1 year immediately preceding the date of inheritance or gift receipt, they are also exempt from tax.

Relationship with the testator or gift-giver	Tax rate
Immediate family members (spouse, children, and parents)	0%
Second-degree relatives	1.5
Third-degree relatives and other beneficiaries	2.5%

Expert assistance for foreigners wishing to buy real estate in Serbia

At International Wealth, we render professional assistance to our readers and subscribers from around the globe looking to buy properties in Serbia and obtain a residence permit. You are also welcome to order any complementary services on our list. For your convenience, we handle tax matters, facilitate the opening of bank accounts, and make moving to Serbia an easy feat for any person interested.