Tax Residence in Serbia: How and Why

How to become a tax resident in Serbia in 2022? Why change the tax residence? How does the tax service verify one’s legal residence in Serbia? What benefits can you get from the Serbian tax residence certificate? Where can you get it? Read on for our experts’ answers.

Serbian Tax Residence: The Reasons to Choose It

There may be many reasons why you might need to change your legal and/or tax residence. Most people venture to look for a more favorable, safer country in the face of adverse private or business circumstances at home. Other reasons may be one’s search for a better job, education opportunities, new markets, family ties, or the freedom to travel the world without visas. In any case, when choosing the right jurisdiction where you could resolve your issues, you have to consider many aspects. 

Fiscal issues deserve your special attention, particularly if you need to obtain the tax residence abroad. For a broader picture, please look up our previous post on how to choose the Best Tax Residence. 

To select a country where no personal income tax is levied from your income regardless of its origin, read our article on Tax Planning – the 16 Most Popular Offshore Destinations.

If you want to narrow your search and focus, for example, on Europe, you can find many insights here: Low Tax Residence in 11 European countries. 

You will discover that in many expert reviews Serbia is featured as a very attractive destination. 

Yet another decisive reason in favor of choosing Serbia is the simple procedure for obtaining tax residence here. This is thanks to the Serbian investment residency program – the shortest way to getting the status and the certificate.

Low taxes, location almost in the center of Europe, and the convenient investment residency program make Serbia a good choice for those seeking to change one’s tax residence.

Serbian Tax Residence: How To Obtain

How to become a tax resident in Serbia? How long does it take to get a residency certificate? Who is the issuer? What documents confirm the Serbian tax residency?

If you are a private person, the tax residency is quite easy to obtain in Serbia: you get the desired status as soon as the validity of your documents and their compliance with the residency requirements are confirmed. 

A private person is considered a resident of Serbia for tax purposes (including income tax) if he or she:

• has a place of residence (permanent home), a business center, and/or vital interests in Serbia, or
• resides in Serbia continuously or occasionally for at least 183 days during 12 months beginning or ending in the relevant fiscal year.

How to secure your eligibility for the Serbian tax residence? With reference to the above information, you need to stay in the country for the required number of days after applying for your legal residence by investment in Serbia. This way, you will meet two conditions at once: the residency requirement and a permanent home. Please read our article on how we can Help with Serbian Residence Permits and Serbian Tax Residency. 

Experts recommend paying attention to the real estate market in the capital of Serbia which offers interesting assets. Belgrade enjoys a rather high standard of living and reasonably low costs. 

You can also set up a business center in Serbia and file your application for the Serbian tax residence. To do so, you will need to apply for your Serbian residence permit along with the registration of your company. For more details, see Legal and Tax Residence in Serbia via Company Registration.

In all the above options, a foreigner receives a Serbian residence permit by investment as the first step towards obtaining citizenship in this hospitable Balkan country. For more specific information, please refer to our article on Residence Permits in Serbia in 2022.

Another way to create a center of business interests and successfully resolve some fiscal and other issues is to open an offshore company in Serbia. The procedure is quite straightforward, and we have explained it in our post on Branches, Offices, and Accounts in Europe.

Serbia’s Tax Residence: Additional Requirements

You probably know that some jurisdictions forbid applicants to return home (to the country of the previous residence) for more than 7 (10/20) days after the countdown starts.

The good news is that in Serbia there are no such restrictive requirements.

However, there are special rules for counting the eligible number of days. The departure and arrival days are considered as days spent in Serbia, while those spent in transit through Serbia are not.

Many would-be-residents want to know whether the Serbian immigration authorities inform the local tax authorities on the dates when they arrived in /left the country.

The immigration authorities in Serbia bear no legal obligation to provide the Serbian tax authorities with such information. However, the tax authorities can verify the data by requesting information from the immigration authorities.

On the other hand, the 13-digit unique personal identification number issued to foreigners by the Serbian immigration authorities serves as the taxpayer identification number in Serbia, and it is shared by the Serbian immigration authorities with the tax authorities.

Serbian Tax Residence: Benefits

The Serbian (tax) residence allows opening accounts in Serbia on very favorable terms. Deposits are protected for up to 50,000 euros.

The only obstacle is that personal accounts are not opened remotely, and your physical presence is mandatory. Here are more articles on the subject:

• Opening an Account Abroad for a Legal Entity in 2022: Everything You Need to Know
• Business Bank Accounts Opening Abroad: Timesaving Advice
• Personal Offshore Bank Account: Better Safe Than Sorry
• Open a Corporate Bank Account in Serbia Remotely Upon Request

A foreigner registering a company or branch in Serbia or buying some real estate becomes a Serbian tax resident. This status provides certain benefits listed below:

1. Quick and easy procedure for obtaining the residence permit – from 1 month.

2. Affordable annual costs:

• 5,000 euros for a company, including the rent
• 1,000 euros for a person buying real estate in Serbia (a house costs 10,000 euros).

3. Favorable taxation regime:

• the corporate income tax rate may be nearly 0% depending on the type of the incoming payments
• the individual income tax ranges from 10 to 15% of the total income
• a special tax of 3–5% on income up to €60,000 for registered entrepreneurs
• corporate tax as low as 15%

4. Reporting:

• no reporting on companies outside Serbia
• no reporting on personal bank accounts outside Serbia
• no reporting on the property and real estate outside Serbia
• you just report on your global income as a private person

5. Banking system is not subject to the CRS commitments, accounts can be opened with Serbian branches of Western European banks:

• personal account can be opened within a few hours, simple and convenient requirements.
• company accounts can be opened within 3–5 business days

6. Residence permits are available to the principal applicant’s dependents under the family reunification program and the Serbian immigration legislation. Your spouse and children can easily become Serbian residents.

Serbia’s Tax Residence: Additional Fiscal Aspects

After private persons become tax residents, they are taxed on their worldwide income. Non-residents are taxed only on income from sources located in Serbia.

If the resident’s annual earnings subject to income tax are three or more times the average annual salary in Serbia in the relevant tax year, additional income tax is paid at the end of the year on income generated outside Serbia. Non-residents’ earnings are also subject to additional annual income tax if their income from sources in Serbia exceeds the same threshold.

What do you need to know about the individual’s taxable income to apply for tax residence in Serbia? The main taxes are paid on income from employment, business activities, capital (dividends, interest, rentals, and income from investments in open investment funds), capital gains (sale of company shares or real estate), and some other income.

The income tax rate depends on the type of income: 10% for wages and business receipts, 15% for capital income (excluding rent taxable at 20%), and 20% for royalty and other income.

Additional income tax charged at 10% or 15% is applied to worldwide income (or net income generated in Serbia for non-residents) exceeding the established threshold.

Capital gains are taxed at 15% (the exemption is possible if you sell the assets that have been in your possession for at least 10 years).

The real estate tax in Serbia is based on the cadastral value at progressive rates ranging from 0.3% to 2%. When real estate ownership is transferred in Serbia, a tax of 2.5% is applied.

There are also inheritance and donation taxes in Serbia. These are charged to the recipients of inherited property and gifts at a rate of 1.5% or 2.5%, depending on how closely they are related to the deceased/donor. However, no inheritance tax is imposed on beneficiaries who are first-degree relatives of the testator.

The tax year in Serbia equals the calendar year. Please remember this to ensure tax compliance for individuals, or fiscal penalties may be imposed otherwise for non-compliance with tax administration provisions.

There are three different methods of tax compliance if you pay fiscal charges: 

• Pay-As-You-Earn (PAYE)
• self-assessment
• assessment by tax authorities

Tax on income from employment is paid using the PAYE system and the tax is withheld at the source by the employer. Taxes on certain types of income are also withheld if the payer is required to do so on behalf of a particular recipient. 

Self-assessment is used for particular kinds of income or when the income payer is not required to withhold taxes.

A person should file a tax return and pay the tax due within 45 days of the income receipt. The tax authorities will assess the additional annual income tax and the entrepreneur’s one-time income. Additional annual tax returns must be submitted by May 15 of each year.

Serbia’s Tax Residence: Tax Agreements

Serbia’s tax residence can help you solve different problems, from reducing the tax burden to simplifying the bank account opening procedure.

Do you need to get your tax residence certificate in 2022? You should consider the list of double taxation agreements signed by Serbia. If you register as a foreign entrepreneur, you need to know how to avoid double taxation to develop your business abroad.

About 60 states have signed double taxation agreements with Serbia, including Armenia, Albania, Azerbaijan, Austria, Belarus, Bosnia and Herzegovina, Belgium, Bulgaria, Croatia, China, the Czech Republic, Canada, Cyprus, Denmark, Germany, Georgia, Hungary, Iran, Italy, Ireland, India, Kazakhstan, Kuwait, Libya, Latvia, Luxembourg, Lithuania, Malaysia, Macedonia, Moldova, Morocco, Malta, Montenegro, Norway, the Netherlands, North Korea, Poland, Pakistan, Qatar, Russia, Romania, Slovenia, Slovakia, South Korea, Sri Lanka, Sweden, Spain, Switzerland, Tunisia, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, Uganda, and Vietnam.

Serbian Tax Residence: Conclusion 

Serbia is becoming increasingly attractive for inbound foreigners. It is turning into a popular destination for permanent migration. Foreigners intending to move to this country and obtain the tax residence should get a residence permit first. Later on, they can obtain a passport/citizenship, which will add to the comfort of living in the Republic of Serbia.

You should consider many things and much information before making your final decision to apply for Serbian tax residence. If you are a foreigner wishing to move to Serbia, you are welcome to start with our insights shared in this article.

However, legal and tax residence matters are always a sophisticated area of expertise. The procedures do vary across countries. Besides, every application requires case-specific considerations and approaches. 

The importance of reliable tax advice at every step should not be underestimated.

All administrative procedures should be followed, particularly in the context of possible tax residence cancellation in your home country (country of the previous residence) or Serbia. You need to inform the tax authorities on the day when you were last taxed in that particular jurisdiction.

An even more important objective is to find out whether any possible exit (expatriation) taxes apply to assets if you change residence and/or citizenship.

There may be more concerns if your new residence leads to double taxation, depending on the number of days spent in another jurisdiction. Any other relevant criteria, such as the center of vital interests, need to be clarified. 

Some jurisdictions, such as the US, also levy taxes based on citizenship. Any foreign residence/citizenship comes not only with benefits but also some extra commitments. Therefore, your knowledge of all relevant details is essential. 

The hereby information is for your general awareness only. However, in practical matters, you won’t be able to do without private advice from qualified experts or persons experienced in this area.

If you need a residence permit, permanent residence, tax residency, or citizenship in Serbia, you are welcome to book a free one-on-one session with our experts. 

Just send us your questions to info@offshore-pro.info.