Two forms to choose from
Foreigners start businesses in Serbia in two ways: a limited liability company, DOO for short, or a sole trader, preduzetnik. The difference is not just the name: a DOO has capital separate from its owner and liability limited to the contribution, while a sole trader carries personal liability but has simpler books and taxes.
DOO: the limited liability company
A DOO is a company with its own capital. The minimum founding capital is symbolic: one hundred dinars, less than one euro. Registration is done at the Business Registers Agency, and the registration fee is eight thousand dinars. The company pays corporate profit tax at 15 per cent, and if profit is distributed as dividends a further 15 per cent is withheld. A DOO keeps full accounting records, files reports and must have an accountant or an accounting firm.
Sole trader
A sole trader registers under their own name, keeps a book of income and expenses or simplified records, and pays taxes under one of the regimes. The most common for small businesses is lump-sum taxation: a fixed monthly amount of tax and contributions that does not depend on actual income. The main condition is annual turnover of up to six million dinars. If the limit is exceeded, the sole trader loses the right to the lump sum and moves to regular taxation on actual income and expenses.
Taxes and contributions
For employees the total contribution rate is 35.05 per cent: 19.9 per cent is withheld from the employee's salary (pension 14, health 5.15, unemployment 0.75) and 15.15 per cent is paid by the employer. Salary tax is 10 per cent, with a monthly tax-free minimum of 34,221 dinars. A sole trader pays contributions personally, and for them this is the main part of mandatory payments. For VAT, the threshold for mandatory registration is eight million dinars of annual turnover, with a standard rate of 20 per cent and a reduced rate of 10 per cent.
What to choose in practice
If you work alone and turnover is small, it makes sense to start as a sole trader: registration is quicker, the books are simpler and the monthly payment is predictable. If you plan to hire people, bring in partners or investors, take loans and work with large clients, you need a DOO: it looks more substantial, shares are easier to transfer and liability is limited. Many go through both stages: they start as a sole trader and open a DOO as turnover grows, since exceeding the lump-sum limit forces a change of regime anyway.
How registration works
Registration goes through the Business Registers Agency, and much of the process is electronic. A foreigner needs a passport, a document on residence and proof of address, plus a Serbian tax number. Registration takes a few working days. After that a bank account is opened, access to electronic tax services is set up and, if needed, VAT registration is filed. It is worth checking separately whether your activity is licensed: selling medicines, security services and certain types of construction require permits.
What not to forget
Right after registration you need to set up an electronic signature and access to the tax system, otherwise reports cannot be filed. Electronic invoices are mandatory for VAT payers, and paper documents are not accepted in that turnover. If you hire staff, each one needs an employment contract and registration with the tax office. And keep the deadlines in mind: the annual report, monthly contributions and advance corporate tax payments; missing deadlines at the tax office costs considerably more than an accountant who handles it for you.