A growing opportunities of doing business and investing in Serbia

Since becoming an EU candidate country, Serbia has experienced significant improvements in its investment environment. In the last few years, Serbia has positioned itself as one of the top European destinations for foreign investments, attracting international investors in various industries. Serbia’s unique blend of strategic location, incentives policy, competitive workforce, and improving infrastructure continues to foster an environment where businesses can thrive. Additionally, the government’s focus on modernization, digitalization, and foreign cooperation provides a foundation for long-term growth.

These efforts with favorable legislative framework makes it a right place to open a company and start your business in Serbia which resulted in granting a Serbia investment credit rating by credit ranking agency S&P.

Why Investing in Serbia?

Strategic Location

Serbia’s strategic geographical position makes it a natural gateway between Eastern and Western Europe. Danube which passes through Serbia contacts Serbia directly with more than ten European countries connecting North Sea on the one side and Black Sea on the other. 

Due its position the key international trade routes, motorways, railroads, Serbia provides seamless access to markets across Europe, the Middle East, and Asia. As a central country in the Balkan region and at the border with EU, Serbia’s location enables companies to optimize logistics, reduce costs, and efficiently serve a broader market. Belgrade airport represent one of the biggest airports in this part of Europe which in the 2024 generated record high 8.4 million passengers with aim to reach 15 million passengers in the near future.

Additionally, Serbia as biggest country on the Wester Balkan represents a biggest commercial hub which gives access to markets with more than 2.8 billion customers from one place. 

Market Potential

As stated above Serbia represent unique place in Europe which allows easy access to its own nearly  7 million people market but with all its free trade agreements it grants the access diversified market of whole West Balkan region as well as EU, Russia, Turkey, Belarus, Turkmenistan Armenia, Kazakhstan, the Kyrgyz Republic, UK, North Irland,  China as well as with EFTA countries (Switzerland, Norway Iceland and Liechtenstein).

On the other hand, Trade with the United States is pursued under the Generalized System of Preferences (GSP). U.S. trade benefits provide for preferential duty-free entry for app. 4,650 products, including most finished and semi-finished goods and selected agricultural and primary industrial products. Certain sensitive goods (e.g. most textile products, leather goods, and footwear) are not eligible for duty-free exports. The list of eligible goods is reviewed and adjusted twice per year, with input from U.S. industries.

Therefore, Serbia’s strategic position with good infrastructure connected to with the main international trade roads and access to more than 2.4 billion consumers through various trade agreements makes Serbia a highly competitive destination for export-oriented businesses.

Skilled and Cost-Effective Workforce

Serbia is the largest and the most populated country in the Western Balkans with nearly 7 million people out of which 2.4 million workers on the market. Having this in mind Serbia is home to a highly educated and skilled workforce, particularly in fields like IT, engineering, and manufacturing.

Despite the high level of expertise, labor costs in Serbia remain significantly lower than in many EU countries, with average gross salary of 1200 euro in 2024 which represent substantial factor to businesses. Good reputation of the Serbian workers is recognized and confirmed by some of the most recognizable worldwide brands as Microsoft, Nordeus, Schneider Electric, Simens, Coca Cola, Carlsberg, Heineken making them an asset for international companies.

Additionally, Serbia’s educational institutions maintain a strong focus on STEM (Science, Technology, Engineering, and Mathematics) fields, ensuring a steady supply of talent for high-demand industries. The availability of affordable and skilled labor contributes to the competitiveness of businesses operating in Serbia.

Favorable Tax Regime

Serbia’s corporate income tax rate of 15% is one of the lowest in Europe. Additional incentives, such as tax holidays, subsidies, and grants, are available for businesses that meet certain criteria. Investors can also benefit from Serbia’s efficient banking system, making it easier to open a bank account in Serbia and manage finances seamlessly.

In addition to the low corporate tax rate, the standard VAT rate is 20% which is also one of the lowest in the region. A reduced rate of 10% applies to basic foodstuffs, listed medicines, daily newspapers, hotel services, gas, the first transfer of ownership on residential buildings, etc. In addition, Serbia recognize VAT exemption for the export of goods, transport, and other services related to export, transit, or temporary import of goods.

The government’s proactive approach to creating a business-friendly tax environment includes tax incentives for investments in underdeveloped regions, job creation, and innovation. Serbia also has also concluded 55 Bilateral treaties on avoidance of double taxation. For companies investing in research and development, Serbia provides additional tax deductions, making it an attractive destination for tech and innovation-driven enterprises. Namely all incentives can be categorized by the following types:

Subsidies for direct investments

• Tax incentives
• Employment incentives
• Custom duty incentives
• Free zones
• Construction land incentives
• Film industry incentives

Currently Serbia is focusing in providing strong direct investments in the following sector:

• Manufacturing sector and service centers;
• Food production;
• Hotel accommodation services;

In addition to subject direct investment Serbia is providing different types of tax credits such as tax credits for startups, R&D tax incentives, IP tax income as well as employment incentives such us:

Newly-employed individuals – employing individuals that have been registered with the National Employment Agency as unemployed for at least 6 months;

• Employment of individuals with disabilities;
• Tax exemption for founders of a company performing innovative activities;
• Tax incentives for micro-companies and small companies;
• Tax incentives for employing new employees that were (and potentially still are) registered entrepreneurs and were not employed during 2019, 2020, and 2021, and is aimed to last until 2025.
• R&D tax incentives
• Newly-settled individuals – individuals who did not predominantly reside in the Serbia before signing the employment agreement with Employer

In addition, Serbia created 15 free zones in Serbia evenly distributed from the north to the south and from the east to the west where over 200 companies found their place to operate: FZ Subotica, FZ Pirot, FZ Zrenjanin, FZ Novi Sad, FAS FZ Kragujevac, FZ Šabac, FZ Užice, FZ Svilajnac, FZ Smederevo, FZ Kruševac, FZ Apatin, FZ Vranje, FZ Priboj, FZ Beograd and FZ Šumadija.

Benefits of the free zones:

• Exemption from customs and VAT from import of raw materials, equipment and construction material intended for carrying out activities in free zones;
• VAT free supply of goods and services within the zone, consumption of energy or piped gas;
• Local municipal incentives;
• Efficient customs procedures;

Main requirements:

• EUR 3 million investment out of which EUR 1 million in the 1st year;
• Minimum 100 employees engaged within 2 years;

Supportive Legal Framework for Foreigners

In 2024 Serbia has implemented new laws and regulations in order to simplify the process of employing foreign workers, obtaining residence permits, work permits, and even Serbian citizenship. With over the 70.000 issued work permits in 2024, these streamlined procedures make it easier for international businesses to relocate employees and establish operations in the country.

Moreover, Serbia has introduced a new legislation which allows foreign investors to invest and open a company in Serbia remotely with legal assistance of licenced lawyers. Procedures for opening a company are straightforward and fast allowing the investor to have opened company within 5 business days. Time for preparation of all necessary documentation depends on the complexity of the ownership structure as well as from nationality of the founders – depending of the country of origin some documentation might require apostille in order to be accepted before Serbian business register agency. In addition, you should have time to detail discuss and prepare with your lawyer one of the most important documents of your future Serbian company – memorandum of association or founding act.

Moreover, government has made some strong legislative reforms in the last two decades in order to secure the protection of the foreign capital in Serbia. Namely, currently Serbia has concluded 55 Bilateral Investment Treaties in order to guarantee safety and non-discrimination to the foreign capital coming to Serbia. Via these bilateral agreements, Serbia has accepted that in case of a dispute, International Investment Arbitration (usually before ICSID) has a jurisdiction to handle these disputes giving the high level to the foreign companies investing in Serbia.

Moreover, Serbian Law on investments grants foreign investment national treatment of their companies as well as free access to Serbian market.  It is also expected that Serbia will join SEPA region in 2025 which will all both domestic but also foreign investors instant and  smooth euro transaction without necessary bureaucracy.

Having this in mind, Serbia represents an attractive destination for foreign investors looking to capitalize on a growing and dynamic market.

Best Business Opportunities in Serbia

Even though there are variety of industries which are commercially lucrative certain industries in Serbia stand out as highly profitable for investors. Some of the most lucrative sectors include:

1. Information Technology: Serbia represents regional a hub for IT and software development, with a rapidly growing tech ecosystem. The country’s IT sector is one of the fastest-growing in the region, supported by a talented workforce, government incentives has annual growth of 20% in the value of the exported services. Even though Serbian tech companies are known for their expertise in blockchain, AI, and software outsourcing there are initiatives from a government that Serbia gets more IT companies with their own products. 
2. Agriculture and Food Production: Agriculture and Food production represents one of the most traditional industries in Serbia. Fertile land and favorable climate conditions make agriculture one of Serbia’s strongest industries. The country is a leading exporter of grains, fruits, and vegetables, and other raw materials which could be find from UK, Russia to China with initiative for transferring the industry to upgrade to production of final product in order to increase a value of its export in this sector.
3. Renewable Energy: Moving towards the EU membership, Serbia has committed to enact regulation and make substantial investments in order to change the source of energy production from coal to renewable sources. With an increasing focus on sustainability, there is significant potential in solar, wind, and hydropower projects. Therefore, Serbian government is providing high level subsidies to this sector in order to satisfy growing demand for clean energy solutions.
4. Automotive Industry: Automotive industry has a longstanding history in Serbian manufacture industry. Since ex Yugoslavia, Serbia had a developed car and track industry and a workforce and education system which was kept until today. The country’s strategic location and skilled workforce have attracted major automotive manufacturers and suppliers such as Stellantis with the manufacture center in Kragujevac as well as a lot of companies which produces car parts in the industry.
5. Tourism and Hospitality: With the rich history and natural attractions offer great opportunities in the tourism sector. In the last years Serbia invested a lot to become a regional destination for the major business events as well as conference center. In 2024 Serbia was chosen to be a host of EXPO 2027. Preparations for the event are expected to involve a wide range of infrastructure projects, including transportation networks, public spaces, and facility upgrades with a lasting impact.

Moreover, there is an initiative to upgrade wellness and nightlife tourism which already resulted in increasing a number of foreign tourists by 23% in 2024 compering to the previous year.

6. Real Estate and Construction: In the last decade government has enacted legislation which allowed rapid growth of real estate sector. On the other hand, high demand for the new and modern buildings led to increase of price of the real estate for 35%. Rapid urbanization and infrastructure development have created significant opportunities in real estate and construction. Major projects, including residential, commercial, and industrial developments, are driving growth in this sector.
7. Logistics and Transport: Serbia’s infrastructure at the beginning of the 21^st century was undeveloped with poor maintenance. However, investments in the last 15 years has created a new and modern network of highways making every part of the country easy accessible and therefore good place for investing capital. Serbia’s strategic location and improving infrastructure with strong connections with EU, Russia, Turkey and China make it a hub for logistics and transport services in the region.

Best Cities and Regions for Investing and Starting a Business in Serbia

1. Belgrade: The capital city is always a good place for investment but in this case, Belgrade represent economic and financial hub not just for Serbia but also for whole region offering opportunities across diverse industries, particularly in IT, real estate, and tourism. With a population of nearly 2 million, Belgrade is a vibrant center for commerce, innovation, and culture.
2. Novi Sad: Second largest but one of the most fast-growing cities is Novi Sad also known as the Serbian Silicon Valley represents a regional center for technology and innovation. Its fast connection with the Belgrade with moder fast railway, rich history and thriving IT sector make it a top choice for investors.
3. Niš: As a center of south of Serbia Nis represents the city for manufacturing and logistics industry due to its excellent connectivity. Niš has a rich industrial heritage and is well-positioned to attract investments in electronics, automotive, and renewable energy.
4. Kragujevac: Historically a hub for the automotive industry, Kragujevac remains a key city for industrial investments. The presence of major manufacturing facilities and skilled labor make it an attractive destination.
5. Vojvodina Region: As a center of Serbian agriculture Vojvodina still has a lot of opportunities for investment in order to reach its full potential. One of the biggest farms, food producers, fertile plans as well as beer producers found their place in the Vojvodina plain. 

Biggest Investors and International Companies in Serbia

Serbia represents an interesting place for foreign investment to invest their capital for the last 25 years. Traditionally, investors from several countries have established themselves as significant in Serbia, such as Germany, Italy, China, Austria, France, Romania, Turkey, Russia and the United States. International companies such as Coca-Cola, Continental, Delez, Nordeus, Microsoft Software, Philip Morris Services, LIDL, Robert Bosch, Siemens, and Huawei have successfully launched operations in Serbia, benefiting from the country’s favorable investment conditions. These companies not only contribute to Serbia’s economic growth but also set benchmarks for others considering investment in the region.

In recent years, China has emerged as a major investor, funding infrastructure projects, industrial parks, and energy facilities.

Disadvantages of Doing Business and Investing in Serbia

While Serbia presents numerous advantages for investors, there are a few challenges to consider:

1. Air Pollution: Environmental issues is something that Serbia did not pay attention to up until recently. Namely, air quality, remain a concern in some regions during the winter since Serbia heat companies still use all systems based on coal to provide heat to the household which has a high negative impact to air quality.  Addressing pollution requires coordinated efforts between the government and private sector and help in financing from international organization and EU.
2. Inefficient Transportation: While infrastructure has improved in the last decade, there are still a lot of room for improvement and investment.  Transportation systems are still inefficient, which effects productivity and logistics. Continued investment in modernizing transportation networks is essential.
3. Bureaucracy: Although reforms have been implemented, bureaucratic hurdles can still pose challenges for investors. Streamlining administrative procedures will be critical to improving the business environment.
4. Slow justice system: Even though there were several reforms in the last 20 years, governments did not spend much resources and energy to upgrade justice systems which can result in slow procedures and inefficient legal remedies. Strong investment and modernization of justice system is required in order to further upgrade and boost investors decision to invest in Serbia.

Conclusion

As a central country of the Balkan region and on the crossroad of the trade roads between EU and Asia Serbia represents a great place for the investors who want to grow their business cooperating with the partners from both EU and Asia. Growing investment environment, supported by strategic location, market potential, and a skilled workforce and government subsidies makes it an attractive destination for foreign businesses.

If you are considering investing in Serbia or starting a business, the experienced team of lawyers at NCR is here to assist you with all your legal and business needs. Contact us today to take the first step towards success in Serbia.