How to start your own business in Serbia

Registering a Limited Liability Company (LLC = DOO in Serbian)

Limited Liability Company (LLC) is registered at the Business Register Agency (BRA). BRA is situated in Belgrade, with several regional centres in Serbia.

An overview of the steps in registering an LLC is given below.

Determining LLC founders

Limited Liability Company founders can be legal entities and/or natural persons, domestic and/or foreign persons.
It is essential to determine who the founders are, since they decide why and how the LLC is established.

Choosing an LLC name

Often a difficult part of the forming process. The name is a part of the identity of the entire business. In the Serbian business practice, it is almost a rule to add the name of the company to the personal name of the founder (owner).
It is also mandatory to check on the Business Register Agency website whether the name is reserved. When doing the reserved names search, the search territory is Serbia.

Determining the LLC head office

Very important.
During the registration procedure, it is not checked whether the registered head office is indeed going to be the actual LLC head office. However, when filing the application for TIN, the Tax Administration performs site control of the actual head office. During the control, the legal basis for using the stated premises as LLC head office is inspected (contract of lease, title deed, purchase contract for the office space – flat, parents` approval to use the space as the LLC head office).
Depending on which municipality territory the LLC head office is located, Tax Administration for the given municipality will have jurisdiction. Although the laws are the same in all municipalities, there is a general belief (in Belgrade at least) that in some municipalities Tax administration services are »more difficult« than others. Depending on the location, the local municipal tax will vary pursuant to the Decision on local municipal taxes for the city or municipality territory on which the given head office is located.

Appointment of the LLC director and his/her authorities

The founder (owner) of the LLC can be its director. Authorities of the LLC director are determined by the Articles of Association and the Company Law. It can be said that the director is responsible to represent the company and run the company`s business in accordance with the law, the Articles of Association and the company members` contract. Also, the LLC director is responsible for proper keeping of business books and internal supervision of business activities, pursuant to the law.
Even a person working part-time can be a company director if it is specified as such by the LLC legislation (Articles of Association, the Rule book on job classification). Contract on mutual rights and obligations is concluded with a director who has not taken up employment.

Determining LLC predominant activity

When incorporating an LLC, its predominant activity must be determined as per the Law on classification of business activities and on the registry of categories.
Anyhow, an LLC can perform all lawful activities apart from those for which the law specifically prescribes to be performed in a certain legal form of the company (banks, insurance companies, etc.).
When registering an LLC, if its predominant activity is the one for which prior approval needs to be acquired from the competent authority (health care activity, veterinary office and pharmacy, agricultural drugstore, taxi services, trade in arms, performing activity of general social concern, representation in the insurance business, trustee in bankruptcy jobs), you have to obtain that approval.
For activities requiring additional approval (e.g. sales of cigarettes), the approval is obtained after the store is registered.
If the predominant activity is in the field of production, this entails submitting certain data to the Statistical Office of the Republic of Serbia, which are the basis for calculating the production statistics (growth of industrial production, and alike).

Determining LLC`s initial capital contribution

Initial capital contribution can be in two forms: in cash or in kind.
The minimum initial capital contribution in cash is 500 Euros in RSD equivalent at the average exchange rate, at least half of which is paid to the suspense bank account until the company is registered. The remainder is paid to the LLC account within two years from the registration date.

Preparing LLC`s Articles of Association

Articles of Association can be either in the form of a Decision (sole founder) or an Agreement.
The Articles of Association contain all of the above-mentioned elements plus some additional obligatory paragraphs as per the Company Law. Example copies of the Articles of Association given on the BRA website can be downloaded here.
– LLC`s Articles of Association (Decision)
 – LLC`s Agreement of Association.
This is the most important document for the registration (and perhaps for the entire business activity of the company). Therefore, if you are not sure that you can prepare the Articles of Association by yourself, you can hire an agency or a laywer for that purpose.

Payment of the initial capital contribution to the suspense bank account

As mentioned above, the minimum initial capital contribution in cash is 500 Euros in RSD equivalent at the average exchange rate, at least half of which is paid to the suspense bank account until the company is registered.
Therefore, one of the documents filed with the Form for founding an LLC is the evidence of initial capital payment to the suspense bank account. A minimum of 250 Euros in RSD equivalent at the average exchange rate needs to be paid. This is done in a bank. The founder himself will have to make the payment at the bank and will be asked for the Articles of Association at that point (it does not have to be certified).
The payment does not have to be made in the bank where the LLC will open the business current account later on. However, this can be a check to see whether the bank is good enough for the LLC.
After the payment is made (on the same day), the bank issues a receipt of initial capital payment to the suspense bank account. The original of the receipt is submitted to the BRA.
A foreign natural person pays the initial capital contribution in Euros and has to provide evidence that the cash was introduced to the territory of the Republic of Serbia, if the payment is made in cash. That document can be obtained at the personal request from the Customs authorities when entering a country. If a foreign natural person or legal entity makes the initial capital contribution in kind (through a bank abroad), the instructions must be requested from the domestic bank, which are then given to the bank abroad to make the transfer.

Certification of the Articles of Association

The Articles of Association (Decision or Agreement) are certified at the court having the jurisdiction for the municipality territory on which the LLC`s seat is located.
The Articles of Association are certified by the founders` signatures, while the domestic natural persons need to give their ID cards for inspection or passports in case of foreign natural entities.

Certification of the OP form (signature certification of persons authorized to represent the company)

The OP form contains signatures of persons authorized to represent the company as per the Articles of Association (only the Director in most cases).

The registration application for founding an LLC should be filled in and signed. The application is signed by the founder or the person authorized by the founder to represent the company.
The LLC registration form for can be downloaded here.

Payment of fees for the Business Register Agency

The following fees are required to be paid:
1. Fee to the Business Register Agency – RSD 3,600.00
2. Fee to the Republic Statistical Office – RSD 1,460.00 for obtaining the company identification number.

Filing the registration application for founding an LLC

One copy of the registration application is submitted to the BRA, directly or by mail. It is also possible to submit the registration application in electronic form. The applicant enters the data into the prescribed form published on the BRA Internet page, while the documentation to be submitted with the registration application should be sent in electronic form to the BRA e-mail address.
The applicant is obliged to submit the original copies of the documentation to the BRA within 5 days from the date of having sent the registration application in electronic form.
The date and time when the documentation was received is considered as the date and time of submission of the application in electronic form. This means that if the mail is late, the BRA is not to blame but the applicant. If the documentation does not arrive in time, it will be considered that the registration application was not submitted.
The following documents should be enclosed with the LLC registration application:
1) proof of the founder`s identity (photocopy of the ID or passport of natural person and/or excerpt from the Register where the legal entity is registered);
2) the Articles of Association of the company (Decision or Agreement), with founders` certified signatures;
3) bank receipt attesting to the contribution in cash credited to the suspense bank account or a certified affidavit of the founder that the deposit was provided;
4) founders` agreement on the value of the contribution in kind, if it is not specified in the Articles of Association;
5) decision on the appointment of the representative, unless already appointed by the Articles of Association;
6) certified signature of the representative.
It is also important to state the way in which one wants to collect the Decision on Registration. Possible options are:
- collection in person at the BRA (may be collected only by the representative or a proxy)
- have it sent by registered mail to the applicant`s address.

Receiving the Decision on Founding

If everything is OK, the Decision on LLC Registration is received within 5 days from the date when the registration application was submitted.
If it is not OK, the BRA reaches a decision to have the mistakes corrected or to supplement the documentation. The deadline for supplementing documentation or making corrections is 30 days from the date when the decision was passed. The Decision can be collected by the founder, by a proxy with the court certified authorization or it can be sent by registered mail.

It takes 5 days for the Decision on Founding to be issued.

Making a company seal

After the Decision is obtained, a seal for the LLC needs to be made.
For some this is just a formality, while the others like to have a nice-looking seal. You will be using the seal in your day-to-day business activities. All your partners will see your seal (clients - customers and suppliers) and it is an opportunity to promote yourself.
The company seal will also be on the list of authorized signatories in the bank, and only with that seal will you be allowed to pay and withdraw money. Each signature of the company`s authorized person(s) will be certified with the seal. The seal is made the same day or it takes one day for it to be made, depending on the seal maker.

Getting a TIN

The first thing you will need the seal for is to obtain a TIN. The documents to be enclosed with this application are a photocopy of the Decision on LLC founding from the Business Register Agency, photocopy of the Director`s ID card and photocopy of IDs of all founders.

It takes 3 days to get a TIN if there is only one founder - natural person. If there are several founders, each of them are checked if they paid all taxes due, as well as all entities linked with the founder (i.e. if other companies in which the founder has a share have settled their tax duties). Only when it is determined that all tax duties have been settled, a TIN is allocated.

Displaying the company sign

It is compulsory to display the company sign on the premises used as the LLC seat. If the Tax Administration cannot locate the actual LLC seat during the field control, then it can initiate a TIN suspension procedure (it may be the case of the so-called phantom company), which practically implies a temporary prohibition of activity performance.

Tax Administration field control of the LLC seat

On the day of filing the TIN application, the Tax Administration field control receives the order to check the data stated in the application. This means that the Tax Administration inspector will come to the address stated in the TIN application as the company seat. The inspector usually calls first prior to the visit. On that occasion, the following documentation should be given for inspection:

1. Decision on Registration
2. the grounds for using the premises as the company seat (certified lease contract, deed of title, parents` approval as the owners of the apartment, purchase contract for the apartment and alike).

The director or an authorized person from the company needs to be present with the company seal at hand, since the minutes are taken on that occasion and afterwards signed and sealed. If the procedure is not finished at the LLC seat for some reason, the rest is finished at the tax inspector`s office.

Opening a bank account (e-banking, payment cards)

After receiving TIN, a bank account should be opened for the LLC.
First of all, one should choose a bank that suits one`s needs best. Things to bear in mind when choosing a bank are:
- bank fee list (payment commission rate)
- location (distance from the company, since, like it or not, there will be occasions when you will go to the branch office where you opened the bank account)
- e-banking (with almost all banks it is cheaper to pay through e-banking; in some banks it is free of charge, while in others an annual fee is paid; there are several e-banking systems – some are suitable only for those constantly on-line, while the others also enable local operation)
- credits (it is often easier to get a credit as a company than as an individual; when credit rating, the banks give preference, as a rule, to regular clients; therefore, it is not bad to build a good reputation with the bank where one intends to get the credit)
- payment cards (there are also debit and credit payment cards for companies; debit payment cards are based on a bank account and are suitable for payment of entertainment costs, fuel and similar purchases which can be cleared as the company`s miscellaneous expenses).

It takes one day to open a bank account.

Application for the founder`s compulsory social insurance

According to the legal regulations, the LLC founder is liable to have a compulsory social insurance.
Namely, the LLC founder can be employed at his/her own LLC but it is not a must. If the founder is employed in his/her own LLC, then the tax and contributions are paid for his salary as for any other employee. The base for the contributions is the salary determined by the employment contract.
However, the LLC founder has to pay the contributions (35.8%), although he/she did not take up employment in his/her company nor is employed in some other company. In that case, the base for payment of contributions is a taxable profit determined by the accountant in the annual balance sheet and agreed by the Tax Administration.
If the the LLC founder as a natural person works in a company but does not have employment in his/her own company, then the founder has to pay the pension and disability insurance contributions (Pension Disability Insurance – 22%). In this case also, the base for payment of contributions is a taxable profit determined by the accountant in the annual balance sheet and agreed by the Tax Administration.
Insurance application is submitted to the Pension and Disability Insurance Fund.

Accounting

It is already clear from the above-mentioned that you also need to have an accountant. The contract with the accounting agency (company) is one of the papers requested by the Tax Administration in order to open a company file kept at their offices.
Look for an accountant before you start with the registration procedure. He/she may suggest some possibilities you have not thought about before. Also, you can ask for advice from tax advisors and other consultants.

Submitting documentation to the Tax Administration

A tax inspector will be assigned to you at the Tax Administration according to the first letter of your company name. That inspector is not designated forever, since they rotate every couple of years.
In order to complete the file with the Tax Administration, it is necessary to submit the following documentation (photocopies) to your tax inspector:
- decision from the BRA
- TIN
- contract with the bank about the current account
- the list of authorized signatories from the bank
- application form for the founder`s social insurance
- contract with the bookkeeping company
- statement about the employees
- statement about the business premises
- statement about the retail sale, wholesale outlets and warehouses
- statement about the capital assets

Filing the advance corporate income tax return

In addition to the above-mentioned, the advance corporate income tax return needs to be submitted to the inspector in order to calculate the annual tax liability. Namely, the LLC has to estimate the income and expenses for the first business year (from the day of founding until the end of the year). The estimate should be true, and it could be given to the tax inspector for checking. Depending on whether the profit has been foreseen or not for the first year, the LLC is liable to make the advance payment of the corporate income tax or not. Therefore, if a profit of RSD 100,000 is estimated to be made until the end of the year, tax in the amount of RSD 10,000 is to be paid (tax rate is 10%). Advance corporate income tax payment is made until the 15th day in a month for the previous month. Total advance payment of RSD 10,000 would be divided with the number of months left until the end of the year and such an amount would be paid monthly.
At the end of the year, the actual profit is determined as well as the actual liability regarding the corporate income tax. Only the tax difference would be paid then. In case the taxpayer paid more than required, the overpaid tax would be allocated for the coming months.

Filing municipal tax and building land use tax return

As stated earlier, municipal tax is the revenue of a city or municipality. Local self-government assesses this tax, but it cannot be higher than the legally regulated amount.
Thus, the Belgrade City Assembly reached a Decision on local municipal taxes for the Belgrade territory. As per the Decision, Belgrade is classified into zones. Depending on the zone on which the LLC seat is located, the municipal tax is calculated accordingly. The Decision can be downloaded on the website www.finansijebgd.org, while for the amount of the municipal tax per zone, please refer to a separate subtitle in the chapter »Taxes and Tax Administration«.

Also, it is necessary to file a building land use tax return as per the decision of local authorities. You can also download the Decision on the building land use tax for Belgrade from the same website.

The Decisions are made for each town and municipality individually.

Registering for VAT

Registering for VAT is not mandatory.
The companies starting their business and estimating that their annual turnover will be more than RSD 4,000,000.00 are liable to register for VAT. On the other hand, the companies starting their business and estimating that their annual turnover will be between 2 and 4 million RSD, can, if they want, register for VAT. The company that starts its business and estimates to make less than 2 million RSD turnover cannot register for VAT and is not supposed to do anything regarding this issue.
When a company registers for VAT, it has to keep that status for at least 2 years. After that, the company can file a request for de-registration, if it is possible according to the law. On advantages and disadvantages of registering for VAT, refer to the chapter on value added tax.

Registration of TIN and bank account with the Business Register Agency

After obtaining TIN and opening a bank account, these data should be reported to the BRA. This is done by filing an application for registration of data change, while photocopies of TIN and the contract with the bank on opening the account should be enclosed. On this occasion, tax is paid in the amount of RSD 1,560.00.

Start

Now you are ready to plunge boldly into business.