Investment Guide Serbia

Transcription

GuideReport
Economics Department
http://economicresearch-e.ba-ca.com
XP L I C I T
Investment Guide
Serbia
2nd Edition, May 2005
In cooperation with
and
A Member of HVB Group
HVB Bank Serbia and Montenegro
Branch network of HVB Bank Serbia and Montenegro incl. Eksimbanka
Beograd
HVB Serbia and Montenegro a. d., the Serbian subsidiary
Documentary business
of Bank Austria Creditanstalt (BA-CA), is together with Ek-
HVB Bank offers the full range of trade finance products and
simbanka, which BA-CA acquired in November 2004, the
services to its corporate customers including various products re-
fifth largest bank on the market. The portfolios of the two
garding documentary business and guarantees: import L/C, ex-
banks complement each other perfectly: HVB Bank enjoys a
port L/C, documentary collection, bid bonds, performance bonds,
strong position in business banking and e-banking. Eksim-
advance payment guarantees, payment guarantee, standby L/C.
banka concentrates on small and medium-sized enterprises.
Together, HVB Bank Serbia and Montenegro and Eksimbanka
serve more than 70,000 customers in 41 branches.
In cooperation with BA-CA’s banking network in Central
and Eastern Europe HVB Bank Serbia and Montenegro offers
Treasury services
HVB Bank offers standard products related to foreign exchange, securities and the money markets, as well as products
tailored to meet specific needs.
a complete range of financial services.
Custodian banking
Among the services for corporates are:
Financing facilities
◆ Access to the local capital market for foreign investors.
◆ Integrated post-trading services: settlement of securities,
HVB Bank offers tailor-made solutions to its customers
account management for securities, money transfer for
for working capital requirements as well as for investment
clients, reporting and market information, local market exper-
projects and factoring services.
tise, liquidity insurance.
02
Investment Guide / Serbia 2005
“Best Bank in Central and Eastern Europe”
Bank Austria Creditanstalt
Bank Austria Creditanstalt, a member of HVB Group, operates the leading international banking network in Central
and Eastern Europe. Within HVB Group, BA-CA is responsible
for these markets. The network of BA-CA comprises nearly
1,000 offices in 11 countries. 18,000 employees serve more
Products4Europe (a selection)
than 4.5 million customers.
BA-CA and its subsidiaries in CEE specialise in servicing
BA-CA’s commitment to Central and Eastern Europe has
enterprises with cross-border operations and providing them
been recognised by international financial magazines on
with the Products4Europe uniform service standard through-
many occasions. In 2004 “The Banker” named BA-CA “Bank
out the larger Europe.
of the Year in CEE”. “Euromoney” awarded the bank the
title “Best Bank in CEE” for the fifth time in succession.
◆ FlashPayment: the fast and efficient way to transfer funds
to Central and Eastern Europe – same-day value on the
credit side, faster execution.
◆ MultiCash: ElectronicB@nking software that enables com-
Your contact person
within HVB Bank Serbia and Montenegro:
Alexander Picker, CEO,
panies with cross-border operations to manage their ac-
Rajiceva street, 27 – 29, Belgrade,
counts in different countries via a single contact.
tel.: + 381 11 3204 508
e-mail: alexander. picker@yu. hvb-cee. com
The advantages of being part of a large international
banking group are standardised high-quality services and integrated risk and capital management.
Branislav Radovanovic, Deputy Head of INM,
Rajiceva street, 27 – 29, Belgrade,
tel.: + 381 11 3204 572
e-mail: branislav. radovanovic@yu. hvb-cee. com
03
Imprint
Imprint:
Published by: Bank Austria Creditanstalt Aktiengesellschaft, http: / / www. ba-ca. com, e-mail: intercontact@ba-ca. com
Edited by: Kurt Fesselhofer (Economics Department), Patrizia Reidl (Public Relations)
Chapters 2.7., 3., 4. were kindly made available by CONSULTATIO.
Information: + 43 (0) 505 05, ext. 41953, e-mail: economic. research@ba-ca. com (contents); + 43 (0) 505 05, ext. 56137 (production).
No part of this publication may be reproduced without the prior permission of the authors.
Printed by: Dataline GmbH
Printed on chlorine-free bleached paper.
Graphics: Horvath Grafik Design
Publications Service: tel.: + 43 (0) 505 05, ext. 56148 (answering machine), fax: + 43 (0) 505 05, ext. 56945, e-mail: pub@ba-ca. com
May 2005
Disclaimer:
Despite careful research and the use of reliable sources, Bank Austria Creditanstalt cannot assume liability for the completeness or accuracy of the information
given herein. This publication does not constitute an offer or solicitation of an offer.
04
Contents
Preface ................................................................................................................................................................................................................06
1. Country overview: Serbia ..............................................................................................................................................................................08
1.1. Political Situation ..................................................................................................................................................................................09
1.2. Economic Conditions.............................................................................................................................................................................10
1.3. Foreign Direct Investment (FDI) ...........................................................................................................................................................12
1.4. Summary and Outlook ..........................................................................................................................................................................13
2. Overview of Assistance Programmesand Financing Products ....................................................................................................................15
2.1. International Project Financing ...........................................................................................................................................................15
2.2. Serbia and the EU..................................................................................................................................................................................16
2.3. EU SME Finance Facility Phase II (SME FF) ...........................................................................................................................................18
2.4. Austrian Financing Products.................................................................................................................................................................18
2.5. International Export Finance (Austria)................................................................................................................................................23
2.6. Structured Trade Finance and Commodity Trade Finance.................................................................................................................24
2.7. Investment Incentives in Serbia ...........................................................................................................................................................24
3. Legal Principles and Investment Environment .............................................................................................................................................26
3.1. Law on Enterprises ................................................................................................................................................................................26
3.2. Foreign Investment Law, Law on Concessions and Law on Free Zones ...........................................................................................27
3.3. Bankruptcy Law .....................................................................................................................................................................................28
3.4. Laws on Privatisation ............................................................................................................................................................................29
3.5. Law on Financial Leasing ......................................................................................................................................................................30
3.6. Law on Secured Transactions on Movable Goods ..............................................................................................................................30
3.7. Accounting Regulations........................................................................................................................................................................31
3.8. Labour Law ............................................................................................................................................................................................32
3.9. Legislation on Foreigners .....................................................................................................................................................................33
3.10. Social Security Legislation ....................................................................................................................................................................34
3.11. Tax Laws .................................................................................................................................................................................................34
3.12. Foreign Exchange, Imports, Customs and Real Estate Acquisition...................................................................................................41
4. Annex ..............................................................................................................................................................................................................44
4.1. Standard Format of Accounts ..............................................................................................................................................................44
4.2. Balance Sheet.........................................................................................................................................................................................44
4.3. Income Statement .................................................................................................................................................................................45
4.4. Bilateral Agreements for Mutual Promotion and Protection of Investments .................................................................................46
4.5. Contacts..................................................................................................................................................................................................46
05
Preface
Preface
Five years have passed since Serbia’s “velvet” revolution.
While tensions within Serbia’s government coalition
The political turnaround heralded the end of the regime of
are preventing reforms from gaining momentum, the path
Slobodan Milošević and paved the way for the introduction
of reform on which the country embarked has been
of the country’s new political and economic order.
pursued with greater determination in recent months. This
It was not easy for Serbia to break free from its political
is partly reflected in the introduction of a value added tax
isolation and the constraints imposed by its enormous social
at the beginning of 2005. These efforts have already been
and economic problems. The country’s legacy dampened the
acknowledged by the international community. The Euro-
momentum of reforms and Serbia was in danger of suc-
pean Union has given the green light for negotiations with
cumbing to the shadows of the past. Despite the difficult
Serbia on a Stabilisation and Association Agreement,
conditions, Serbia succeeded in achieving important objec-
a move which has made the country more attractive for
tives at the beginning of the new course taken by it. Efforts
foreign investors. Serbia is coming a little closer toward
to reintegrate the country in the international community
realising its target of EU membership; this will help to
were soon crowned by success. The suspension of its mem-
more effectively structure subsequent reform initiatives.
bership in the UN, the CSCE, the IMF and the World Bank
In addition, the prospects of a settlement of the dispute
was lifted and relations with Serbia’s neighbouring countries
over the status of Kosovo and of the clarification of
started to normalise. The reorganisation of the legal system
relations with Serbia’s Union partner Montenegro are
and economic structures also got off to a good start.
improving. This is also likely to increase Serbia’s attractive-
The business environment for foreign investors gradually
improved. After a hesitant start, the growing interest of
ness for foreign investors.
In this publication, Bank Austria Creditanstalt wants
potential investors was reflected in substantial inflows of
to address these issues. Its “Investment Guide” is a series
foreign capital. These amounted to € 500 mn in 2002, and
of publications which now covers ten markets in Central
rose to as much as € 1.2 bn in the following year. Efforts to
and Eastern Europe. This Investment Guide is the second
strengthen democracy and increase economic prosperity
edition and has been updated in response to the rapid
however suffered a serious setback with the assassination of
changes in the Serbian market. Its purpose is to give our
Prime Minister Zoran Djindjić in 2003. The pace of reforms
customers easier access to the markets in Central and
slowed considerably and the privatisation process came to
Eastern Europe by providing them with information on
a standstill. Foreign investment consequently declined to
the economic and political situation, and on the legal
€ 800 mn in 2004.
framework.
06
Preface
This booklet provides a comprehensive overview of the
As a universal bank providing private and corporate
country, which describes the current situation of Serbia’s
customers with a broad selection of services, HVB Bank Serbia
economy, followed by an economic outlook. In addition, it
and Montenegro offers foreign investors and companies
contains information on all assistance programmes and
engaged in foreign trade the full range of products available
financing opportunities which complement the investment
from an international banking group. In addition to our
financing services offered by Bank Austria Creditanstalt and
experienced local staff, you can contact a competent partner
HVB Group. The legal section was prepared by our coopera-
in HVB Group for your investment and financing needs.
tion partner. Building on its experience, CONSULTATIO and
The Serbian market has great potential. We invite you to take
its local partner PRIVREDNI SAVETNIK – REVIZIJA focus in this
advantage of our services to exploit this potential.
section on company law, fiscal law, labour law and other
regulations, which are at present of particular significance
for investors. CONSULTATIO, a well-known firm of tax
consultants and chartered accountants, has been advising
and otherwise assisting investors in Central and Eastern
Europe for over 16 years. It offers its expertise especially for
acquisitions and participations in this region.
The companies of HVB Group have also acquired many
years’ experience in the markets of Central and Eastern
Europe. Bank Austria Creditanstalt, which is responsible for
Regina Prehofer
Marianne Kager
Member of the Managing Board
Chief Economist
these markets, has one of the most extensive networks of
banking subsidiaries and other financial service companies in
the region. HVB Group was one of the first international
banks to launch business activities in Serbia after the political
turnaround, and it established a banking subsidiary,
HVB Bank Serbia and Montenegro, in 2001. Bank Austria
Creditanstalt acquired a majority holding in Eksimbanka at
the end of 2004, which made it the 5th largest bank in
Serbia’s banking market.
07
Country overview
1. Country overview: Serbia
North
Backa
Hungary
North
Banat
West
Backa
Vojvodina
South Backa
Croatia
Romania
Central
Banat
South Banat
Srem
Belgrade
Macva
Podunavlje
Branicevo
Bor
Kolubara
Sumadija
Bosnia and Herzegovina
Pomoravlje
Moravica
Zajecar
Zlatibor
Raska
Rasina
Nisava
Toplica
Pirot
Jablanica
Montenegro
Bulgaria
Kosovsko
Mitrovica
Pec
Kosovo
Kosova KosovskaPomorav
Albania
Pcinj
Prizren
FYR Macedonia
Population:
7.5 million (excluding Kosovo)
composed of the Republic of Serbia, with
President of Serbia:
Boris Tadić
the autonomous provinces Vojvodina and
Prime Minister:
Vojislav Kostunica
EUR 17.4 bn
Form of government: The Union of Serbia and Montenegro is
Kosovo, and the Republic of Montenegro
GDP (2004):
Capital:
Belgrade (population 1.6 million)
GDP per capita (2004): EUR 2,310
Area:
88,361 km2, common borders with
Currency:
average exchange rate in 2004:
Macedonia, Albania, Montenegro,
72.8 CSD = 1 EUR
Bosnia and Herzegovina and Croatia
08
CSD (1 Dinar = 100 Para)
Hungary, Romania, Bulgaria, FYR
Country overview
Political Situation
1.1.
nally elect a President and end the crisis, with the office finally
Five years ago, the era of Slobodan Milošević ended in
going to Boris Tadić, a representative of the Democratic Party.
the Federal Republic of Yugoslavia, which has now become
The greatest setback to the reform efforts in this fledgling
Serbia and Montenegro. Supported by a united opposition,
democracy was undoubtedly the assassination of the Serbian
Vojislav Kostunica finally won the presidential elections in
Prime Minister Zoran Djindjić in March 2003, which finally led
September 2000, bringing to an end a decade marked by war
to the collapse of the government supported by the reform
and political isolation.
coalition DOS as well.
The new political leadership, with Kostunica as the Presi-
The early elections held in December 2003 saw a resur-
dent of both Republics in Yugoslavia, and the broad Serbian
gence in strength for the nationalist forces in the country. The
reform coalition led by Zoran Djindjić, which triumphed in the
Serb Radical Party (SRS), led by Vojislav Seselj, who stands ac-
parliamentary elections in December 2000, set to work with
cused of war crimes by the tribunal in The Hague, emerged as
great ambitions of transforming the country into a state
the clear winner from these elections. After long negotiations,
based on democratic principles. Immediately after taking of-
however, the reform-minded parties were able to agree on the
fice, the new political leadership make successful efforts to
formation of a minority government. The current coalition con-
reintegrate the country into the international community. Sus-
sists of the Democratic Party of Serbia, the liberal G17plus and
pension of the country’s membership of the UN, the OSCE,
the Serb Renewal Movement. This government, which is sup-
the IMF and the World Bank was terminated, and relations
ported in parliament by the Socialist Party, is headed by Vojislav
with neighbouring countries were normalised. Extradition of
Kostunica, who took office as Serbian PM after his mandate as
the former Yugoslav president Slobodan Milošević to the in-
President of Yugoslavia ended in early 2004.
ternational war crimes tribunal in The Hague in June 2001
Due to its many constituent parties, the Serbian government
was a major step forward in finally ending the country’s inter-
appears somewhat unstable, though in recent months it has
national political isolation. Far-reaching structural reforms
proved to be unexpectedly resilient and managed to dispel fears
with the goal of modernising and the economy and harmon-
of early elections. While the pace of reforms has suffered from
ising it with Western European standards were put on the
the internal differences of opinion within the coalition, progress
economic policy agenda, in order to reinforce the political
in reforms is still being made. Indeed, the EU Commission has
transition of the country by fostering prosperity and a rapid
confirmed Serbia’s wide-ranging efforts to press forward with in-
increase in the population’s standard of living.
stitutional and economic reforms. In reflection of this, with the
Progress with the reforms that were initiated, however,
positive outcome of the feasibility report of 12 April 2005 the EU
was slowed by the internal disputes in the broad coalition
gave the green light for commencing the negotiation of a Stabili-
and a power struggle between the top leaders in the country.
ty and Association Agreement with Serbia and Montenegro in
Amongst other things, the political instability was reflected by
2005. This decision, which was positively influenced by the im-
the unsuccessful effort to elect a successor to the President of
proved cooperation with the UN tribunal in The Hague as evi-
the Republic of Serbia in Yugoslavia, Milan Milutinović, in
denced by the extradition of 11 alleged war criminals, is an im-
2002, due to low voter turnout. It took until June 2004 to fi-
portant milestone for Serbia on the road to a closer relationship
with the EU and a key prerequisite for eventual membership of
the Union. New economic opportunities are dawning in Serbia
Distribution of seats in the Serbian Parliament
following the elections of 28 December 2003
with the possibility of concluding such an agreement with the
EU in the foreseeable future, as this will not only facilitate bilateral trade but will also provide a structural framework for further
Party
Serb Radical Party (SRS)
Seats
82
reforms and a chart for political progress to help navigate the
country back to Europe in terms of values and principles.
Democratic Party of Serbia (DSS)
53
This process will also be facilitated by the final resolution
Democratic Party (DS)
37
of the territorial conflicts, which should take shape during the
G17Plus
34
coming year. The issue at hand is the future status of Kosovo,
Serb Renewal Movement – New Serbia (SPO-NS)
22
which in legal terms is a province of Serbia, whose majority
22
ethnic Albanian population is struggling for independence. Di-
250
rect negotiations between Belgrade and Pristina will probably
Socialist Party of Serbia (SPS)
Total
Source: Republic electoral commission,
Bank Austria Creditanstalt Economics Department
finally get underway in 2005, mediated by Sören Jessen-Petersen, the UN’s special representative for the UN protectorate
09
Country overview
of Kosovo. Above and beyond this, relations with Serbia’s
instability. Since then, the pace of privatisation has slowed
partner in the State Union, Montenegro, have also reached a
greatly and, as of the end of 2004, the share of the private
decisive phase. The State Union of Serbia and Montenegro,
sector in GDP only amounted to about 50 %, quite low even
brokered by the EU in February 2003, has turned out to be a
by regional standards. For 2005, the Serbian government is
rather dysfunctional solution. Final clarification of these two
giving high priority to restructuring more companies, such as
countries’ status will perhaps be achieved by the referendum
the electricity company EPS and the rail operator ZTP, as well
on the independence of Montenegro which the Montene-
as accelerating the process of privatisation, including in the
grins intend to hold in the spring of 2006. This could result in
banking sector. With the new bankruptcy law that came into
a final parting of ways for Serbia and Montenegro, or the for-
force in mid-2004 and the reinforcement of the privatisation
mation of a loose federation of the two states.
agency, and fostered by a more stable political environment
Regardless of what the actual decision is, final resolution
than last year, significant progress can be expected in re-
of the territorial future of Serbia will certainly provide a clearer
structuring, which will provide critical support for the suc-
framework for the country’s future development and thus sup-
cesses already achieved in the macro-economic arena.
port more rapid reform progress in the realms of politics and
the economy.
Over the last five years, the Serbian economy has been
placed on a remarkable path of growth. GDP has increased
at an average rate of roughly 5 % per year. Thanks to a fine
1.2.
Economic Conditions
year for agriculture and powered by robust rises in industrial
The economic development of Serbia suffered immense-
output, 2004 saw economic growth rise to 7.5 %, the
ly from the long years of political isolation, enforced in eco-
strongest rate registered since the political renewal. This
nomic terms by the UN and EU embargos. This was only ex-
brisk pace of economic growth would not be possible with-
acerbated by the loss of the country’s sales markets and dis-
out the success that Serbia has achieved in stabilising the
ruption of the existing production structures as the former
monetary situation. Bolstered by a transparent exchange rate
Republic of Yugoslavia disintegrated. A decade marred by
policy, inflation has been reduced to a great degree: despite
numerous regional conflicts, international isolation and eco-
suffering from hyperinflation at the beginning of the reform
nomic mismanagement resulted in a particularly difficult
process, by 2004 the country’s rate of inflation had been
starting position when reforms finally got underway at the
brought down to “only” 10 %. In conjunction with a cau-
beginning of the new millennium. When the change of polit-
tious monetary policy, Serbia’s economic policy has been
ical regime finally occurred, the country’s economic output
marked by strict fiscal discipline. Indeed, the 2004 budget
was less than one-half of what it had been at the beginning
deficit was even lower than targeted, coming in at just 2 %
of the 1990s. The economy was also plagued by high unem-
of GDP.
ployment, hyperinflation, an insolvent banking and corporate
sector, poor infrastructure and excessive debt.
With the financial assistance of the international com-
Chart 1
munity, however, it was possible within a relatively short peri-
Export and import volumes
od of time to stabilise Serbia’s economy and set the stage for
in EUR mn
a structural overhaul. Immediately following the so-called
“Velvet Revolution”, the investment climate improved quickly with reorganisation of public finances, tax reform, liberalisation of prices and trade, initiation of reforms in the banking sector, a credit agreement with the IMF and conclusion
of a debt rescheduling agreement with the World Bank and
the Paris Club of creditors. After passage of the new law on
privatisation, rapid progress was made in placing the economy in private hands. Some 1,000 medium-sized enterprises
were privatised through auctions and 25 large companies
were sold off within the framework of international tenders.
Progress in the field of reforms was, however, delayed by
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2000
2001
2002
2003
Exports in EUR mn
Imports in EUR mn
the change in government following the assassination of
Serbian PM Djindjic in March 2003 and the ensuing political
10
Source: RSO, Bank Austria Creditanstalt Economics Department
2004
Country overview
The most vulnerable aspect of the Serbian economy is ex-
compared to other countries in Central and Eastern Europe.
ternal relations: in 2004, the current account deficit swelled
Slovakia and the Czech Republic exhibit the highest values
to more than 13 % of GDP. The main factor behind this devel-
amongst the Central and Eastern European transition
opment is the massive trade deficit. On the one hand, this
economies, with levels considerably over 100 %.
weakness in foreign trade is a consequence of the dissolution
A closer look at Serbia’s foreign trade also reveals weak
of the former Republic of Yugoslavia and the ensuing loss of
trade relations with the neighbouring countries, an aftermath
sales markets, which could not be compensated for due to
of the political conflicts. It should, however, be noted that ex-
the long years of international isolation. On the other hand,
ports to neighbouring countries have increased at above-aver-
delays in privatisation and some foot-dragging in restructur-
age rates in the last five years, and some 35 % of Serbian ex-
ing the corporate sector have done nothing to enhance the
ports are now absorbed within the region itself. Indeed, Bosnia
relatively weak international competitiveness of Serbian com-
and Herzegovina has advanced to become Serbia’s most impor-
panies.
tant trading partner, followed by Germany and Italy.
Consequently, the last few years have seen growth in im-
In terms of imports, foreign trade relations with the
ports far outstrip increases in exports. A great deal of de-
country’s direct neighbours are even less well developed. Less
mand simply cannot be satisfied from domestic production.
than 20 % of total imports originate in region. This is also re-
This has caused imports to grow at an average rate of 27 %
lated to the structure of imported goods: alongside energy
per year since the beginning of the reform process in the year
imports, primarily from Russia, the majority of imports consist
2000. Disregarding necessary energy imports, the imports
of high quality consumer and investment goods, mainly pro-
coming into the country are mainly consumer goods, the total
vided by trading partners in Western Europe. Only one of Ser-
volume of which grew to almost EUR 9 bn in 2004. Exports,
bia’s neighbours the new EU member Hungary ranks amongst
primarily raw materials or semi-finished goods, on the other
the top 10 import partners.
hand, only amounted to just over EUR 3 bn, despite the fact
In the coming years, trade relations with the neighbour-
that they have increased briskly since the end of the country’s
ing countries can be expected to deepen, as a “Memoran-
economic isolation, posting average growth rates of almost
dum of Understanding” (MoU) on measures to liberalise re-
20 % annually (in nominal, EUR terms).
gional trade was signed as a part of the Stability Pact in June
Nevertheless, Serbian foreign trade not only suffers from
2001. The goal set forth in the MoU is to abolish duties for at
this major imbalance. Another problem is the relatively low
least 90 % of goods, which should affect at least 90 % of the
significance of foreign trade for the economy as a whole. De-
bilateral trade volume. After some delay, a set of bilateral
spite the fact that it is constantly increasing, the volume of
trade agreements has now entered into force. Moldavia has
trade only amounts roughly 65 % of GDP, which is quite low
also joined this free trade zone, which consists of Albania,
Chart 2
Chart 3
Exports by trade partners
Imports by trade partners
2004, in %
2004, in %
BiH 18%
Other 36 %
Germany 13 %
Other 49%
Russia 13 %
Italy 13%
Italy 10 %
France 4 %
Russia 5 %
Switzerland 6 %
Germany 10%
FYR Macedonia 8%
Slovenia 3%
France 3%
China 5 %
USA 4 %
11
Country overview
Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia
vestors. From 2002 on, these efforts bore fruit, especially as
and Romania, in addition to Serbia and Montenegro. This
the first phase of privatisation really got underway and nu-
provides a suitable basis for deepening foreign trade between
merous attractive projects enticed foreign investors. In 2002,
the individual countries in the region and forebodes further
total foreign direct investment (FDI) amounted to EUR 500
rapid increases in the volume of foreign trade.
mn, jumping to almost EUR 1.2 bn in the following year. This
Nonetheless, the EU will continue to be Serbia’s most im-
record high was not surpassed in 2004 as the pace of privati-
portant trading partner. Compared to the other transition
sation slowed. Nevertheless, FDI of more than EUR 800 mn
economies in Central Europe, the share of trade with the EU
was still registered in 2004.
is still relatively low at 40 % in respect of both imports and
Despite recent years’ impressive development, total FDI
exports, due to the lasting effects of the embargo. Presently,
in Serbia remains relatively low because the market was
Serbia foreign trade enjoys preferential treatment by the EU
opened up so late. By end-2004, the cumulative influx of FDI
in the form of unilateral trade concessions (abolition of quotas, reduction of customs tariffs). Conclusion of a Stabilisation
and Association Agreement, which has moved tangibly closer
Chart 5
as the EU has decided on the basis of the positive outcome of
Foreign direct investment in Serbia
the feasibility study to commence negotiations in the autumn
Total volume in EUR, year-end
of 2005, will provide further impetus for foreign trade between Serbia and the EU.
4,000
Foreign Direct Investment (FDI)
1.3.
3,500
With the change of political regime, Serbia suddenly
3,000
found itself in the centre of attention of potential foreign in-
2,500
vestors, both as a low-cost production site and as a potential
2,000
1,500
sales market. Nevertheless, in the first few years following po-
1,000
litical reorientation, the influx of foreign capital was quite
500
subdued due to the political and legal uncertainties, the jun-
0
1997
gle of red tape, inefficient public administration and corrup-
1998
1999
2000
2001
2002
2003
2004
tion. In response, the government quickly implemented measures to create a favourable overall economic framework, offering equal opportunity for both domestic and foreign in-
Source: NBS, Bank Austria Creditanstalt Economics Department
Chart 4
Chart 6
Foreign trade relations with the EU-15
Comparison of FDI in the region
in %
50
45
40
35
30
25
20
15
10
5
0
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
10
ia
rb
Se
ia
an
ia
m
Ro
ac
ed
on
M
tia
oa
Cr
ria
lga
Bu
-H
nia
Bo
s
Cz
.
0
nia
2004
20
Al
ba
2003
30
p.
2002
40
Re
2001
50
ec
h
2000
60
Exports to EU-15 (as a % of total exports)
Imports from EU-15 (as a % of total exports)
Per capita FDI in EUR (lhs)
FDI as a % of GDP (rhs)
12
Source: Central Banks, Bank Austria Creditanstalt Economics Department
Country overview
amounted to EUR 3.6 bn. This meant that at the end of
1.4.
Summary and Outlook
2004, FDI only amounted to roughly 20 % of GDP, or just
Since casting off the old political regime a mere five
under EUR 500 per capita. In this regard, the leading country
years ago, Serbia has made significant progress with reforms,
in Central Europe is the Czech Republic, which boasts FDI of
overcoming the dire aftermath of economic isolation and
almost 50 % of GDP and per capita FDI of more than EUR
military conflict. Despite the political setbacks marked by the
4,100. In the narrower region of South-eastern Europe, the
tensions between nationalism and Europeanism, the market
top two contenders for FDI are Bulgaria, at 45 % of GDP or
has become very attractive as a target for foreign direct in-
EUR 1,100 per head, and Croatia, at 35 % and almost EUR
vestment. Inflows of FDI are expected to remain strong in the
2,300 per capita FDI. Nevertheless, compared to the other
coming years as well, driven by a faster pace of privatisation,
former republics from the old Yugoslavia, Serbia has made
with the banking sector taking a leading role in this regard.
good progress in recent years (see Chart 6).
In order to maintain the current surge in capital inflows from
The most important investor countries for FDI in Serbia
abroad independently of attractive privatisation projects and
are all members of the European Union, which accounted for
to thus continue closing the gap to the other countries in
some 3 / 4 of total FDI in 2004. In 2004, Austria advanced to
South-eastern Europe, and in particular to the countries in
become the largest foreign investor in Serbia, responsible for
Central Europe, overall conditions in Serbia will have to im-
some 20 % of total FDI inflows to the country (see Chart 7).
prove even more. Many potential investors remain hesitant
No data is yet available on the sectoral breakdown of FDI
of taking advantages of the opportunities opening up in this
in Serbia. Nevertheless, based on the major privatisation pro-
market, due to unresolved problems such as inefficient pub-
jects, it can be determined that the tobacco industry is one
lic administration, corruption and the difficulties associated
of the main recipients of FDI, due to the involvement of
with enforcing legal claims, legal regulations which deviate
Philip Morris and British American Tobacco (BAT). Moreover,
from EU law, and the general political environment.
a considerable portion of FDI has been directed at the bever-
One convincing argument, however, is the extremely
ages industry, with the sale of Apatinska pivara to Interbrew
brisk pace of growth in this market. Following a particularly
and Čelarevo to Carlsberg. The banking sector has also ab-
impressive year boasting economic growth of 7.5 % in 2004,
sorbed significant FDI through privatisations and the founda-
the further outlook calls for a brisk pace of around + 5 %
tion of new banks and subsidiaries. This also includes the ac-
GDP growth in the coming years. This positive development
tivities of Bank Austria Creditanstalt (HVB Group), which has
will be backed by a fiscal policy clearly aligned towards main-
been on the market in Serbia since 2001 and advanced to
taining stability. The budget deficit, which was squeezed
become the fifth largest credit institution in the country with
down to 2 % of GDP in 2004, is supposed to be reduced
the acquisition of Eksimbanka in November 2004.
even further in 2005, to a mere 0.6 % of GDP. This will come
as welcome support for the cautious monetary policy pursued by the central bank with the goal of cutting inflation,
because in the second half of 2004 inflation, which has de-
Chart 7
FDI by country of origin
clined into the single digits, picked up again on the back of
2004, in %
burgeoning domestic demand. In addition to this, the introduction of 18 % VAT in Serbia as of 1 January 2005 also fuelled the rise in inflation. The strict fiscal and monetary poliAustria 20%
ances. This is particularly true as the Serbian export sector
Other 27 %
will gain increasing strength from privatisation and restrucNetherlands 14%
Switzerland 4 %
UK 9%
turing, which should help to reduce the current account
deficit over the medium term.
Italy 5 %
Greece 7 %
cies will also help to relieve the country’s dire external imbal-
Germany 14%
Three years following the conclusion of the debt
rescheduling agreement with the Paris Club of official creditors, Serbia was able to wrap up a deal with the Western
creditor banks (the London Club) last year, which also calls
for debt reduction. With the final solution of the debt issue,
the international rating agencies cancelled the default status
Source: SIEPA, Bank Austria Creditanstalt Economics Department
and have begun issuing ratings (Moody’s, for example, gave
13
Country overview
Serbia a B3 rating). This will facilitate Serbia in accessing fi-
Your contacts at Bank Austria Creditanstalt:
nancing on the international capital market, making financing
Marianne Kager, Head of Department
itself easier and helping to reduce financing costs.
(Economics Department)
Certain positive developments, such as the deal with the
IMF on the extension of the existing agreement and, first and
A-1010 Vienna, Hohenstaufengasse 6,
foremost, the position of the EU Commission that Serbia has
tel.: + 43 (0) 505 05 ext. 41952
reached a state in its development when it is ready to begin
e-mail: marianne. kager@ba-ca. com
negotiating a Stability and Association Agreement in the
Walter Pudschedl
autumn of this year, have paved the way for a brighter future
(Economics Department)
for Serbia than was the case just a few brief months ago. The
A-1010 Vienna, Hohenstaufengasse 6,
prospect of eventual membership of the European Union is a
tel.: + 43 (0) 505 05 ext. 41957
particularly strong incentive for Serbia to continue pushing
e-mail: walter. pudschedl@ba-ca. com
forward with economic reforms it has launched and further
reinforcing the democratic structures in the country. Alignment with the European Union will lead to a continuos
improvement in the overall conditions for investors in Serbia,
allowing the potential of one Europe’s most promising
markets to be exploited amidst an atmosphere characterised
by diminishing risks.
Serbia – Selected indicators
2001
2002
2003
2004
GDP (real)
5.5
4.0
3.0
7.5
4.0
4.5
Industrial production (real)
1.4
3.1
0.0
7.1
3.0
4.0
Change in % on previous year
Gross fixed capital formation (real)
Inflation (annual average)
2005
2006
forecast
–
–
–
–
–
–
93.3
16.6
9.9
11.4
14.2
9.5
Unemployment (annual average)
26.8
29.0
31.7
31.7
32.0
31.8
Budget balance (% of GDP)
– 1.4
– 4.0
– 2.7
– 2.0
– 0.6
– 0.5
Exports of goods
2,248
2,551
2,180
3,133
3,508
3,999
Imports of goods
5,429
6,684
6,446
8,798
8,882
9,257
Current account balance
– 700
– 1,831
– 1,697
– 2,352
– 2,090
– 1,925
Current account balance (% of GDP)
– 5.9
– 12.0
– 10.2
– 13.6
– 11.7
– 10.4
in EUR mn
Net inward FDI
185
513
1.197
777
1.045
815
13,411
12,520
12,589
11,334
10,599
11,109
112.2
82.2
75.5
65.3
59.5
60.0
2.7
4.0
5.3
4.2
4.1
4.2
CSD / EUR (annual average)
59.4
60.5
65.3
72.8
82.8
90.2
CSD / USD (annual average)
66.7
63.9
57.4
58.6
61.8
66.8
Gross foreign debt (end of period)
Gross foreign debt (% of GDP)
Import cover (in months)
Source: Bank Austria Creditanstalt Economics Department, NBS, RSO
14
Overview of Assistance Programmes and Financing Products
2. Overview of Assistance Programmes
and Financing Products
2.1.
International Project Financing
Another possibility is the involvement of multinational
The term project financing refers to a direct financing
organisations (European Bank for Reconstruction and Develop-
arrangement for a legally independent business entity created
ment – EBRD, the World Bank subsidiary International Finance
to carry out a specific project (Special Purpose Company –
Corporation – IFC, the Overseas Private Investment Corporation
SPC). The capital requirement for the project is met by sponsors
– OPIC, and the European Investment Bank – EIB). All these in-
(initiators, providers of equity), providers of outside capital
stitutions have extensive experience in project financing and
(commercial banks, multinational organisations such as the
can also make equity investments of their own, thereby making
IFC, EBRD, etc.) and guarantors. Further project financing
it possible to realise financing deals in difficult markets as well.
participants are project contractors and project operators.
Besides pure project finance deals, it is also possible to
In deciding whether a project will be realised, the key
combine project financing and export financing, guarantees
criterion is the project’s financial viability (cash-flow orientation).
extended by OeKB for Austrian suppliers, etc. – see Chapter
Apart from this, spreading the project risks among the project
2.5. “International Export Financing” – in order to meet
participants is of particular importance in project financing.
customer demands in the best possible way.
Another important aspect is to achieve an optimised structuring
In times of globalisation when takeovers are becoming
depending on the financial performance of the individual
increasingly common and expansion is the trend in many sectors,
project participants. As far as risk sharing is concerned, every
acquisition financing has become a significant segment of
participant should bear the risks which lie within his scope of
project financing. This type of financing involves the takeover
responsibility (e.g. the project contractor should be responsible
of an existing company by a competitor. The loan used in
for risks related to the timely completion of the project).
financing the takeover must be repayable from the joint
A project finance deal is characterised by a variety of risks –
future cash flow of the two undertakings – taking into
commercial risks (e. g. market risk, acceptance risk, transport
account the savings potential (synergy effects) resulting from
risk), political risks (e. g. extraordinary government intervention,
such transactions.
expropriation, war, revolution, strike and import restrictions),
technical risks (e. g. process risks, operational and technological
risks) and force majeure (e. g. natural disasters). Consequently, a
detailed project analysis and evaluation (feasibility study) must
be carried out before the execution and financing of a project.
2.1.1.
International project financing and
The Corporate and Project Finance department, which is
responsible for project finance at Bank Austria Creditanstalt,
This feasibility study should cover the following: project
has long-standing contacts with multinational organisations
description, financing need, the structure of the financing
(EBRD, EIB, the World Bank Group – in particular, IFC and
arrangement, market study, competitor analysis, cost calcula-
MIGA) and serves as central point of contact for any enquiries
tion, investment calculation, projected balance sheets, break-
in this area for Bank Austria Creditanstalt. Excellent coopera-
even analysis, general contractor and subcontractors, project
tion with multinational organisations makes it possible to re-
participants and credit position reports, collateral and a final
alise private investment projects even in difficult markets. The
risk and project assessment.
department’s expertise and experience, coupled with the excel-
Although the special purpose company’s assets serve as
lent quality of its advice and assistance, enable it to provide
main collateral, and in addition to the assignment of shares in
valuable support for covering local and global markets. By co-
the company, project participants may be required to furnish
operating with the units of Bank Austria Creditanstalt abroad,
further collateral. This may include the assumption of special
it can efficiently serve companies on site and provide financ-
guarantees, assignments, liens or various types of guarantees
ing tranches in local currency.
(warranty, sales, utilisation and transfer guarantees).
15
World Bank Group
2.1.2.
capital and commercial bank loans or other EU assistance
The World Bank Group consists of the IBRD (International
schemes. The EIB refinances its loans on the capital market
Bank for Reconstruction and Development), IDA (International
thanks to its AAA rating. Smaller projects can be financed
Development Association), IFC (International Finance Cor-
through “global loans” granted to banks. Under this arrange-
poration), MIGA (Multilateral Investment Guarantee Agency)
ment, the EIB extends loans to banks subject to the condition
and ICSID (International Center for Settlement of Investment
that these banks grant smaller loans to project applicants.
Disputes).
EIB activities in the CEE countries are coordinated with
Whereas the IBRD extends loans at the usual market rates
to countries with a good credit rating and refinances them by
the Phare and ISPA programmes and with EBRD financing
arrangements.
issuing bonds on the capital market, IDA makes available loans
The EIB has set up a financing scheme for CEE countries
to countries with low credit ratings. Such loans (interest-free,
under which it makes available a total of EUR 21.2 bn for the
small processing fee, extremely long-term, 10-year redemption-
period from 2000 to 2007.
free period) cannot be refinanced on the capital market but are
funded by contributions from 30 member states.
Unlike the IBRD and IDA, IFC does not lend to countries
Your contact at Bank Austria Creditanstalt:
Martin Handrich, Head of Department,
but directly to private companies (lender to the private sector).
Corporate and Project Finance CEE,
It can refinance these loans on the capital market at
Schottengasse 6, A-1010 Vienna,
favourable rates thanks to its AAA rating. Apart from lending,
tel.: + 43 (0) 505 05 ext. 42860,
IFC can also take equity interests and provide know-how if
e-mail: martin. handrich@ba-ca. com
required. Since IFC lends only a specific percentage of the
project costs, international commercial banks – in addition to
providers of equity capital – are also integrated in the project
financing (providers of B-loans).
MIGA issues guarantees against political risks to project
investors (providers of equity capital, shareholder loans or
for Global Loans:
Christian Rakos, Public Finance CEE,
tel.: + 43 (0) 505 05 ext. 43132,
e-mail: christian. rakos@ba-ca. com
outside capital). Projects insured by MIGA guarantees must be
Our sectoral experts for telecoms & media, energy, oil &
economically viable, correspond to the development plans of
the host country and comply with environmental standards.
gas, transport infrastructure & PFI and the processing industry
& natural resources will also be pleased to assist you with any
European Bank for Reconstruction and
Development (EBRD)
2.1.3.
The EBRD was established in 1991. Its purpose is to promote
questions and inquiries you may have.
2.2.
Serbia and the EU
the transition to an open market economy and to encourage pri-
Following the removal of the previous president Milosevic
vate and entrepreneurial activities in those countries of Central
in October 2000, a constructive dialogue was immediately
and Eastern Europe (CEE) and the Commonwealth of Indepen-
launched with the European Union. In November 2000, a
dent States (CIS) which are committed to and guided by the
framework agreement was signed, commissioning the Euro-
principles of multi-party democracy, pluralism and market econ-
pean Agency for Reconstruction with management of the
omy. The main types of EBRD financing for private sector enter-
large amount of European support for Serbia.
In April 2005, the European Union took another step to-
prises are loans, investments (shares) and guarantees.
wards closer relations with Serbia. In its feasibility study, the
European Investment Bank (EIB)
2.1.4.
Union drew the conclusion that Serbia has achieved sufficient
The EIB is the financing institution of the European Union. It
finances
projects
which
are
consistent
with
European
objectives (promotion of small and medium-sized enterprises,
progress in the fields of political reforms and economic development for the country to now negotiate a Stabilisation and
Association Agreement with the European Union.
environmental protection, improvement of transportation and
The basis for such an agreement is provided by the stabil-
telecom infrastructure, etc.) and involve a volume of over
isation and association process, in which the entire region of
EUR 25 million at standard market rates in the form of individual
South-Eastern Europe is involved. A Stabilisation and Associa-
loan arrangements. EIB financing covers a maximum of 50 % of
tion Agreement is the culmination of this process, and regu-
the project costs; the difference must be raised through equity
lates the contractual relations between a country in this region
16
and the European Union. In this regard, the main emphasis is
where assistance was needed were also determined. Based
on recognition of the fundamental principles of democracy
on this foundation, a multi-year programme was drawn up, in
and the key elements of the EU’s internal market. Step-by-
which the reforms to be carried out are described. On this
step introduction of a free trade zone and acceptance of the
basis, annual action programmes are established for the de-
related principles (freedom of competition, freedom of estab-
sired goals, and the support areas and budget allocations are
lishment, intellectual property rights, etc.) are components of
determined. The action programmes contain detailed lists of
all association agreements. These basic aspects are also sup-
projects with the allocated funds.
plemented by country-specific measures. One key point for
The annual action programme for 2005 has been allocated
the European Union and its economy is that the reform
a budget of roughly EUR 184 m for projects in Serbia and
process promoted by the EU is oriented to the basic principles
Montenegro.
of the European Union. Every year a report is prepared on the
The Directorate General for External Relations is respon-
progress that has been achieved. Successful implementation
sible for the CARDS programme within the European Com-
of the contents of the agreement is a prerequisite for further
mission. This body determines the political framework and
approximation with the European Union, finally leading to the
the strategic direction to be taken.
country’s accession.
The European Commission has appointed the European
Stabilisation and Association Agreements are backed up
Agency for Reconstruction (EAR) to execute and manage the
by financial support which is provided by the European
projects financed by CARDS in Serbia and Montenegro (and
Union. The main instrument in this regard is the CARDS pro-
in FYR Macedonia as well). EAR’s headquarters are in Thessa-
gramme.
loniki, with offices in Belgrade, Pristina and Podgorica. In contrast to the other countries in the Western Balkans, where the
2.2.1
Economic and financial cooperation
EU delegation for the respective country and the EuropeAid
The CARDS programme was created by the EU on 5 De-
Co-operation Office in Brussels are responsible for perform-
cember 2000 and is designed to provide comprehensive assis-
ance of the CARDS programme, in Serbia and Montenegro
tance for the countries in the Western Balkans (Albania,
EAR is only responsible for implementation of the pro-
Bosnia and Herzegovina, Serbia and Montenegro, Croatia,
gramme, i. e. for the procedures for awarding projects and
and the Former Yugoslav Republic of Macedonia). In terms of
conclusion of the relevant contracts.
financial aid, a total of EUR 5 bn was allocated to CARDS for
the period 2000 – 2006.
Similar to other external assistance programmes, the
firms and consultants are selected in a tendering process in
The objective of the CARDS programme is to support the
the CARDS programme. EU firms and companies from the re-
participation of the countries in the Western Balkans in the
cipient countries are eligible to participate. Generally, for pro-
Stabilisation and Association Process, which is the European
curement of supplies and work, the process is conducted
Union’s strategy for the countries in the region until their
through public tenders, whereas for services, a pre-selection
eventual accession.
process is employed with a corresponding short list.
The main focal points of the CARDS programme include
All of the current calls for tenders for the CARDS
development of government institutions, gradual approxima-
programme can be viewed on the Internet website of the Eu-
tion with European legal standards and harmonisation with
ropeAid Cooperation Office at:
the EU acquis. The EU’s financial assistance is directed at rein-
http: / / europa. eu. int / comm / europeaid / cgi / frame12. pl
forcing democracy and the rule of law, human rights, civil
society and the media as well as a free market economy system.
For more details on the CARDS programme, please check
Moreover, sustained economic recovery is supported and
the website of the Directorate General “External Relations”
social development and structural reforms are promoted.
http: / / europa. eu. int / comm / external_relations / see / fry / serbia /
To this end, the programme functions as a uniform legal
framework for the countries involved.
This EU assistance is used to support the procurement of
index. htm or contact the EAR.
European Agency for Reconstruction (EAR)
Vasina 2 – 4, Belgrade 11000, Serbia,
supplies and works as well as services (preparation of studies,
tel.:
+ 381 (11) 30 234 00,
technical consultation, training and education, etc.).
fax:
+ 381 (11) 30 234 55,
Within the framework of CARDS, all of the activities for a
http: / / www. ear. eu. int /
country strategy were initially determined for the period
through to 2006, and the long-term goals and key areas
17
Your contact at Bank Austria Creditanstalt:
Kurt Klepeisz, Public Finance CEE,
Florence Werdisheim, Deputy Head of Department
International Export and Trade Finance,
tel.: + 43 (0) 505 05 ext. 53955,
Am Hof 2, A-1010 Vienna, tel.: + 43 (0) 505 05 ext. 50330,
e-mail: kurt. klepeisz@ba-ca. com
e-mail: florence. werdisheim@ba-ca. com
Brigitte Elmecker, International Export and Trade Finance,
2.4.
Austrian Financing Products
2.4.1.
ERP Internationalisation Programme
e-mail: brigitte. elmecker@ba-ca. com
Peter Rieger, Representative,
Applicants:
Small and medium-sized production enterprises and pro-
Bank Austria Creditanstalt Brussels Representative Office,
duction-related service companies, subject to the following
Avenue de Cortenbergh 89, B-1000 Brussels,
upper limits:
tel.: (+ 32 2) 735 41 22,
◆ Workforce: 250
e-mail: peter. rieger@pophost. eunet. be
◆ Turnover: EUR 50 million or
◆ Total assets: EUR 43 million
◆ For shareholdings in companies between 25 % and less
2.3.
EU SME Finance Facility Phase II
(SME FF)
In 1999 the EU Commission launched a Finance Facility
than 50 %, the pro-rata figures for the so-called “partner
company” are added. For affiliated companies (min. 50 %
of the voting rights), the relevant data are added in full.
for the ten applicant countries. The Commission manages the
programme in cooperation with the EBRD, the EIB and the
CEB (Council of Europe Development Bank) or KfW
(Kreditanstalt für Wiederaufbau).
The essential purpose of the programme is to facilitate
Projects eligible for assistance:
Direct investments in the European reform countries, provided the investment improves the strategic position of the
applicant company.
long-term lending to small and medium-sized enterprises
◆ Set-up of production plants or subsidiaries
(SMEs) by local financial institutions (banks, leasing companies
◆ Set-up of production joint ventures
and equity funds) in the applicant countries. Support to these
◆ Acquisition of a qualified equity interest (minimum: 25 %)
intermediaries is provided in two ways: the “traditional”
◆ Set-up, permanent and qualified participation in, and oper-
lending procedure, through the so-called “Loan and Guarantee
ation of commercially-oriented environmental projects to
Window”, in which technical assistance, performance bonuses,
improve the ecological standard and to avoid adverse
exchange risk hedging, incentives for small-volume loans and
cross-border influences (e. g. recycling plants, waste water
the assumption of costs of special loan guarantees are offered.
treatment projects). Such projects can only be supported in
Through the other variant, the so-called “Equity Window”,
the reform countries bordering on Austria.
equity capital and management support are made available.
In either “Window”, the final borrowers, i. e. local SMEs,
have to meet the local and national standards in the areas of
environmental protection, security and health protection. The
Finance is granted for:
◆ Equity investments acquired in connection with business
start-ups
lending banks are contractually obliged to apply the assis-
◆ Shareholder loans
tance granted to them exclusively to measures promoting
◆ Purchase price of equity investments
SMEs and to provide information on individual financings to
◆ Other costs directly related to these investments (prelim-
the institutions managing the programme and the EU Com-
inary costs, start-up costs etc.).
mission on request.
Requirements to be met:
◆ Operational units must not be relocated.
Christian Rakos, Public Finance CEE,
◆ The project must not cause environmental damage.
◆ The strategic position of the Austrian company must be
tel.: + 43 (0) 505 05 ext. 43132,
e-mail: christian. rakos@ba-ca. com
improved.
◆ The project must involve a positive impact on the Austrian
economy.
18
Amount of assistance:
EUR 0.35 million up to a maximum of EUR 7.5 million per
project.
◆ Acquisition of equity interests in foreign companies; raising
equity interests in, and capital increases of, companies in
which an interest is held already.
Term:
◆ Granting shareholder loans, shareholder contributions and
6 years, of which up to a maximum of 2 years redemption-free.
other shareholder instruments (e. g. sureties) to the affiliated
company, provided that these measures may be expected to
increase the company’s efficiency and to lead to a sustained
Collateral:
Bank guarantee, guarantee issued by Austria Wirtschaftsservice Gesellschaft (AWS), pledging of securities.
improvement in the Austrian company’s market position.
◆ In the case of equity interests in EEA countries, the applicant
company must qualify as SME (= small or medium-sized enterprise) under the EU definition (fewer than 250 employ-
Applications must be filed with:
Your Bank Austria Creditanstalt branch.
ees, an annual turnover of less than EUR 50 million or total
assets of less than EUR 43 million).
◆ For more details on regulations pertaining to “partner
Applications must be accompanied by:
companies” and affiliates, see item 2.4.1.
◆ Information on the borrower’s economic and personal
circumstances, and evidence of its compliance with company law and trade law regulations.
◆ Documentation on the investment project and its effects.
Your corporate account manager at
There must be a need for collateral, i. e. failure of the project would cause substantial damage to the applicant company.
Project limits:
Lower limit: EUR 0.73 million; no upper limit.
Bank Austria Creditanstalt, and the head and team of
Export & Investment Promotion Finance
tel.: (+ 43 (0) 505 05 ext. 44405, 44424
e-mail: 8844_EXIN@ba-ca. com
Method of assistance:
The assumption of a
◆ Direct guarantee – AWS / East-West Fund undertakes to pay
the Austrian company a certain share of the equity
investment (risk-sharing ratio) if and when the defined event
2.4.2.
Austria Wirtschaftsservice Gesellschaft
mit beschränkter Haftung (AWS)
(formerly Finanzierungsgarantiegesellschaft mit beschränkter Haftung)/
Ost-West Fonds (East-West Fund)
Objective:
Promoting the internationalisation of Austrian companies,
(= commercial failure of the investment project) occurs.
◆ Financing guarantee with risk sharing – this is a combination
of a direct guarantee and a guarantee undertaken in
favour of a financing bank.
Where financing is to be granted: what is the
cost of financing?
reducing the risk in connection with equity investments of
◆ It will be in line with market terms.
Austrian companies outside Austria through issuance of a
◆ A combination with cost-attractive loans (ERP loans, OeKB
guarantee to cover the commercial risk.
Applicants:
Companies
◆ which have their registered office in Austria,
◆ which are majority-owned by Austrian investors,
investment finance, start-up loans, etc.) is possible.
Risk covered by the guarantee:
◆ Risk-sharing ratio in the case of direct guarantees: a maximum of 50 % (the exact share is determined on a case-bycase basis).
◆ which are not majority-owned by Austrian investors yet where
◆ Financing guarantees with risk sharing: the loan amount
the investment project promotes the strategic goals and
must not exceed 90 % of the planned project costs. The
strengthens the competitive position of the applicant compa-
guarantee in favour of the bank covers up to 90 % thereof
ny and the latter is in charge of the execution of the project.
(with ERP financing arrangements: up to 100 %).
19
Guarantee fee:
Depending on type and scope of guarantee: approximately
Equity investments, rights similar to equity investments
1 % p. a., payable semi-annually on 30 June and 31 December.
(loans similar to equity investments, shareholder loans).
Term of guarantee:
Scope of guarantee:
◆ Direct guarantee: up to a maximum of 12 years.
◆ Book value of the equity investment (financial contribu-
◆ Financing guarantee with risk sharing: up to a maximum of
15 years.
tions or contributions in kind, shareholder loans).
◆ Increases (e. g. in connection with capital increases) are
possible. The amount of the guarantee will be reduced in
Origination of claims:
line with decreases in equity interests held, loan repay-
◆ Direct guarantee: occurrence of the event(s) defined (e. g.
ments, write-downs etc.
insolvency of the affiliated company, enduring operating
losses etc.)
◆ Guarantee cover for interest and income is possible. There
is no upper or lower limit for the project.
◆ Financing guarantee with risk sharing:
◆ Insolvency of the Austrian company
◆ Occurrence of the special event(s) defined
Guarantee cover ratio:
Up to 100 % for political risks (portion of loss to be
borne by the applicant: 0 – 5 %).
◆ Your Bank Austria Creditanstalt branch.
◆ Austria Wirtschaftsservice Gesellschaft m. b. H.
Variable guarantee fee:
Between 0.2 % and 1.5 % p. a., payable annually in
(formerly Finanzierungsgarantie Ges. m. b. H.) / Ost-West-
advance, for the cover of the political risk in the narrower sense
Fonds, Gasometer A, Guglgasse 12, A-1110 Vienna.
(e. g. expropriation, war, armed conflict, etc.). For the assumption of guarantee cover for the transfer risk, an add-on of 50 %
is charged.
◆ Information on the applicant’s economic and personal
circumstances, and evidence of its compliance with company law and trade law regulations.
◆ Documentation on the investment project.
Term:
Up to a maximum of 25 years; in practice: 5 to 10 years
in most cases.
Origination of claims, covered risks:
Complete or partial loss or complete or partial destruc-
Bank Austria Creditanstalt and the head and team of
tion of the equity investment or of the right similar to an
equity investment as a result, directly or indirectly, of a political
tel.: + 43 (0) 505 05 ext. 44405, 44424
action (e. g. nationalisation, expropriation etc.) and restrictions
on the transfer of the proceeds derived from the sale or
liquidation of the equity investment, of income from equity
2.4.3.
Insurance and financing products of
Oesterreichische Kontrollbank (OeKB)
2.4.3.1.
Guarantee of the Republic of Austria:
OeKB investment guarantee
Objective:
Promoting investment projects which directly or indirectly
serve the improvement of Austria’s current account through issuance of a guarantee to cover the political risk.
investments or of payments of capital and interest under legal
transactions similar to equity investments.
Application procedure:
G4 applications (forms) are to be filed through Bank Austria
Creditanstalt as the applicant’s principal banker.
Applicants:
Austrian companies, e. g. production, trading and service
companies, holding companies, etc.
20
tel.: + 43 (0) 505 05 ext. 44405, 44424
2.4.3.2.
OeKB investment financing
Objective:
Financing an equity investment (up to 100 %) in a foreign company. Granting of a shareholder loan for the setting
up of production facilities, distribution facilities, etc.
G4 guarantee (if there is a conceivable political risk), or a
Further information:
Information
sheet
“Exportservice-OeKB-Beteiligungs-
finanzierung” or Bank Austria Creditanstalt’s Internet page
(http: / / www. ba-ca. com).
bill guarantee commitment of the Republic of Austria, or a
guarantee undertaken by Austria Wirtschaftsservice Gesell-
tel.: + 43 (0) 505 05 ext. 44405, 44424
schaft mit beschränkter Haftung (AWS).
Financing amount:
Value of the equity investment and / or the loan, in certain
cases less a portion to be borne by the applicant.
Term:
A maximum of 25 years, of which a maximum of 10
years may be redemption-free (in practice 5 to 10 years, of
which usually 2 to 3 years redemption-free).
2.4.4.
Austria Wirtschaftsservice Gesellschaft
mit beschränkter Haftung (AWS)
(formerly BÜRGES Förderungsbank
Gesellschaft m. b. H.)/
Internationalisation projects
Objective:
Promoting the internationalisation of Austrian small and
medium-sized enterprises (SMEs).
Financing cost:
◆ Terms of OeKB Export Financing Scheme (EFS) depending
on the term of the loan.
Applicants:
SMEs with their registered office in Austria.
◆ Fee for G4 (the guarantee fee is variable, depending on the
country risk) or bill commitment (bill of exchange fee:
0.2 % p. a.; the risk is borne by Bank Austria Creditanstalt)
or a guarantee of AWS.
The interest rates applicable at any given time are shown
on the information sheet “Exportservice” or on the Internet
page of Bank Austria Creditanstalt (http: / / www. ba-ca. com).
Foreign investment / internationalisation projects whose
projected costs must not exceed EUR 1 million.
Conditions:
The project must help to strengthen the competitiveness
of Austrian SMEs; it must have a positive effect on Austria’s
current account.
Financing fee:
0.8 % of the financing amount, payable only where the
financing is backed by a guarantee of AWS.
Method of support:
The issuance of
◆ Guarantees to cover the commercial risk (= project guaran-
Interest is charged:
Quarterly in arrears.
tee) or the financing relating to the project (= financing
guarantee) and
◆ Guarantees to cover the political risk (transacted via OeKB).
Collateral:
Assignment of G4, assignment of the equity investment / loan agreement, in certain cases additional material
collateral (e. g. mortgage security, AWS guarantees, etc.)
Risk covered by the guarantee:
This is determined on a case-by-case basis, although the
beneficiary of the guarantee must in each case assume part of
the commercial risk (minimum: 50 %). The financing guarantee
Written application (no formal requirements) to Bank Austria
Creditanstalt as the applicant’s principal bankers, after a G4, a
covers a maximum of 80 % of the outstanding loan amount. As
regards the political risk, a cover ratio of up to 100 % (with
5 – 10 % to be borne by the beneficiary) is possible.
bill commitment, or an AWS guarantee has been obtained.
21
Guarantee fee:
Approximately 1 % p. a.
Object and amount of support:
◆ Support for applications: general expenses arising in connection with applications for assistance under EU pro-
Where financing is to be granted: what is the
grammes and comparable programmes of other inter-
cost of financing?
national organisations. There is a lump-sum grant of
◆ It will be in line with AWS terms.
EUR 2,900; in the case of costs exceeding EUR 5,800 the
◆ A combination with cost-attractive loans (ERP loans, OeKB
grant will be 50 %, but not more than EUR 7,250.
investment financing, start-up loans etc.) is possible.
◆ Support for studies: If support under the programmes
referred to above is not available, AWS will take over 50 %
Origination of claims:
of the costs of external consultants and experts for the
◆ Failure of the internationalisation project (prevention of
development, preparation and evaluation of the feasibility
enduring damage to the Austrian SME).
◆ Insolvency of the beneficiary under the guarantee (= Austrian company).
of the project. Cash outlays of the company (e. g. travel expenses) may be included in the costs eligible for assistance
up to a maximum of 25 %.
◆ Occurrence of political event(s) covered by the guarantee.
◆ Support for applications: filing of the application, duly
◆ Your Bank Austria Creditanstalt branch.
signed by the applicant company, with the European or
◆ Austria Wirtschaftsservice Gesellschaft m. b. H.,
international organisation; the application must comply in
Taborstrasse 10, A-1020 Vienna.
terms of form and substance with the requirements of the
relevant programme.
◆ Information on the borrower’s economic and personal
◆ Support for studies:
circumstances and evidence of its compliance with compa-
◆ The investment project must be plausible.
ny law and trade law regulations.
◆ The conditions necessary for a successful execution of the
◆ Documentation on the equity investment project.
tel.: + 43 (0) 505 05 ext. 44405, 44424
project are met or can be created by the SME or its partners.
◆ The qualifications of the external consultants are ensured.
◆ There must be an appropriate relationship between the
consultancy costs and total project costs.
◆ Work on the study has not yet started at the time of filing
of the application.
◆ No other assistance programmes are available for this project.
OeKB study fund
2.4.5.
Study funds of AWS and OeKB
AWS:
Objective:
The objective is to offer financial support for and assistance
with the application for programmes of European and inter-
Objective:
Assistance in penetrating new markets and reduction of
start-up costs. Access to professional market studies which
are of significance to the exporting sector as a whole. Information on new growth markets and growth sectors.
national organisations (= suppport of applications) and preparing
and accompanying projects (= support for studies) in connection with direct investments, equity investments and / or other
Amount of assistance:
Up to 100 % of the costs for which evidence has been
investments outside Austria.
furnished, up to a maximum of EUR 200,000.
Eligible for assistance:
Companies active in all economic sectors (with the excep-
Application for the commissioning of a study directly
tion of agriculture and forestry, real estate and insurance
with OeKB, including a detailed description and the re-
companies), having their registered office in Austria.
quested scope of the study, a breakdown of the prospective
costs and a list of potential deliveries and services.
22
Bank Austria Creditanstalt and the Head and team of
taking full advantage of all available national and international assistance and insurance options.
The main focus is on the Austrian export promotion system.
The Republic of Austria has appointed Oesterreichische Kon-
tel.: + 43 (0) 505 05 ext. 44405, 44424
trollbank AG (OeKB) as its agent for the operation of the ex-
port guarantee scheme and export financing system.
Requirements for the assumption of guarantees
2.5.
International Export Finance
(Austria)
by the Republic of Austria:
◆ The underlying export transaction must improve the Austrian
In global competition, exporters increasingly face the
current account either directly or indirectly and must comply
challenge of having not only to sell their products and serv-
with the applicable regulations regarding the minimum net
ices but also to raise part or all of the finance to fund such
product generated in Austria.
transactions. This means that besides the price, technology,
◆ Compliance with the rules set at the international and EU
quality, delivery period and after-sales service, the appeal of
level (Berne Union, OECD Consensus – the Arrangement
the accompanying financing offer is a crucial factor in landing
on Guidelines for Officially Supported Export Credits – this
a contract.
is accepted as a gentlemen’s agreement by almost all
In response to this trend, financial institutions and com-
OECD member states).
mercial banks have developed a number of products and
◆ Examination of each individual transaction for eligibility for
facilities to offer tailor-made financing arrangements to sup-
cover on the basis of the current guarantee cover policy of
port export projects – all of which seek to take into account
the Austrian export promotion agencies.
as much as possible the sometimes very different preferences
and demands of buyers.
International export finance generally covers the wide
range of buyer-related export financing arrangements. It
Major products offered by the International Export
Finance department of Bank Austria Creditanstalt:
◆ Buyer credits with / without OeKB guarantee:
includes all financing measures in which the foreign buyer /
This is the classical product in international export finance.
importer, its bank or the respective government acts as
Based on an export contract, a credit agreement is concluded
borrower or guarantor.
between our bank and the buyer or the buyer’s bank for the
Since international export finance is a type of sales
direct financing of the export contract. The loan is disbursed
finance, there must be a direct connection between an actual
directly to the exporter on a pro-rata basis against delivery,
export transaction and the relevant financing.
and against presentation of documentary evidence. The borrower then repays the credit in accordance with the agreed
This means:
terms. Depending on the project and the prevailing inter-
◆ There must be a material connection between the export
national conditions, the term of a buyer credit ranges between
contract and the financing.
◆ The financing must be used directly for the performance of
the export contract.
2 and 10 years (power plants: up to 12 years).
◆ Purchase of receivables with / without OeKB guarantee:
This is the recommended method for lower-volume export
transactions. Unlike the extensive negotiations required for a
Cross-border financing operations frequently entail com-
buyer credit, the contractual arrangement is limited to an
mercial risks (production, acceptance, del credere risks, etc.)
agreement between Bank Austria Creditanstalt and the ex-
and also political risks (e. g. extraordinary government interven-
porter. However, it offers the same advantage of balance sheet
tion such as the freezing of payments, moratoriums, transfer
contraction as does the buyer credit. Furthermore, even with-
and exchange restrictions as well as strikes, expropriation, revo-
out OeKB cover, Bank Austria Creditanstalt may discount ex-
lution, war, import restrictions, etc.). To counter these risks, re-
port receivables with or without recourse (forfaiting), if
course to national (OeKB or private insurers) and international
necessary with the involvement of a private insurance compa-
(MIGA, AIG, etc.) insurance products is often advisable.
ny – this depends on the creditworthiness of the debtor and
The range of international export financing products
the collateral furnished.
offered by Bank Austria Creditanstalt comprises a broad selection of short, medium and long-term financing facilities,
23
◆ Advance payment or local cost financing (without
Structured Trade Finance and
Commodity Trade Finance
2.6.
OeKB guarantee):
This financing product is a supplementary credit to the buyer
These are financing instruments used by commodity pro-
credit. It is not backed by a guarantee of the Republic of Austria.
ducers and commodity traders, and involve raw materials
The handling of the transaction resembles that of a buyer credit,
and goods purchased for resale (e. g. crude oil, steel and
but generally shorter repayment periods are involved.
steel products, metals, cotton, fertilisers, paper, etc.).
◆ Syndicated loans:
In structuring the financing arrangement account is taken
Bank Austria Creditanstalt, in an arranger or co-arranger
of the production, transport and selling cycle of the commodity
capacity, acts as lender jointly with selected domestic and / or
concerned. As collateral for the financing, rights to the goods
foreign banks (banking syndicate) to finance large-scale projects.
(including, if applicable, insurances) and / or rights to the
◆ Framework agreements:
contracts of sale are assigned to Bank Austria Creditanstalt.
Bank Austria Creditanstalt has concluded framework
Generally, a maximum of 80 % of the contract value is
agreements with a number of foreign banks. These agree-
financed. Structured trade finance is a form of sales finance,
ments set down the basic arrangements for the aforemen-
so credit periods are in the short to medium range (6 – 18
tioned financing projects. The incorporation of a financing
months).
transaction in this type of agreement greatly reduces and simplifies administrative procedures and the time required for the
Frequently used methods of financing:
transaction.
◆ Pre-export financing,
◆ Letter of credit follow-up financing (with / without
◆ tolling financing,
OeKB guarantee):
A foreign bank opens a letter of credit in favour of an
◆ transport financing,
◆ Inventory financing,
Austrian exporter, payable “at sight”. For the medium-term
◆ trade receivables financing,
financing of payments under the L / C, the foreign bank si-
◆ financing of capital goods redeemed by the sale of goods
multaneously concludes a financing contract with the advising bank of Bank Austria Creditanstalt.
under firm delivery contracts,
◆ barter and countertrade transactions.
◆ Multisourcing in international export finance:
As the degree of globalisation increases, so does the com-
In contrast to classical “balance sheet lending”, in structured
plexity of export projects. Larger contracts today often involve
trade finance the main focus is on the individual delivery con-
several deliveries from various countries. Thanks to the extensive
tract and on the collateral.
international network of HVB Group, Bank Austria Creditanstalt
is in a position to take advantage, directly or indirectly, of the
various government financing and guarantee programmes
Margit Slezak, Deputy Head of Department
and to obtain private insurance cover, thus offering tailor-
made financing solutions under one roof.
e-mail: margit. slezak@ba-ca. com
Where it is possible and appropriate, refinancing of the
aforementioned products will be obtained under the Export
Financing Scheme (EFS) operated by OeKB.
Alfred Wolloch
e-mail: alfred. wolloch@ba-ca. com
Robert Fleischmann, Head of Department
e-mail: robert. fleischmann@ba-ca. com
Florence Werdisheim, Deputy Head of Department
e-mail: florence. werdisheim@ba-ca. com
24
2.7.
Investment Incentives in Serbia
Regardless of a somewhat complicated political situation
in Serbia in 2003 and 2004, Serbia has managed to attract a
considerable number of foreign direct investments. The forthcoming period should be a phase of further reforms, enhanced financial effectiveness and efficient governmental
administration.
European investors have ranked Serbia among the top 25
investment opportunities globally.1 Serbia’s advantages include: 2
◆ Strategic positioning for markets in Europe, Asia, and the
Middle East;
◆ duty free access to the South East Europe Free Trade Zone
with 60 million consumers;
◆ only country outside the CIS with a free trade agreement
with the Russian Federation;
2.7.2.
Tax Incentives
2.7.2.1.
Accelerated depreciation
Accelerated depreciation is available for certain fixed assets
(e. g. computers, assets for protection of the environment,
noise reduction, energy conservation, afforestation, waste recycling, as well as assets for science and research, and training
and education of personnel). Depreciation rates may be increased by up to 25 %.
◆ lowest corporate profits tax rate in Europe;
◆ skilled labour at a reasonable cost; and
◆ highest percentage of English language speakers in SE and
Central Europe.
2.7.3.
Tax Exemptions
In Serbia enterprises are exempt from corporate income tax
for 10 years, starting from the first year in which they realize
taxable income if they:
Various investment incentives in Serbia are primarily designed to increase investments, accelerate the development of
underprivileged regions and create new jobs.
◆ invest in fixed assets an amount exceeding CSD 600 million
(approx. EUR 8 million); and
◆ employ at least 100 additional employees for an indefinite
period.
The tax regime in Serbia has become the most favourable
A 5-year tax holiday is granted for concession-related invest-
in the region. Some of its features include:
ments from the day the concession investment is completed. No
◆ the lowest corporate profit tax rate in Europe, set at 10 %;
tax is due if income is derived before the completion of the con-
◆ tax credits for investing in fixed assets of up to 80 % of the
cession investment. The actual period of the exemption is deter-
assets’ value;
mined by the Decree on Concessions or in the concession contract.
◆ a 10-year tax holiday for investments of € 8 million or more; and
Income of an enterprise engaged in training, professional
◆ government subsidies, tax exemptions, and other incentives
rehabilitation and employment of disabled persons is exempt
for creating new jobs.
2.7.1.
Tax Credits
2.7.1.1.
Investment in fixed assets
A tax credit for investment in fixed assets is recognised up
from income tax in proportion to the ratio of disabled persons
to the total number of employees.
Your contacts at CONSULTATIO:
Gerhard Pichler,
to 80 % of the tax liability for companies engaged in agricul-
Certified Public Accountant and Tax Consultant,
ture, fishing, textile and leather manufacture, production of
Managing Director
base metal, standard metal products, machines and units, office
Holzmeistergasse 7 – 9, A-1210 Vienna, Austria,
machines, electrical units, radio, TV and communication equip-
tel.: (+ 43 1) 27 775, ext. 240
ment, medical instruments, motor and other vehicles, recycling
e-mail: gerhard. pichler@consultatio. at
and video production. The unused part of any such investment
can be carried forward for up to ten years.
Small companies in all industries may apply a tax credit in
the amount of 40 % of the investment in fixed assets during
the year. This credit may not exceed 70 % of the tax due.
Medium-sized and large companies can use tax credits in the
amount of 20 % of the investment in fixed assets during the
year. The unused part of any such investment can be carried
forward for up to ten years.
2.7.1.2.
New employees
Employing new staff for an unlimited period of time also
Siegfried Scheiner, Auditor and Tax Consultant
tel.: (+ 43 1) 27 775, ext. 244
e-mail: siegfried. scheiner@consultatio. at
PRIVREDNI SAVETNIK – REVIZIJA:
Miloš Petrovic, General Manager
11000 Belgrade, Kneginje Zorke 96, Serbia,
tel.: (+381) 11 3020562
e-mail: [email protected]
Dijana Cvetkovic, Certified Auditor
gives the right to a reduction of the tax liability amounting to
100 % of salaries paid out to new employees.
tel.: (+381) 11 3020538
1) A. T. Kearney, 2003 Global FDI Confidence Index / 2) Source: SIEPA
25
Legal Principles and Investment Environment
3. Legal Principles and
Investment Environment
3.1.
Law on Enterprises
The most commonly used legal form in Serbia is a limited
The Serbian Parliament adopted the new Law on Enter-
liability company. The liability of the owners is limited to their
prises, which became effective as of 30 November 2004. This
share in the company, and they cannot be liable for obliga-
law regulates the incorporation of companies and entrepre-
tions of the company itself, unless they misuse the company
neurs, corporate organisation and governance, affiliation and
for unlawful or deceptive purposes.
changes to corporate status and legal forms of companies, as
well as the liquidation of companies. With the enactment of
3.1.1.
Joint Stock Company (a. d.)
this law, the provisions of the old Company Law are no
A Joint Stock Company may be a closed or a public joint
longer applied, except for provisions dealing with socially-
stock company the difference being whether they are listed
owned companies and regulating corporate governance of
on the stock exchange or not. A closed joint stock company
companies that have entered into the privatisation process.
may have a maximum of 100 shareholders.
Separate laws are in effect in specialised areas such as insurance, banking and the stock exchange. In these areas, the
◆ Shareholders
general provisions of the Law on Enterprises are applied only
A joint stock company is established by one or more legal
as supplementary to other legislation dealing with that area.
entities and / or natural persons.
According to the Foreign Investment Law, foreign per-
◆ Minimum capital
sons, both legal and natural, are generally given the same
CSD equivalent of EUR 10,000 for a closed joint stock com-
legal status with respect to establishing companies in Serbia.
pany and CSD equivalent of EUR 25,000 for a public joint
There are four types of companies that may be established in
stock company.
Serbia, all of which already existed under the previous Compa-
◆ Share and contribution requirements
ny Law. These types include: partnership, limited partnership,
Nominal value of shares may not be less than CSD equiva-
limited liability company and joint stock company. All types of
lent of EUR 5. Shareholder’s contribution may be made in
companies existing in Serbia have the status of a legal entity.
cash or in kind but not in labour or services.
The Business Registration Agency was established on
◆ Specific features
4 January 2005 and is responsible for the registration of all
A public joint stock company must have a board of direc-
business entities, both domestic and foreign. Until 2005,
tors while a closed joint stock company may choose be-
registration of business entities was carried out by commer-
tween a single director or a board of directors.
cial courts and local authorities. With the establishment of
this Agency, registration procedures have been simplified by
There are higher minimum capital requirements for com-
reducing the time for registration from the previously estimat-
panies functioning as:
ed 51 days to 10 days and enabling enterprises to be regis-
◆ Banks
tered in one place, with the future possibility of on-line registration. This register has been designed as a centralised elec-
CSD equivalent of EUR 10,000,000
◆ Insurance companies
tronic database of registered business entities, contracts on fi-
Between EUR 1,000,000 and EUR 4,500,000 in CSD equiv-
nancial leasing and liens.
alent depending on the type of insurance
Limited Liability Company (d. o. o.)
Foreign investors may establish a business in the form of:
3.1.2.
◆ Joint Stock Company (a. d.);
◆ Shareholders
◆ Limited Liability Company (d. o. o.);
◆ Limited Partnership (k. d.); or
◆ General Partnership (o. d.).
26
Maximum 50 individuals or legal entities
◆ Minimum capital
CSD equivalent of EUR 500
◆ Characteristics
Relations. Representative offices are not legal entities and are
A shareholder may have only one share in the company,
not permitted to engage in commercial activities within
which is expressed as a percentage. The share capital may
Serbia. Representative offices can be used for the purposes of
consist of cash and contributions “in kind”, such as equip-
surveying the market and providing assistance in concluding
ment, goods, know-how etc., and work and services. The
agreements.
value of contributions in kind can be assessed by the shareholders themselves. Shares are freely transferable between
the shareholders. A share may be transferred to a third
party, in which case other members of the company have
pre-emptive rights.
3.2.
Foreign Investment Law, Law on
Concessions and Law on Free Zones
Foreign investors may invest in almost all types of profit-
generating economic activities. They have the same status,
rights and obligations as residents and enjoy legal security
3.1.3.
Limited Partnership (k. d.)
◆ Partners
Two or more individuals
◆ Minimum capital
No minimum equity requirements
◆ Characteristics
and legal protection in respect of the rights acquired by virtue
of the investment.
Foreign investments in Serbia can be made by establishing a new enterprise or by increasing the capital of an existing
domestic enterprise. Additionally, a concession may be granted
to a foreign investor for utilisation of natural resources or
A limited partnership must have at least one general part-
goods in common use (e. g. roads) or for carrying on activities
ner who is fully liable for the obligations of the partnership
of public interest, in accordance with the law. Build, operate
and at least one limited partner whose liability is limited to
and transfer schemes are also permissible. The maximum period
the amount of the contribution agreed. The general part-
for which a concession licence is given is 30 years. A conces-
ner is jointly and severally liable for the obligations of the
sion licence is granted through public tender, which is
partnership, while the limited partner bears the risks and
governed by the tender commission. The tender commission
obligations only to the extent of his investment.
prepares a report which is submitted to the Government. The
Government makes the final decision on the concessionaire
3.1.4.
General Partnership (o. d.)
◆ Partners
Two or more
◆ Minimum capital
No minimum equity requirements
◆ Characteristics
within 30 days of the receipt of the report. The concession
contract is concluded between the Government of Serbia and
the concessionaire. A concession fee is paid for the concession licence granted in accordance with the concession act
and the concession contract. The concessionaire may incorporate the company for conducting concession activities either
All partners may make contributions in cash or in kind
as a limited liability company or a joint stock company within
including past or future labour and services. All partners
60 days from the date the concession contract is signed.
bear unlimited liability for the obligations of the general
partnership.
Foreigners, however, may not by themselves establish a
company in the field of production or trade of armaments, or
in areas that are considered to be restricted zones. On the
3.1.5.
Branches of Companies
other hand, in these fields foreigners may establish a new
Domestic and foreign companies may establish one or
company or invest in an existing company together with a
more branches. A branch does not have legal personality, but
domestic entity, but without acquiring the majority rights and
conducts business activities in the name and on the behalf of
only with the consent of the Ministry of Defence of Serbia
the company. A branch is registered in accordance with the
and Montenegro.
Law on Registration of Business Entities.
Foreigners may establish an insurance company only as a
joint venture with a local natural person or legal entity. As an
3.1.6.
Representative Offices
exception, a foreign legal entity may establish a wholly
Foreign persons have the possibility to open representa-
owned captive insurance company for offshore activities only.
tive offices in Serbia. The opening and operation of repre-
An insurance company with foreign capital is not allowed to
sentative offices is regulated by a special Decree and by the
carry out re-insurance activities abroad.
Law on Foreign Trade. Representative offices are registered at
A foreign investment may consist of foreign convertible
a specialized Registry at the Ministry of Foreign Economic
currency, goods, intellectual property rights, securities and di-
27
The Law on Foreign Investments guarantees the follow-
nars which are transferable abroad under the foreign
exchange regulations. A foreign investor may convert his
ing rights to foreign investors:
established claim into a business share or stock of the debtor
◆ the restitution of the investment, or the remainder of the
company.
Foreign investors may, in respect of any payment related
to the foreign investment, freely convert domestic currency
into foreign convertible currency.
investment, in case of premature termination, expiry or
breach of the investment agreement, or dissolution of the
company;
◆ a share in equity and its restitution in case of dissolution of
the company; and
A foreign investor has the right to:
◆ control or take part in the management of the enterprise
he has founded or in which he has invested;
◆ transfer the rights and obligations (set out in the invest-
◆ unrestricted transfer of profits abroad, restitution of the investment and share in equity (also provided by the Foreign
Exchange Operations Law) after all obligations towards the
State are settled.
ment contract or the deed of foundation) to another forThe Law on Free Zones guarantees the above rights to
eign or domestic person;
◆ share in and freely dispose of profits accruing from his investment;
◆ inspect the books and business operations of the enterprise
the zone founders, management of the zone enterprise and
users. These rights may not be violated by other acts or regulations.
in which he has invested; and
◆ audit interim and annual financial statements either by
himself or through an authorised representative.
3.3.
Bankruptcy Law
The Law on Bankruptcy Procedure was adopted on
23 July 2004, followed by the Law on Agency for Licensing
Foreigners are also allowed to buy real estate – business
Receivers in Bankruptcy . The Law on Bankruptcy Procedure
premises and apartments, provided the reciprocity condition
has been in full force since 1 February 2005, and is applicable
is met. Urban construction land is still state-owned, implying
for all bankruptcy procedures initiated after that date. The
that foreign investors (as well as domestic investors) may be
previous Law on Compulsory Settlement, Bankruptcy and
given only the right to use it, for which a charge is to be paid.
Liquidation will be applicable for all such procedures initiated
Foreign investors may, upon payment of local duties, trans-
before 1 February, as well as for procedures in which courts
fer all financial and other assets related to the foreign investment
of law have not rendered a decision on selling the assets, or
(profits, dividends, additional payments, property upon dissolu-
the decision on selling was rendered but not more than 50 %
tion of the enterprise, etc.) abroad in a convertible currency.
of the book value of assets has been sold within six months
The rights of foreign investors acquired at the moment of
from the effective date of the new Law.
registration of foreign investment at the Business Registration
Agency may not be restricted by subsequent amendments of
laws and other regulations.
With the new Law, bankruptcy procedures are improved
and the process is structured more transparently. First of all,
In order to stimulate foreign investments, the Law on
the new Law prescribes an exact period of time for initiation
Foreign Investments enables the import of equipment (except
of bankruptcy procedures, meaning that this procedure must
for motor vehicles, casino and entertainment machines) to be
be implemented against the insolvent debtor. An insolvent
exempted from customs and other import duties.
debtor is defined as debtor who:
The Law on Foreign Investments has simplified the registra-
◆ cannot meet payment obligations within 45 days;
tion procedure for foreign investments, stipulating that all for-
◆ ceased all payments during the period of 45 days;
eign investments are to be registered at the Business
◆ makes probable that its obligations will not be paid; or
Registration Agency in accordance with the Company Law.
◆ was unable to pay its obligations even through court or tax
However, in order to establish a company for production and
execution procedures.
sale of armaments, foreign investors must obtain approval from
the Federal Ministry competent for state defence operations.
The new Law introduced an Agency for Licensing Re-
Contributions by foreign investors and assets of compa-
ceivers in Bankruptcy, which is regulated in detail in another
nies with foreign ownership cannot be subject to expropria-
law: the Law on the Agency for Licensing of Receivers in
tion or other equivalent measures, unless public interest is
Bankruptcy. The jurisdiction of the new agency is:
contravened. Adequate compensation is envisaged.
◆ issuing, renewing and revoking licenses for receivers;
28
◆ organizing the license exam;
Domestic or foreign legal entities as well as individuals
◆ keeping the registry of receivers in bankruptcy;
can act as potential buyers in the process of privatisation. The
◆ supervising and monitoring the development of the re-
Privatisation Agency takes part in the sale of capital and / or
ceivers profession;
property.
◆ following the application of regulations on bankruptcy procedures and collecting and processing data on bankruptcy
procedures; and
◆ proposing the standards for management of bankruptcy
assets and ethics codes.
3.4.1.
Sale of Capital
Methods for the sale of capital are public tender and
public auction. Both methods envisage publicity and competition. The entity to be privatised offers 70 % of capital for
privatisation. Privatisation of large companies is carried out by
The licence as a receiver in bankruptcy is a new legal in-
means of public tenders, while small and medium-sized busi-
stitution, which is compulsory for receivers. It is to be issued
nesses are privatised mainly through public auctions.
after a special exam has been passed, is revocable and is sub-
◆ Public tender
ject to renewal and revocation at the Agency for Licensing.
The Privatisation Agency is authorised to carry out the pro-
Eligibility criteria for receivers are prescribed as well, and now
cedure of organising a public tender, proposes the announce-
a university degree, status of entrepreneur, and a licence are
ment of the buyer and signs the contract with the buyer,
required, as well as the absence of any conflict of interest.
while the Tender Commission monitors the entire proce-
The main goal of the new Law is reorganisation of insolvent
dure and approves the results of the public tender. A public
debtors, in terms of repayment to creditors through an
tender ensures that potential buyers are provided with in-
adopted reorganisation plan. All parties involved in bankrupt-
formation. The Law also envisages the possibility for a par-
cy procedures are entitled to submit a reorganisation plan,
ticipant in a public tender to submit objections regarding
fulfilling eligibility criteria for adoption. Reorganisation plans
may include several methods, such as: sale of assets, dissolu-
the lawfulness of the tender procedure.
◆ Public auction
tion of non-profitable units, alteration of business activities,
The procedure of sale of capital and property by public
write off, debt conversion and similar methods.
auction includes: preparation of auction, submission and
The assembly of creditors is active in this process, meaning
registration of participants, conducting the auction, con-
that the assembly of creditors has the position of a sharehold-
tract conclusion and other operations of importance for
ers’ assembly. Members of the assembly are creditors with
auction. The Privatisation Agency is authorised to carry out
unsecured receivables, while creditors with secured receiv-
public auctions.
ables can also participate in the assembly, up to the unse-
As it is possible that shares may be left over after the sale
cured amount. Voting rights in the assembly are proportional
of capital by means of the public auction and the transfer
to the amount of receivables. The assembly is, among other
of shares free of charge, such shares are to be transferred
things, entitled to appoint a creditors’ committee, which is a
to the Share Fund.
body with a more active impact on bankruptcy procedures by
◆ Transfer of capital free of charge
its instructions, opinions, objections given to receivers and
The transfer of capital free of charge is implemented upon
other bodies relevant for this procedure.
completion of the sale of capital through transfer of shares
to employees or citizens. The transfer of capital free of
3.4.
Laws on Privatisation
charge is carried out in two ways: 1) by transferring shares
In 2001, a new package of privatisation laws was intro-
to employees of the entity that is undergoing privatisation,
duced in Serbia including: the Law on Privatisation, the Law
according to the criteria fixed by this law, and 2) by trans-
on the Privatisation Agency and the Law on the Share Fund.
ferring the capital to citizens. The opportunity to acquire
Recent changes to the Law on Privatisation were enacted in
shares free of charge is given not only to employees and
December 2004.
pensioners of the entity being privatised but to all adult
citizens, except those who have taken part in the free dis-
Entities to be privatised are either socially-owned compa-
tribution of shares, according to previous laws.
nies or state-owned companies. There are two models of privatisation:
The Privatisation Register, which is kept with the ministry
◆ sale of capital; and
in charge of privatisation, is the register that contains data on
◆ transfer of capital free of charge.
the part of the company’s capital, expressed in shares, that
29
will later be issued free of charge to citizens who have not
with due care, pay the lease fee, return the leased good on
taken part in the free distribution of shares. The Law excludes
expiry of the lease and is obliged to insure the leased good.
the possibility for the same entity to realise the right to ac-
The supplier is obliged to deliver the leased good to the
quire shares free of charge on two bases, namely as an em-
lessee, and is responsible to the lessee for any delay in delivery,
ployee in the entity where privatisation is being carried out,
non-delivery, and material defects of the leased good in
and through the Privatisation Register. Shares that are not
accordance with the contract.
sold are to be transferred to the Share Fund. This Fund is obligated to sell all of these shares within six years, i. e. by July
3.5.3.
Repossession
The Law allows for efficient repossession of the leased
2007.
Since a large number of entities undergoing privatisation
good in the event of default. The Law foresees the signing of
incurred losses in the previous ten or more years and are un-
a judicial settlement by the parties (lessee and lessor) on the
able to repay their debts or have an organisational or age
basis of which the court can issue a decision transferring the
structure that is unsuitable for privatisation, the Privatisation
leased good to the lessor upon default within 3 days of a pe-
Agency may decide to carry out restructuring so as to enable
tition to the Court.
the sale of their capital or property.
3.5.4.
Law on Financial Leasing
3.5.
Registry
The Register of Leasing Contracts started operations on
The Law on Financial Leasing came into effect in January
1 January 2005. Its aim is to provide information to third par-
2004. As defined by the Law, financial leasing is a transaction
ties on objects financed via financial leasing, thereby decreas-
involving three parties – the supplier, the lessee and the
ing the risk of potential misuse of leased objects when dealing
lessor.
with third parties. The drawback introduced by the Register is
The contract on financial leasing must be concluded in
writing and for a minimum period of two years. Mandatory
that it is heavily paper-based and increases the paperwork
needed for registration.
elements of the contract include: precise specification of the
leased good, amount of the total fee, amount of each instal-
Law on Secured Transactions
on Movable Goods
3.6.
ment, the number of instalments, due dates, and duration of
the contract.
The recently enacted Law on Secured Transactions on
Other elements of the contract may include place, time
Movable Goods governs the creation of a non-possessory
and manner of delivery, title of ownership, insurance and pur-
charge on movable goods and rights in order to secure credi-
chase option, or a contract extension option.
tors’ claims. The pledge contract obliges the “charger” to
provide security for the “chargee” by registering the chargee’s
3.5.1.
Parties to Financial Leasing
The lessor must be a company registered for undertaking financial leasing, with a minimum initial capital of EUR 100,000.
The lessee may be any natural or legal person. The supplier
may not be the lessor.
claim on the charger’s assets in the charge registry. The charger
can be the debtor or a third party. The pledge contract must
be in a written form.
A debt capable of expression in pecuniary terms, whether
in domestic or foreign currency, may be secured. Future or
conditional debts may also be secured by a charge.
3.5.2.
Compulsory Rights and Obligations
The lessor has the right to request separation of the
leased good from other assets to be liquidated in the event of
The Representative of the chargee may authorise a third
party to protect and enforce the secured claim in their name
and for their account.
the lessee’s bankruptcy. He is responsible for legal defects of
the leased good but is not responsible for material defects
Charged property can be:
and damage caused by material defects of the leased good.
◆ Movable goods;
The lessor has the right to assign ownership of the leased
◆ rights;
good to a third person under conditions that do not disturb
◆ joint ownership shares; or
the lessee, and has the right to terminate the contract if the
◆ rights and goods to be acquired in future.
lease instalments are not paid by the lessee.
The lessee has the right to terminate the contract for the
reason of non-delivery. He is obliged to use the leased good
30
3.6.1.
Enforcement
Additionally, all audited companies are requested to pub-
If the debtor does not fulfil his obligation when due, the
lish their financial statements together with the auditor’s
chargee acquires possession of the charged property by the
opinion either on their website or in newspapers at the latest
force of law. At the same time, the chargee acquires the right
seven months after the balance sheet date. However, there
to enforce his principal claim, due interest, and expenses of
are two exceptions to the rule relating to the preparation of
enforcing the claim from the value of the charged asset. The
annual financial statements as at 31 December:
chargee must turn over to the charger the proceeds from the
◆ Subsidiaries of foreign companies for which the financial
sale that exceeds the value of the secured claim. The sale can
year differs from the calendar year. Such companies may
be:
prepare and submit their financial statements according to
◆ Judicial sale of the charged asset;
the financial year of the parent company. However, ap-
◆ out-of-court sale;
proval from the Ministry of Finance is obligatory.
◆ public sale through auction; or
◆ sale at a market or stock market price.
◆ Entities undergoing a change of status, for example merger, liquidation or bankruptcy. Such entities are required to
prepare their financial statements as at the date on which
3.6.2.
Charge Registry
the change is completed.
A registry of charges on assets has been created. All information stored in the Charge Registry is public. Either the
chargee or the charger can request the registration of a
charge in the registry.
3.7.
Accounting Regulations
3.7.1.
International Accounting Standards
3.7.4.
Chart of Accounts and Accountants
Records must be kept in accordance with the prescribed
Chart of Accounts. The Ministry of Finance has prescribed the
new Chart of Accounts and released it in May 2004. This
Chart of Accounts is applicable for opening balances and
transactions as of 1 January 2004.
The Law on Accounting and Audit, in effect as of Decem-
All legal entities must employ professional staff that have
ber 2002, introduced the implementation of International
appropriate certificates for bookkeeping, preparation and
Accounting Standards / International Financial Reporting Stan-
presentation of financial statements.
dards (IAS / IFRS) for all legal entities; for banks, as from 1 January 2003, and for other companies, as from 1 January 2004.
The new Chart of Accounts has been designed to provide
classification, recording, measuring and presenting transactions and balances in accordance with IAS and International
3.7.2.
Annual Financial Statements
Annual financial statements comprise:
Financial Reporting Standards (IFRS) requirements.
The Provisional Regulations of the Rules on the Chart of
◆ balance sheet;
Accounts prescribe ways of transferring balances from old to
◆ income statement;
new accounts as well as ways of making reclassifications and
◆ cash flow statement;
accounting adjustments where necessary.
◆ a statement of changes in equity; and
◆ notes to the financial statements.
The new Chart of Accounts also prescribes the accounting treatment of certain balance sheet items in opening IFRS
balance sheets subject to the reconciliation of equity as at
However, for small companies, only the balance sheet
and the income statement are obligatory (please see the table
below).
1 January 2004 and the reconciliation of the relating profit
and loss.
Legal entities are not required to prepare comparative
figures in accordance with IFRS for the year 2003, thus the
3.7.3.
Submission of Financial Statements
first financial statements in accordance with IFRS will be those
Only annual financial statements are obligatory (as at
prepared for the year 2005. Additionally, the Ministry of
31 December) and they must be submitted to an agency of
Finance has prescribed the format of financial statements as
the National Bank of Serbia. Legal entities must submit their
mentioned above (please see chapter 3.7.2.).
financial statements as follows:
◆ annual financial statements by 28 February;
◆ consolidated financial statements by 31 March; and
◆ approved financial statements together with the auditor’s
opinion by 30 June.
31
Company Size
3.7.5.
3.8.1.
Employment Contract
All companies are divided into three groups (small, medi-
All employers are required to sign an employment con-
um-sized and large) by the number of employees, sales rev-
tract with their employees. The contract must specify the type
enues and total assets as stated in the annual reports of the
of work to be carried out, the terms of remuneration includ-
previous fiscal year.
ing the amounts, duration of employment (for an unlimited
or limited period), working hours, commencement date and
Small
Medium-sized Large
place of work. An employment contract can be concluded for
≤1
≤5
>5
a limited or unlimited period. If it is concluded for a limited
Sales revenues (EUR m)
≤ 2.5
≤ 10
> 10
period, the period may not be longer than 12 months. The
Employees
≤ 50
≤ 250
> 250
Balance sheet total (EUR m)
probation period may not be longer than six months.
An employment contract concluded for an unlimited pe-
Requirements for preserving records:
◆ salary records containing important employee information:
riod may be terminated with the consent of the employee, or
without his consent, and by the force of law.
permanently;
◆ financial statements: 50 years;
An employer may terminate the employment contract
◆ the general ledger: 10 years; and
without the consent of the employee in the following cases:
◆ supporting documentation: 5 years
◆ if the employee does not meet the expected job standards;
◆ if the employee violates obligations stated in the employ-
Financial institutions are obliged to keep data on payment clearance for 5 years.
The standard format of accounts and the structure of the
balance sheet and income statement are shown in Chapter 4
ment contract;
◆ if the employee disturbs working discipline;
◆ if the employee commits a criminal act at work or in relation
to the work;
◆ if the employee does not return to work within 15 days
(Annex).
from the end of his unpaid leave or employment standstill;
3.7.6.
Audit And Disclosure Requirements
From 1 January 2004, all large and medium-sized companies must be audited. Medium-sized companies must change
their auditors every five years while large companies must
◆ if the employee abuses his sick leave;
◆ if the employee refuses to accept a necessary change in the
employment contract; or
◆ for redundancy reasons.
change their auditors every three years.
Audits are performed in accordance with the Law on Accounting and Auditing, International Standards on Auditing
and the Code of Ethics for Professional Accountants.
3.8.2.
Working hours
Full working hours are 40 hours per week with a possibility to reduce this to 36 hours per week. The employer must
An audit firm is not allowed to audit a legal entity if it
introduce a shorter working week for employees working in
has already rendered bookkeeping services, prepared annual
an unhealthy environment. Overtime work cannot be longer
financial statements or if there is a conflict of interest accord-
than 8 hours per week or 4 working hours per day.
ing to the Code of Ethics for Professional Accountants.
The Law sets conditions for establishing and operating
3.8.3.
Retirement Age
audit companies. In order to audit large companies the audit
Employment is terminated by virtue of law upon the em-
firm is required to have at least three certified auditors, while
ployee reaching 65 years of age and a minimum of 15 years
for auditing medium-sized companies the requirement is at
of service.
least one certified auditor and three certified accountants.
Audit reports are to be submitted by the audited entity to
the National Bank of Serbia. The Commission for Accounting
and Audit is entitled to supervise the fulfilment of the legal
3.8.4.
Average Wage
In February 2005, the average monthly gross wage
amounted to CSD 22,402.
requirements by the auditing firms.
3.8.5.
3.8.
Labour Law
A new Labour Law was passed by the Serbian Parliament
in March 2005 and came into effect as of 23 March 2005.
32
Unemployment
The unemployment rate in Serbia has increased in the
last couple of years. According to the latest data, the unemployment rate is around 30 %.
3.8.6.
Holidays
3.8.8.3.
Maternity Allowance
The minimum holiday period is 20 working days per year.
The allowance is based on the salary that the pregnant
The duration of the holiday depends on different criteria,
woman would have received if she had worked. If the employ-
such as working results, working conditions, work experi-
ee was employed for less than six months before obtaining the
ence, health conditions at work, etc. Wages during the holi-
maternity allowance, compensation may not be less than the
day period are paid according to the employee’s average
minimum net wage. Employed women have a right to materni-
monthly remuneration.
ty leave and leave for childcare for a period of 365 days for the
Remuneration for public holidays is equal to the employee’s average monthly remuneration.
first two children and two years for the third and fourth child.
The general rule is that maternity leave begins 28 days before
delivery and lasts three months, after which the employed
Public holidays are:
woman is entitled to leave for childcare.
◆ New Year’s Day: 1 and 2 January
Legislation on Foreigners
◆ Orthodox Christmas: 7 January
3.9.
◆ Constitution Day of Serbia: 15 February
Employment of Foreign Nationals
◆ Orthodox Easter in April
◆ Labour Day: 1 and 2 May
Employment of foreigners is based on the Law on the
Conditions for the Employment of Foreign Citizens and the
Labour Law.
3.8.7.
Paid Leave
An employee has a right to paid leave for up to seven
days per year in the following cases:
◆ child birth;
The conditions for employment are:
◆ general conditions applicable for all residents and non-residents (minimum 15 years of age and medical fitness);
◆ death of a close family member;
◆ special conditions applicable only for non-residents:
◆ wedding; and
◆ Serbian temporary residence permit issued by the Ministry
◆ other cases specified in the employment contract.
of Internal Affairs;
◆ work permit issued by the Employment Office, for which
3.8.8.
3.8.8.1.
Social Benefits
Contributions
the employer must apply in writing indicating the reasons
for employing a foreigner;
Mandatory social security contributions include old age
◆ jobs for which foreigners may be employed are determined
pension and disability insurance, health insurance and unem-
in the articles of association of the company where the for-
ployment insurance. Social security contributions are payable
eigner is to be employed.
both by the employer and the employee at equivalent rates.
Under the Law on the Movement and Residence of ForPayments from the Social Security Fund include:
eigners, a foreigner who is coming to Serbia for the purpose
◆ medical care;
of employment or performing professional activities, is given
◆ allowances for temporary work disability;
a temporary residence permit with a validity of 3 months to
◆ travelling allowances related to medical care; and
one year. The temporary residence permit can be extended as
◆ allowances in case of death.
long as substantial reasons exist.
Foreigners coming to Serbia for investment purposes and
3.8.8.2.
Sick Leave
A distinction is made between sick leave that lasts less
foreigner’s who can be employed without a public announcement can obtain a business visa. A business visa is issued for
than 30 days and sick leave of over 30 days.
an unlimited number of trips, with the validity necessary to
◆ sick leave up to 30 days – an employee is entitled to com-
continually run a business, or equal to the validity of the for-
pensation from the employer that amounts to 100 % of
eigner’s passport.
the salary in case of injury at work or occupational disease,
and 65 % of the salary in case of sickness or injury not occurring at work.
3.9.1.
Foreigners’ Real Estate Rights
According to the Law on Basic Legal Ownership Relations,
◆ sick leave over 30 days – the allowance is 100 % of the
foreign natural or legal entities can acquire real estate just
salary in case of injury at work or occupational disease and
like local residents. However, Article 82 of this Law stipulates
65 % in all other cases and is compensated from the Fund.
that foreign legal and physical entities that have business re-
33
lations in Serbia and Montenegro have the right to acquire
These incentives are applicable for two years starting
real estate under two conditions:
from the date of signing the employment contract. An addi-
◆ the property in question must be for business use; and
tional condition for application of these incentives is that
◆ reciprocity must exist with the foreign country in question.
these employees must continue to work during the “incentive
period”, and for the next three years (in total 5 years). In case
There are certain limits on the acquisition of real estate
of termination of the employment contract before the period
property rights by foreigners which pertain to the property’s
of five years, the relief granted becomes payable in full, in-
location (e. g. in the vicinity of military facilities or the like).
creased by the inflation rate.
According to Article 82b of the above Law, it is stipulated
that a foreign natural person who is not conducting business
3.10.2.
operations may own some forms of real estate such as an
Terms for Payment
of Social Security Contributions
apartment or an apartment building in Serbia, subject to the
The employer is obliged to pay social security contribu-
condition of reciprocity. It is not necessary to have one’s per-
tions only on disbursed wages. Therefore, if there is no wage
manent or temporary residence in Serbia.
payment, there is no liability for calculating and paying social
security contributions, which is an innovation compared with
Social Security Legislation
3.10.
the previous legal regulations.
The new Law on Contributions for Mandatory Social Security came into force as of 1 September 2004. Mandatory
3.11.
Tax Laws
social security contributions are: old age pension and disabili-
The taxation system in Serbia and Montenegro is regulated
ty insurance, health insurance and unemployment insurance.
at the federal level and at the republic level (Republic of
Social security contributions are payable both by the employ-
Serbia and Republic of Montenegro).
er and the employee at equal rates, which are as follows:
The federal government is responsible for specifying
what types of taxes the republics can collect and under what
Pension and disability insurance each
11.00 % *
conditions. Detailed regulations on taxation, tax collection
6.15 % *
and control are the responsibility of each republic. This means
0.75 % *
that income tax, corporate income tax, value added tax and
Health insurance each
Unemployment insurance each
Total each
18.25 %
*) Valid as of February 2005
other taxes are regulated separately in each republic.
A major tax reform was implemented in Serbia in April
2001, which brought a complete revision of tax legislation. In
The monthly base for calculation of social security contributions may not be lower than 40 % of the average monthly
January 2005, value added tax was introduced and some
changes regarding tax rates were made.
salary in the Republic of Serbia.
Payments from the Social Security Fund include:
At the moment, the tax system in Serbia is comprised of
◆ medical care;
the following taxes:
◆ allowances for temporary disability;
◆ income taxes (corporate and personal income taxes);
◆ travelling allowances related to medical care; and
◆ value added tax;
◆ allowances in case of death.
◆ property taxes; and
◆ customs and excise duties.
3.10.1.
Social Security Contribution Incentives
An employer who signs an employment contract with a
3.11.1.
Taxation of Individuals
person who is older than 50 years and has been registered as
Individuals are subject to income tax, property taxes, in-
unemployed at the National Bureau of Employment for at least
heritance and gift taxes, turnover tax and other duties and
a year, is relieved from payment of social security contributions
fees. They make contributions to the employees’ Pension
for that employee. Also, an employer who signs an employment
Fund, Health and Social Insurance Fund. The Law on Personal
contract with a person older than 45 years who has been regis-
Income Tax in Serbia became effective as of 20 April 2001.
tered as unemployed at the National Bureau of Employment for
Residents and non-residents are taxed according to this Law.
at least a year pays social security contributions that are reduced
Each individual is treated as a separate taxpayer.
by 80 % (pension and disability insurance: 2.2 %, health insurance: 1.23 % and unemployment insurance: 0.15 %).
34
Income tax in Serbia is applied by means of a two-stage
system:
1. During the year, separate income types are taxed separately
3.11.1.4. Assessment
The tax year is the calendar year. Taxes are generally collected during the tax year by advance payments. There are
(personal earnings 14 %, real estate income 20 %, …).
two types of advance taxes:
Please see chapter 3.11.1.6. Advance Taxes Payable on Par-
◆ withholding taxes – on each individual income;
ticular Sources of Income for taxation during the year.
◆ other taxes upon decision of the tax authorities.
2. At the end of the year, the total income is calculated. The
total annual income earned during the year is calculated
Taxpayers are obliged to file a return on their income de-
and taxed in a second stage at the flat rate of 10 %, if the
rived during the calendar year. Tax returns should be filed not
total income exceeds a certain sum (please see below – An-
later than 15 March of the following year.
nual Taxation).
3.11.1.5. Annual Taxation (at the end of the year)
3.11.1.1. Taxpayers
Residents of Serbia are subject to personal income tax.
Total annual income earned during the year is calculated
and taxed at the flat rate of 10 % (according to stage II of
Their tax liability applies to their worldwide income. An individ-
taxation) if it exceeds a certain amount:
ual is deemed to be a resident of Serbia if he has a permanent
◆ Generally, local residents are taxed on their annual earn-
home or business and vital interests in Serbia, or stays in Serbia
ings that exceed the amount of 4 times the average annual
permanently or in intervals for at least 183 days during 12
earnings per employee in the Republic of Serbia (average
months. Non-residents are individuals who stay in the country
gross annual earnings per employee, published by the sta-
for less than 183 days during one calendar year. Non-residents
tistical office).
are taxed only on income deriving from local Serbian sources.
This sum will be reduced by certain additional deductions
(i. e. reduced by 40 % of average annual earnings per em-
3.11.1.2. Taxable Base
The taxable base of each source of income is computed
separately. The net result, gross income less realisation costs,
is aggregated at the end of the year. The final liability is computed after certain deductions.
ployee in the Republic of Serbia and 15 % of average annual earnings for each child but these deductions may not
be more than 50 % of taxable personal income).
◆ Foreigners employed locally are only taxed on the part of
earnings that exceeds the amount of 10 times the average
annual earnings per employee in the Republic. Following
3.11.1.3. Exempted Income
Tax exemptions regarding the aggregate net income are
motivated by social and economic reasons. A brief overview
the latest changes to the Personal Income Tax Law, this
regulation is introduced also for local residents assigned to
work abroad.
of these exemptions includes the following:
◆ state child support, scholar and student grants up to a certain amount;
◆ unemployment benefits and other social welfare benefits;
◆ sums received from property and personal insurance;
3.11.1.6. Advance Taxes Payable on
Particular Sources of Income
(taxation during the year)
During the year, earnings are taxed separately, according
◆ death and funeral benefits up to a certain amount;
to the groups stated below (i. e. personal earnings 14 %; roy-
◆ compensation for damage caused by natural disasters;
alties 20 %, capital gains 20 %, rentals 20 % etc.).
◆ pension severance payment in the amount of two average
monthly salaries in the Republic; and
◆ redundancy severance payments in the amount prescribed
by the Labour law considering years of service, etc.
3.11.1.6.1.
Personal earnings
A taxpayer is an individual who derives earnings from fulltime employment (earnings and remuneration), part time or
occasional jobs. The tax base consists of each source of earn-
All other income is subject to tax. The tax base of personal
income taxes is the taxable income.
ings. Personal earnings are taxed at a flat rate of 14 %. The
employer must calculate and pay tax on employees’ salaries.
Therefore, this tax has the character of a withholding tax.
35
There are two groups of personal earnings that are not
of membership fees; advertising, entertainment and inciden-
taxed:
tal costs, etc. Interest expenses, except for debts to the public
◆ Income below certain amounts, namely, fringe benefits such
sector, are also considered deductible. Deductible amounts
as business trip daily allowances up to CSD 1,000; solidarity
help in the case of serious illness up to CSD 15,000, etc.
also include written-off receivables and bad loan reserves.
Transactions with associated persons at transfer prices
◆ Non-resident’s and foreigner’s earnings from working for
must be specified in the tax balance sheet and are compared
diplomatic and consular missions or international organisa-
with other arm’s length transactions. Losses and methods of
tions in Serbia.
depreciation are regulated in the same way as in the case of
corporate income tax.
3.11.1.6.2.
Income from Agriculture and Forestry
The same incentives apply as for companies. A taxpayer
The taxpayer is the owner of land, beneficiary or user of
who does not keep business books has a right to pay taxes ac-
the land if registered in the public registry by 31 December of
cording to a lump sum basis determined by the tax authorities.
the previous year. The tax base is either the income that is supposed to be derived from the land or actual income derived
3.11.1.6.4.
Royalties
from the property. Supposed income is taxed, even if the land
A taxpayer is a person who, as an author or owner of in-
is not used for agricultural purposes in that year. However, a
tellectual property rights, obtains income from those rights.
taxpayer can request to pay tax on his actual income.
The tax base is gross income less regulated or actual costs, if
the taxpayer claims them and proves them. Regulated costs
Income from agriculture and forestry is taxed at a rate of
14 %. Income derived from the following types of land is ex-
depend on the type of author’s work and can vary from 10 to
65 % of gross income. The tax rate is 20 %.
empted from taxation:
◆ land for a special use, e. g. for protection against floods or
erosion;
3.11.1.6.5.
Income from capital
The taxpayer must pay tax on the following income from
◆ land prohibited for use;
capital:
◆ land under and around buildings of diplomatic and con-
◆ income from interest on loans, savings and other deposits,
sular missions, and international organisations, on the condition of reciprocity;
bonds and other securities;
◆ income from dividends and other income from profit sharing.
◆ land of national parks and around cultural monuments;
◆ courtyards of sacred buildings;
◆ newly cultivated arable land and new orchards during the
The tax rate is 20 %. Interest on dinar deposits and on
government loans is exempted from taxation.
first five years;
◆ land around residential buildings up to 500 m2;
3.11.1.6.6.
Real estate income
◆ land that has been used by a man who is over 65, a
The taxpayer is a person who lets or sublets land, busi-
woman over 60 years, or by refugees if that is the only in-
ness and residential buildings, premises, garages and other
come they have.
real estate. Gross income consists of rent and all obligations
fulfilled by a leaseholder. The taxable base is gross income
In the event of damage caused by vis major, which has
reduced by regulated costs (20 % of gross income). The tax
reduced income by more than 25 % of the supposed income
rate on real estate income is 20 %. If the taxpayer reports
in the last three years, the taxable base can be proportionally
lower income than usual, the tax authorities will determine
reduced.
the income on a lump sum basis.
3.11.1.6.3.
Income from self-employment
3.11.1.6.7.
Capital gains
The tax rate on income from self-employment is 10 %.
A capital gain is the difference between the sale and pur-
The tax base is taxable profit which is determined in the tax
chase price of assets, securities, equipment, real estate, au-
balance sheet by adjusting income and expenses, according
thorship rights, intellectual property rights and the right to use
to the Law on Accounting and Auditing and the Personal In-
and build on urban construction land. A capital gain arises
come Tax Law. Expenses can include certain costs, up to a
only if the property was obtained after 24 January 1994. The
certain percentage of total income. For example, contribu-
tax rate on a capital gain is 20 %. A capital gain is tax exempt-
tions for culture, education, humanitarian funds; some types
ed if it is invested into housing within a period of 60 days.
36
3.11.1.6.8.
Other income
3.11.3.4. Significant tax adjustments
Income from renting movable assets (equipment, vehi-
Areas where tax adjustments may arise include:
cles, etc.), income from lotteries, income from insurance, etc.
◆ Inventory (valued at average cost or FIFO method);
is taxed at the rate of 20 %.
◆ costs of employment (e. g. salary, social security contribu-
3.11.2.
tions): fully deductible excluded severance payments calcu-
Taxation of Expatriates
3.11.2.1. Tax exemption granted
lated but not paid out;
◆ depreciation: allowances are granted for certain fixed
to foreign nationals
assets (please see 2.7.2.1.).
Fringe benefits received by a foreign national-resident from
Fixed assets are defined as assets whose useful life is longer
his local employer are exempt from salary tax in the amount
than one year, and whose purchase price is higher than the
equivalent to 35 % of the local salary paid to a foreign nation-
average gross wage at the Republic level at the time of pur-
al. To benefit from tax exemption, local employment of a for-
chase. All fixed assets are classified into five groups, accord-
eign national in Serbia should not exceed three years. After
ing to the depreciation rates. The straight-line method ap-
three years of local employment, the foreign national is no
plies to the purchase price of fixed assets classified in the
longer entitled to tax exemption on fringe benefits.
first group (separately on each asset) and the declining balance applies to the whole group value for those classified in
3.11.2.2. Social security contributions
the remaining four groups. Depreciation rates are as follows:
of expatriates
The status of expatriates regarding social security insurance depends on whether or not the country of origin has
Group
Depreciation rate
I
2.5 % Buildings, bridges, marinas, parking lots,
tunnels, airport landing fields, roads and
highways, oilpipes, docks, and all other
immovable fixed assets.
II
10 % ◆ Airplanes, cars, ships, etc.,
◆ vineyards
◆ intangible assets (concessions, licences,
patents, trade marks, etc.)
III
15 % Tools and supplies, buses, trucks,
laboratory equipment, photocopiers, all
other fixed assets (except immovables)
not mentioned in other groups
IV
20 % Furniture in airplanes, telegraph and
telephone equipment, and other equipment of special industries
V
30 % Computer software,
electronic equipment for processing data
◆ livestock
signed the Social Security Convention with Serbia and Montenegro. The purpose of this Convention is to avoid double
payment of social security contributions by citizens in the
countries involved. Provided that expatriates are covered by
recognised social insurance, they do not have to pay local social security contributions in both countries.
3.11.3.
Corporate Tax
3.11.3.1. Tax residents
A legal entity is considered resident if it is established or
has its place of effective management in Serbia. Residents are
taxed on their worldwide income, while non-residents are
taxed only on their Serbian-source income.
3.11.3.2. Taxable persons
Taxable persons include a joint stock company, a limited
liability company, a socially-owned company, a general part-
◆ Reserves and provisions: a write off of specific doubtful
nership, a limited partnership as well as any other legal entity
debts is tax deductible only if it is documented that collec-
selling goods and services.
tion was attempted through the court, while provisions are
tax deductible upon the expiry of 60 days from the due
3.11.3.3. Tax rate and tax base
date;
As of 1 August 2004, the tax rate is 10 % and the tax
◆ expenses for health care, scientific, educational, humani-
year is the calendar year. The tax base is determined by ad-
tarian, religious, ecological and sport-related purposes are
justing the taxpayer’s accounting profit before tax according
to IFRSs (from its profit and loss account) and in accordance
with the Corporate Income Tax Law.
tax-deductible up to 3.5 % of gross receipts;
◆ expenses for cultural purposes are tax-deductible up to
1.5 % of gross receipts;
◆ membership fees paid to chambers of commerce and other
associations (except political parties) are deductible up to
0.1 % of gross receipts;
37
◆ advertising, promotional and business entertaining expenses are tax deductible up to 3 % of gross receipts.
New employees are not required to be unemployed prior
to employment with the taxpayer to satisfy this need.
If a condition for the tax holiday is breached during the
3.11.3.5. Thin capitalisation
Interest paid to a related company which exceeds four
times share capital and reserves multiplied by 110 % of the
holiday period, the taxpayer will lose the holiday. The taxpayer must pay the tax saved, increased by the relevant inflation
rate.
interest rate of the central bank of the lender’s country is not
deductible. The excess may be carried forward.
A five-year tax holiday exists for companies investing at
least CSD 6 million (approximately EUR 76,000) and employing
a minimum of five workers in underdeveloped regions.
3.11.3.6. Transfer pricing
Profit earned on the basis of a concession is tax exempt
A company must identify transactions with related com-
for five years from the date of completing the concession in-
panies and compare them with arm’s length transactions
vestment. For concessionaires who generate profit before
when filing its tax return. Credit relations between associated
completing the concession investment, tax exemption is al-
companies are compared with credit conditions in the market.
lowed within the term regulated by the Government of Serbia
Any unexplained differences are included in taxable income.
in the concession agreement.
3.11.3.7. Groups of companies
3.11.3.10.
Tax credits
Companies are considered a group if one company con-
A taxpayer who employs additional staff previously regis-
trols 75 % or more of the shares of another. A group has the
tered as unemployed is granted a tax credit for the value of
right to tax consolidation if all companies are Serbian residents.
their gross salaries. The tax credit is granted for employment
Each company files its own tax return and the parent company
in the taxable year.
files a consolidated return for the entire group. In the consoli-
A company which acquires fixed assets may reduce its tax
dated return, losses of one or more companies are offset by
liability by 20 % of the investment, but the reduction may not
the profits of other companies. Each company is liable for tax
exceed 50 % of its total tax liability. A small company may de-
in proportion to its share of the profit of the group.
crease its tax liability by 40 % of the investment, but the reduction may not exceed 70 % of its total tax liability.
3.11.3.8. Fundamental errors
Companies registered in particular activities such as agri-
Income or expenses caused by fundamental errors or
culture, fishing, types of textile production, production of
changes in accounting policy that are not presented in finan-
motor vehicles, machines, medical equipment etc. may reduce
cial reports for the period in which they arise should affect
their tax liability by 80 % of the investment when acquiring
the financial report for the year in which they arise. A funda-
fixed assets.
mental error is an error defined by International Financial Re-
Unused credits for investment in fixed assets may be car-
porting Standards that changes taxable profit / loss by more
ried forward for ten years and offset against future tax liabili-
than 2 %.
ties.
3.11.3.9. Tax holidays
3.11.3.11.
Other tax incentives
A proportional tax holiday of 10 years is available for a
Accelerated depreciation is allowed in respect of some
taxpayer who makes an investment in tangible fixed assets of
fixed assets associated with ecology, scientific research and
at least CSD 600 million (approximately EUR 7.6 million) and
education as well as computer equipment. Accelerated depre-
creates additional employment for at least 100 employees
ciation rates are up to 25 % higher than rates prescribed by
during the investment period. The tax holiday begins when
the Corporate Income Tax Law.
these two conditions are met but only from the first year in
A Serbian resident company which generates profits in a
which taxable income is generated. The tax holiday is propor-
newly established branch in an underdeveloped region has
tional based on the ratio between the investment concerned
the right to reduce its tax liability, proportionally to the share
and total fixed assets after the investment. Until the condi-
of total profits attributable to this branch. This tax incentive
tions for the tax holiday are met, the taxpayer is entitled to
may be used for a period of two years.
the tax credits mentioned below. Only new fixed assets pur-
The tax liability of companies employing disabled persons
chased in Serbia or imported fixed assets (new or second-
is decreased in proportion to the percentage of such persons
hand) are recognised for the holiday.
to the total number of employees.
38
3.11.3.12.
Losses
Losses resulting from business, financial and non-busi-
Dividends 1
Country
Interest
Royalties
Belarus
15 / 5
8
10
ness transactions, excluding capital losses, can be carried for-
Belgium
15 /10
15
10
ward for up to ten subsequent tax periods to offset future
Bulgaria
15 / 5
10
10
taxable income. Losses carried forward in the future are not
China
5
10
10
cancelled by organisational changes.
Croatia 2
10 / 5
10
10
10
10
10
Czech Republic
15 / 5
0
10
Denmark
15 / 5
0
10
Cyprus
3.11.3.13.
Capital gains and losses
A capital gain is the difference between the sale and purchase price of assets. If such difference is a negative one, a
Egypt
15 / 5
15
15
capital loss is recorded. Capital losses can be carried forward
Finland
15 / 5
0
10
for ten years and offset only against capital gains.
France
3.11.3.14.
Permanent establishment
The term Permanent Establishment (PE) refers to a fixed
15 / 5
0
0
Germany
15
0
10
Hungary
15 / 5
10
10
10
10
10
Italy
place of business through which the company’s business is
Korea
10
10
10
wholly or partly carried on. It includes especially: a place of
Kuwait
10 / 5
10
10
management, a branch, a factory, and a building site lasting
Macedonia
15 / 5
10
10
longer than six months. The non-resident is obliged to keep
Malaysia
20
10
10
records in a PE, in order to obtain data regarding profit gen-
Netherlands
15 / 5
0
10
erated in that PE.
Norway
15
0
10
Poland
3.11.3.15.
Withholding tax
Withholding tax at the rate of 20 % is levied on divi-
Romania
15 / 5
10
10
10
10
10
Russia
15 / 5
10
10
dends, shares, interest, royalties, capital gains, income from
Slovak Republic
15 / 5
10
10
renting movables and immovables paid to a non-resident. An
Slovenia
10 / 5
10
10 / 5
applicable double tax treaty may reduce withholding tax
Sri Lanka
12.5
10
10
rates. Payment of inter-company dividends between Serbian
Sweden
15 / 5
0
0
companies is tax exempt.
Ukraine
10 / 5
10 / 0
10
United Kingdom
15 / 5
10
10
Zimbabwe
15 / 5
10
10
3.11.3.16.
Assessment and payment
Corporate tax is payable in monthly advance instalments
by the 15th day of the following month, based on the tax liability of the preceding year using the self-assessment method.
1) If the recipient company owns / controls at least 25 % of the equity of the
paying company, the lower of the two rates applies.
2) Applicable from 1 January 2005.
The tax return and tax balance sheet must be filed by 10
March of the following year. The taxpayer establishes his
monthly advance tax obligation in the tax return based on the
tax balance sheet and an estimate of income / losses in the
following year.
3.11.5.
Value Added Tax
On 23 July 2004 the Serbian Parliament passed a new
VAT Law. The new VAT Law came into effect 1 January 2005.
VAT is a tax on consumer spending. It is collected by VAT-
3.11.4.
Double taxation treaties
registered traders on their supplies of goods and services to
Serbia and Montenegro has concluded 29 double taxa-
their customers. Each such trader in the chain of supply from
tion treaties. The agreements with France, the United King-
manufacturer through to retailer charges VAT on his sales and
dom, Finland and Malaysia cover the avoidance of double
is entitled to deduct from this amount the VAT paid on his
taxation of income only. A DTT with Austria has not been
purchases. The effect of offsetting purchases against sales is
concluded so far. It has been subject to negotiations for sev-
to impose the tax on the added value at each stage of pro-
eral years. The negotiations have not yet been completed. An
duction – hence Value-Added Tax. The final consumer, who is
overview of double taxation treaties is presented below:
not registered for VAT, absorbs VAT as part of the purchase
price.
39
3.11.5.1. Taxpayers
Taxpayers of VAT are all legal entities and entrepreneurs
3.11.5.6. Tax rates
The tax rates prescribed by the VAT Law are as follows:
who in the previous 12 months of business operations had
◆ Standard VAT rate – 18 %;
turnover of goods and services in excess of CSD 2,000,000
◆ reduced VAT rate – 8 %
(approx. EUR 27,000) or who predict that they will have
◆ exempt supplies with and without the right to recover
turnover higher than the above amount. Registration of an
input VAT.
entity as a VAT taxpayer requires submission of a registration
tax return to the tax authorities. A taxpayer is generally a per-
The standard VAT rate is applicable for most taxable sup-
son that sells goods and services or an appointed agent of a
plies. However, the reduced VAT rate applies on turnover
foreign legal entity. If a foreign legal entity has not appointed
which includes the following goods and services:
an agent to pay tax on a taxable supply, the taxpayer is the
◆ Basic foodstuffs (bread, milk, sugar, vegetable oil, fresh
recipient of the goods or services.
meet, eggs, fruits and vegetables);
◆ daily newspapers;
3.11.5.2. Amount on which VAT is chargeable
◆ community services, etc.
The amount on which VAT is chargeable is the total sum
paid or payable to the person supplying the goods or services
In addition to the above tax rates, VAT exemption is also
including all taxes, commissions, costs and charges whatso-
applicable. VAT exemption with the right of recovery of input
ever but not including the VAT chargeable in respect of the
VAT applies to turnover which includes the following goods
transaction.
and services:
◆ Export of goods;
3.11.5.3. Tax point
The VAT liability arises on the first day of any of the
following events occurring:
◆ Sale of goods and services;
◆ international air transport;
◆ transport services related to exports of goods and
temporary import;
◆ services performed on temporarily imported goods, etc.
◆ collection, if collection was made prior to the sale of goods
and services;
◆ date of customs clearance in case of the import of goods.
VAT exemption without the right of deduction of input
VAT applies to turnover which includes the following goods
and services:
3.11.5.4. Input and output VAT
Input VAT is the VAT calculated and paid by a taxpayer to
◆ Trading in shares and other securities;
◆ typical banking services;
the supplier upon purchase of goods and services. Output
◆ insurance and reinsurance;
VAT is the VAT which a taxpayer charges and collects on
◆ turnover of land;
goods and services provided to customers.
◆ lease of apartments and business premises; etc.
3.11.5.5. Determination of VAT obligation
3.11.5.7. Reporting period
Taxpayers are generally entitled to offset input VAT (VAT
VAT returns are accounted for:
paid upon purchase of goods and services) against output
◆ every month – for taxpayers whose turnover in the previ-
VAT (VAT calculated on goods and services provided to cus-
ous 12 months was over CSD 20,000,000 (approx. EUR
tomers) when determining the amount of VAT payable to the
280,000) or who predict to have such a turnover in the
state budget. However, input VAT paid for supplies on certain
products and services (such as cars, motorcycles, representation costs, hotel accommodation, meal costs, home electric
appliances, etc,) cannot be deducted from output VAT. Any
excess amount of recoverable input VAT paid that cannot be
fully offset against output VAT can be generally carried forward as a tax credit and offset against future VAT obligations
or the taxpayer has the right to claim a refund, in which case
the overpaid amount of input VAT should be refunded within
45 days or 15 days for exporters.
40
next 12 months; or
◆ every three months (quarter) – for taxpayers whose
turnover is between CSD 2,000,000 and 20,000,000.
◆ The VAT return must be filed and paid within 10 days after
the end of each reporting period (month or quarter).
3.11.5.8. Basis of accounting
Tax base
Registered persons normally account for VAT on the invoice (“sales”) basis. This means that they become liable for
Tax liability
up to 6 million CSD
0.4 %
between CSD 6 and 15 million
CSD 24,000
+ 0.8 % on the amount
exceeding 6 million CSD
VAT by reference to invoices issued and sales made by them
to registered persons irrespective of whether payment has actually been received.
3.11.6.
between CSD 15 and 30 million
CSD 96,000
+ 1.5 % on the amount
exceeding CSD 15 million
Excise Duties
The main goods subject to excise duties in Serbia are:
over CSD 30 million
CSD 321,000
+ 3 % on the amount
exceeding CSD 30 million
◆ petroleum products;
◆ tobacco;
◆ alcoholic beverages (except wines produced in Serbia);
◆ artificial soft drinks; and
Companies pay property tax at the rate of 0.4 %. This
◆ coffee.
property tax is paid in four equal instalments.
Gift and inheritance tax rates are progressive. They de-
Excise duties in 2005 are charged as a fixed fee per
unit of the product as follows:
pend on the value of the property and on the relationship with
the deceased or the donor. All direct descendants and spouses
are not taxed. A tax rate of 3 % is applied for amounts not ex-
Petrol fuel
CSD
27.50
per litre;
ceeding CSD 300,000. For amounts exceeding CSD 300,000 a
Diesel fuel
CSD 15.66
per litre;
tax rate of 5 % is applied. Transfer of securities and stakes in
Beer
CSD
per litre;
legal entities is taxed at the rate of 0.3 %, while transfer of
Whisky
CSD 126.00
per litre, etc.
other absolute rights is taxed at the rate of 5 %.
8.00
With effect from 1 January 2005, a special excise regime
3.12.
Foreign Exchange, Imports, Customs
and Real Estate Acquisition
3.12.1.
Foreign Exchange Regulations
was imposed on the production and import of cigarettes as in
the following examples:
The Law on Foreign Exchange Operations came into effect on 28 April 2002. Regulations are restrictive regarding
Domestically produced
cigarettes
CSD 1
per pack + 30 %;
Imported cigarettes
CSD 10
per pack + 30 %;
the transfer of foreign exchange abroad.
Foreign exchange may be brought into Serbia without
any restrictions. It is mandatory to declare the amount of for-
Excise duty is payable by the producer or importer of
eign exchange brought in cash or taken out of Serbia. Foreign
products at the moment when an excisable product is dis-
citizens can take foreign exchange out of Serbia only up to
patched from the factory, or when the goods enter into the
the amount declared when entering the country. Citizens of
customs area of the Republic of Serbia upon import.
Serbia may take out of the country up to EUR 2,000 in foreign exchange without restrictions.
3.11.7.
Property Taxes
There are three types of property taxes:
Legal entities may have a foreign exchange bank account
◆ tax on property;
under the following conditions:
◆ tax on gifts and inheritance;
◆ if they earned hard currency by exporting goods and services;
◆ tax on transfer of absolute rights.
◆ foreign legal entities or individuals for purposes of keeping
deposits under the conditions set by the National Bank;
In Serbia, the tax on property is paid by the holder of
property rights (owner, usufructuary, etc.).
◆ domestic and foreign individuals under the Resolution of
the Governor of the National Bank.
Individuals are subject to progressive tax rates on property.
Foreign exchange may be deposited with an authorised
bank, sold to a bank, or used for international payments.
Profits earned may be transferred abroad without any restrictions, once all obligations have been met in Serbia.
41
All payments and money transfers in Serbia must be
made in local currency. There are some exceptions to this
3.12.3.
Real Estate
In 2003, a new Law on Urban Planning and Construction
rule; however they cannot be made in cash, as follows:
was adopted by the Serbian Parliament. This Law introduced
◆ sale and rent of flats, business premises and other real es-
a number of changes related to land ownership that influenced the real estate market in 2004, and introduced a vari-
tate;
◆ repayments of foreign currency loans in Serbia;
ety of options in terms of real estate acquisition. However,
◆ collection of insurance premiums from non-residents;
the general rule has remained:
◆ collection and transfer of life assurance premiums and
◆ Urban land remains the sole property of the Republic of
claims for motor vehicles insurance for vehicles with foreign registration plates;
◆ purchase and sale of domestic securities denominated in
foreign currency.
Foreign entities may keep accounts with authorised
banks in dinars under the conditions set out by the Law on
Foreign Exchange Operations and by-laws.
Serbia,
◆ agricultural land remains privately owned, however, it can
be transferred into urban land through a relatively easy and
inexpensive procedure if it is included in the Master Plan.
Land acquisition can be undertaken in a number of ways:
Up to 99-year lease of urban land:
This method of land acquisition refers to undeveloped
urban land that is under the jurisdiction of the local munici-
3.12.2.
Customs Duties
A new Customs Law in Serbia entered into force as of 1
pality. In Belgrade, this is the Agency for Construction Land
and Development.
January 2004. The new Law stipulates reduction of inspections
at border crossings (every fifth vehicle should be subjected to a
“Rights of use”:
prescribed procedure), but additional customs checkpoints will
This was the only known way of owning urban land in
be installed with the possibility of performing subsequent
Serbia until 2003, when the new Law on Urban Planning and
checks and controls. The Law envisages tougher regulations re-
Construction was adopted. As opposed to the 99-year lease
lated to protection of intellectual property, as well as the possi-
right, introduced by the new Law on Urban Planning and
bility of electronic submission of customs clearance documents.
Construction, “rights of use” were granted for an indefinite
The customs tariffs are based on the internationally har-
time period, on the basis of either ownership of the building
monised system of names and codes of goods, as well as the
constructed on urban land, or an intention to construct a
tariff codes of the EU. The Law on Custom Tariffs is effective
building on urban land. “Rights of use” are linked to the
as of June 2001 and represents an adjustment of the Serbian
ownership of the building located on urban land. It entitles
customs tariffs bringing them closer to the requirements of
the user to permanently use the land for as long as they own
GATT and the World Trade Organisation. The average cus-
the building. “Rights of use” are irrevocable and permanently
toms rate is approximately 35 %. The customs basis is the
“attached” to the ownership of the building located on a
value of the goods including all expenses that have been in-
particular piece of land, and it is acquired, transferred and
curred up to the Serbian border.
terminated automatically with the acquisition, transfer or ter-
Equipment that can be imported free of charge relates to
mination of ownership of the building.
equipment for scientific research, education and cultural activities, training and employment of disabled persons, and direct
Transferable “rights of use”:
environmental protection. Goods can also be temporarily im-
Except for the above “rights of use”, which are transfer-
ported or exported for the purpose of improving or repairing
able along with the ownership of a building located on urban
them. The duration of this import or export cannot exceed two
land, there is another type of “rights of use” which are trans-
years. Exports of certain products are subject to licences and
ferable, whether or not there are objects located therein. This
quotas imposed by the Government. The existing restrictions re-
type of “rights of use” was introduced by the new Law on
late principally to the export of certain raw materials and food.
Building and Planning, and may exist in respect of undevel-
Serbian major foreign trade partners are Italy, Germany,
oped urban land which is restituted to individuals from whom
the Former Yugoslav Republic of Macedonia, Bosnia and
the land was taken (nationalised) after the Second World
Herzegovina and the Russian Federation.
War. These individuals are free to dispose of the “rights of
use” over undeveloped urban land once the competent Municipality makes a decision on restitution of the land.
42
3.12.3.1. Mortgage
3.12.3.4. Real estate transactions
Mortgage rights are acquired solely by entering a mort-
In order to transfer real estate ownership rights, it is nec-
gage in the ownership register. Therefore, only real estate
essary to have a relevant written agreement with the signa-
properly entered in the land register can be mortgaged.
tures of the contractual parties verified in court (a public deed
form).
3.12.3.2. User rights of city construction plots
The tax on real estate transactions amounts to 5 % of the
All city plots are under the state property regime. Even
market price, which is assessed by the competent tax authori-
though the land itself is public, the structures built on it are
ty. In practice, a lawyer or specialised real estate agencies
private. A person who owns real estate built on a city plot
handle real estate transactions, and the customary fee for
automatically enjoys an exclusive “right of use” of the lot.
their services is an additional 3 % of the contractual price.
This “right of use” can be entered in the land register, but it
is unnecessary, since this right exists “ex lege”.
Your contacts at CONSULTATIO:
Gerhard Pichler,
3.12.3.3. Right to build
A building is lawfully constructed if a permit to build has
Certified Public Accountant and Tax Consultant,
Managing Director
been issued. The permit is issued on the basis of technical docu-
mentation submitted by the applicant. The documentation
tel.: (+ 43 1) 27 775, ext. 240
consists of the following: general design, preliminary design,
e-mail: gerhard. pichler@consultatio. at
main design, working design and the project of constructed
building. Municipalities are authorised to issue permits to
build. The Ministry of Capital Investment, in charge of construction matters, is authorised to decide on the permit application in cases prescribed by the Law, such as nuclear plants,
oil and gas production / processing industry, hydroelectric
power stations, airports, traffic infrastructure etc. Prior to use,
the owner of the construction has to apply for and obtain the
permit to use.
Siegfried Scheiner, Auditor and Tax Consultant
tel.: (+ 43 1) 27 775, ext. 244
e-mail: siegfried. scheiner@consultatio. at
PRIVREDNI SAVETNIK – REVIZIJA:
Miloš Petrovic, General Manager
tel.: (+381) 11 3020562
Dijana Cvetkovic, Certified Auditor
tel.: (+381) 11 3020538
43
Annex
4. Annex
4.1.
Standard Format of Accounts
Class 0 – Subscribed unpaid capital; intangible assets;
4.2.
Balance Sheet
TOTAL ASSETS
property, plant and equipment; biological assets;
A.
long term investments
PERMANENT ASSETS
A. I.
Outstanding contributions to subscribed capital
Class 1 – Inventories; payments made in advance
A. II
Intangible assets
Class 2 – Receivables; short-term securities; cash and cash
A. III
2. Biological assets
items; deferred tax assets; losses higher than capital;
Class 3 – Capital
Property, plant, equipment and biological assets
1. Property, plant and equipment
equivalents; value added tax; accrued and deferred
A. IV.
Long-term financial investments
1. Investments in equity
Class 4 – Provisions; liabilities; value added tax and accrued
2. Other long-term financial investments
and deferred items; deferred tax liabilities
Class 5 – Expenses
50 Acquisition cost of merchandise sold
B.
CURRENT ASSETS
51 Cost of material
B. I.
Inventories
52 Personnel costs
B. II.
Short-term receivables, investments and cash
53 Services purchased
1. Receivables
54 Depreciation, allocation to provisions
2. Short-term financial investments
55 Non-material costs
3. Cash and cash equivalents
56 Expenses for financial transactions
4. Value added tax and accrued and deferred assets
57 Other expenses
B. III
Deferred tax liabilities
58 Expenses due to impairment of assets
59 Extraordinary expenses and accounts for the
transfer of expenses
Class 6 – Income
60 Revenues from the sale of merchandise
61 Revenues from the sale of products and services
62 Own work capitalised
63 Changes in inventories
64 Income from premiums, subsidies
65 Other operating income
66 Income from financial transactions
67 Other non-operating income
68 Revaluation income
69 Extraordinary income and accounts for the
transfer of income
Class 7 – Opening and closing of balance sheet and income
statement accounts
Class 8 – Off-balance sheet records
Class 9 – Cost accounting
44
C.
OPERATING ASSETS
D.
LOSS HIGHER THAN CAPITAL
E.
TOTAL ASSETS
F.
OFF-BALANCE-SHEET RECORDS
Annex
TOTAL LIABILITIES
B.
A.
CAPITAL
B. I.
Extraordinary income
A. I
Equity and other capital
B. II.
Extraordinary expenses
A. II.
Outstanding contributions to subscribed capital
B. III.
Profit from extraordinary items
A. III.
Reserves
B. IV.
Loss from extraordinary items
C.
PROFIT BEFORE TAX
A. IV.
Revaluation reserves
A. V.
Undistributed income
EXTRAORDINARY ITEMS
A. VI. Loss
D.
LOSS BEFORE TAX
A. VII. Own shares
E.
INCOME TAX
F.
NET PROFIT
G.
NET LOSS
B.
LONG-TERM PROVISIONS AND LIABILITIES
B. I.
Long-term provisions
B. II.
Long-term liabilities
1. Loans
2. Other long-term liabilities
B. III. Short-term liabilities
1. Short-term financial liabilities
2. Operating liabilities
3. Value added tax and other taxes
4. Other short-term liabilities and accrued and
deferred liabilities
B. IV.
Deferred tax liabilities
C.
TOTAL LIABILITIES
D.
OFF-BALANCE-SHEET RECORDS
4.3.
Income Statement
A.
OPERATING INCOME AND EXPENSES
A. I.
Operating income
1. Sales revenues
2. Own work capitalised
3. Increase in inventories
4. Decrease in inventories
5. Other operating income
A. II.
Operating expenses
1. Expenses for merchandise sold
2. Costs of material
3. Wages, salaries and other personnel expenses
4. Depreciation and provisions
5. Other operating expenses
A. III.
Operating profit
A. IV.
Operating loss
A. V.
Financial income
A. VI. Financial expenses
A. VII. Other income
A. VIII. Other expenses
A. IX. Profit from ordinary activities
A. X.
Loss from ordinary activities
45
Annex
Bilateral Agreements
for Mutual Promotion and Protection
of Investments
4.4.
Contacts
Serbia and Montenegro – Ministry Council:
4.5.
MINISTRY OF FOREIGN AFFAIRS
The State Union of Serbia and Montenegro has signed several
11000 Belgrade, Kneza Milosa 26;
bilateral agreements on mutual promotion and protection of
tel.: (381 11) 3615-666; fax:(381 11 3618-366)
investments:
e-mail: mailto:mfa@smip. sv. gov. yu
website: http: / / www. mfa. gov. yu /
Country
Effective date
Albania
Mr. Vuk Draskovic, Minister
15 May 2004
Austria
26 January 2002
MINISTRY OF INTERNAL ECONOMIC RELATIONS
Belgium-Luxemburg Economic Union
02 October 2004
11070 BELGRADE, Bul. Mihaila Pupina 2,
Bulgaria
Belarus
28 December 2003
tel.: (381 11) 3111-312; fax: (381 11) 142-088
09 January 1997
e-mail: kabinet@smput. sv. gov. yu
25 January 1997
Mr. Amir Nurkovic, Minister
China
12 September 1996
Croatia
17 November 2002
Republic of Serbia Authorities:
Cuba
28 August 2000*
MINISTRY OF FINANCE AND ECONOMY
Czech Republic
29 January 2001
11000 Belgrade, Nemanjina 22 and 11,
France
Germany
1975
tel.: (381 11) 3617-596; fax: (381 11) 3617-613
1990
website: http: / / www. mfin. sr. gov. yu /
Ghana
30 June 2000
Greece
14 March 1998
Guinea
15 July 1998
MINISTRY OF FOREIGN ECONOMIC RELATIONS
Hungary
15 May 2004
11000 Belgrade, Gracanicka 8,
Israel
2004
Italy
19 May 2001
Korea
14 August 2000
Macedonia
Netherlands
Mr. Mladjan Dinkic, Minister
tel.: (381 11) 3617-583; fax: (381 11) 3617-628
website: http: / / www. mier. sr. gov. yu /
Mr. Milan Parivodic, Minister
22 July 1997
28 December 2002
Nigeria
08 February 2003
Poland
1996
MINISTRY OF JUSTICE
11000 Belgrade, Nemanjina 22,
tel.: (381 11) 3616-548;
Romania
16 May 1997
e-mail:mailto:kabinet@mpravde. sr. gov. yu
Russian Federation
19 July 1996
website: http: / / www. mpravde. sr. gov. yu /
Slovakia
16 July 1998
Mr. Zoran Stojkovic, Minister
Slovenia
03 April 2004
Spain
13 March 2004
Sweden
Turkey
Ukraine
Great Britain and Northern Ireland
USA
December 1979
05 July 2001
14 August 2001
15 May 2004
MINISTRY OF CAPITAL INVESTMENTS
tel.: (381 11) 3616-273; fax: (381 11) 3617-486
website: http: / / www. mki. sr. gov. yu /
Dr. Velimir Ilic, Minister
01 December 2001
Zimbabwe
22 July 1997
*) signature date
Source: Ministry for International Economic Relations and the Official Gazette
of the Republic of Serbia
MINISTRY OF CULTURE AND PUBLIC INFORMATION
11000 Belgrade, Trg Nikole Pasica 11,
tel.: (381 11) 3398-498; fax: (381 11) 3398-936
e-mail: mailto:kabinet@min-kul. sr. gov. yu
website: http: / / www. minkul. sr. gov. yu /
Mr. Dragan Kojadinovic, Minister
46
Annex
MINISTRY OF AGRICULTURE AND WATERWORKS
Financial Institutions:
NATIONAL BANK OF SERBIA
tel.: (381 11) 306-5272; fax: (381 11) 3616-574
11000 Belgrade, Kralja Petra 12,
website: http: / / www. minpolj. sr. gov. yu /
tel.: (381 11) 3027-100;
Mr. Ivana Dulic Markovic, Minister
Mr. Radovan Jelasic, Governor
http: / / www. nbs. co. yu /
MINISTRY OF ENERGY AND MINING
11000 Belgrade, Srpskih Vladara 36,
BELGRADE STOCK EXCHANGE
tel.: (381 11) 3346-755; fax: (381 11) 3612-307
11070 Novi Beograd, Omladinskih Brigada 1,
website: http: / / www. mem. sr. gov. yu /
tel.: (381 11) 3115-328;
Mr. Radomir Naumov, Minister
website: http: / / www. belex. co. yu /
Ms. Gordana Dostanic, Director
MINISTRY OF THE INTERIOR
11000 Belgrade, Kneza Milosa 101,
Republic Agencies for Privatisation
tel.: (381 11) 3062-000
AGENCY FOR PRIVATISATION
website: http: / / www. mup. sr. gov. yu /
OF THE REPUBLIC OF SERBIA
Mr. Dragan Jocic, Minister
11000 Belgrade, Terazije 23,
tel.: (381 11) 684-360; fax: (381 11) 643-941
MINISTRY OF LABOUR, EMPLOYMENT AND
website: http: / / www. priv. yu /
SOCIAL WELFARE
tel.: (381 11) 3646-253;
Business Associations and
Chambers of Commerce
website: http: / / www. msoc. sr. gov. yu /
CHAMBER OF COMMERCE AND INDUSTRY OF SERBIA
Mr. Predrag Lalovic, Minister
Resavska 13-15, 11000 Belgrade,
tel.: (381 11) 3240-611, 3233-955;
MINISTRY OF PUBLIC ADMINISTRATION
fax: (381 11) 3230-949
AND LOCAL GOVERMENT
Slobodan Milosavljevic, President,
Slobodan Milosavljevic, Director
tel.: (381 11) 3613-654;
http: / / www. pks. co. yu /
website: http: / / www. mpalsg. sr. gov. yu /
Mr. Zoran Loncar, Minister
MINISTRY OF PRIVATISATION AND ECONOMY
11000 Belgrade, Kralja Milana 16,
tel.: (381 11) 3617-599; fax: (381 11) 3617-699
website: http: / / www. mpriv. sr. gov. yu /
Mr. Predrag Bubalo, Minister
MINISTRY OF SCIENCE, TECHNOLOGY AND ECOLOGY
11000 Belgrade, Nemanjina 22 / IV,
tel.: (381 11) 2688-047; fax: (381 11) 3616-516
website: http: / / www. mntr. sr. gov. yu /
Mr. Aleksandar Popovic, Minister
MINISTRY OF TRADE, TOURISM AND SERVICES
tel.: (381 11) 3616-308;
website: http: / / www. minttu. sr. gov. yu /
Mr. Bojan Dimitrijevic, Minister
47
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48
G O O D A DV I C E I S AT H A N D : A U D I T I N G • TA X C O N S U LT I N G • B O O K - K E E P I N G •
PAY R O L L AC C O U N T I N G • C O N T R O L S • I T AU D I T S • B U S I N E S S VA L U AT I O N •
C O M M E R C I A L L AW A DV I C E I N C O - O P E R AT I O N W I T H M E M B E R S O F T H E L E G A L
P R O F E S S I O N • B U S I N E S S C O N S U LT I N G • P E R S O N N E L C O N S U LT I N G • A DV I C E
O N F O R E I G N E X C H A N G E R E G U L AT I O N S • A S S I S TA N C E W I T H PA RT N E R S E A R C H
AND SETTING UP JOINT VENTURES • SEMINARS FOR TRAINING AND ADVANCED
TRAINING • TRUSTEESHIP • PERFORMANCE OF SUPERVISORY AND ADVISORY
BOARD DUTIES
왘
CONSULTATIO
Wirtschaftsprüfung GmbH & Co KEG
Auditors
Mag. Gerhard PICHLER
Mag. Siegfried SCHEINER
Holzmeistergasse 9,A-1210 Wien
Tel: ++43 1/27775-0
Fax: ++43 1/27775-279
mail: [email protected]
[email protected]
왘
왘
Member of the International Association
of Independent Public Auditors
AGN INTERNATIONAL
CONSULTATIO danovo-poradenska k.s./
Tax Consultants
DI Karol CSANYI
Stara Prievozska 2, SK-821 09-Bratislava
Tel: ++421 2/5341 11 41
Fax: ++421 2/5341 13 90
왘
왘
왘
AGN CONSULTATIO
Revizija in Svetovanje, d.o.o., Ljubljana
Tax Consultant and Auditor
Mag. Maja BARISIC
Jana Husa 1a, SLO-1260-Ljubljana
Tel: ++386 1/544 66 12
Fax: ++386 1/544 66 13
CONSULTATIO Kft.
Gazdasági és Adóügyi Tanácsado/
Tax Consultants and Auditors
Zsuzsa MAROSFALVI
Zugligeti ut 6, HU-1121-Budapest
Tel: ++36 1/391 4170
Fax: ++36 1/391 0055
왘 CONSULTATIO danove-poradenska s.r.o./
Tax Consultants
DI Karol CSANYI
Korunni 129,Vinohrady, CZ-130 00-Praha 3
Tel: ++42 02/72732320
Fax: ++42 02/67311086
NETWORK COMMUNICATIONS AGENCY / I. HAUSMANN
Co-operation with Androsch International
Managementberatung Ges.m.b.H. /
Management Consultants
Opernring I,A-1010 Wien

Investment Guide Serbia

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