Key steps and tax obligations for opening a branch in Serbia

Opening a branch in Serbia is a crucial move for business expansion, whether it’s for local entrepreneurs seeking to broaden their reach or foreign companies looking to enter the Serbian market.

Though a branch does not have its own legal personality, it operates in the name of the parent company, which is fully responsible for the obligations of the branch. The procedure for establishing a branch in Serbia is governed by the Law on Business Companies, which outlines clear guidelines for registration.

Branch registration process
According to Article 567 of the law, a branch is considered a part of a company without legal personality, but it can perform activities on behalf of the parent company. Article 569 stipulates that branches must be registered with the Agency for Business Registers (APR), and procedures must be followed to update or remove the branch from the registry.

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Without official registration with the APR, a branch cannot legally operate. Therefore, registration must be completed before the branch begins any activities.

Requirements for registration
The requirements for branch registration differ depending on whether the parent company is domestic or foreign. Domestic companies must provide a decision to establish a branch, which includes the company’s name, registration number, address, activities, representative, and a single registration application. They must also submit proof of payment for the registration fee.

For foreign companies, additional documents are needed: a certified and translated decision to establish a branch from the parent company, a certified and translated extract from the foreign company’s home country register, proof of account numbers, a statement of responsibility from an authorized person, and proof of payment of the registration fee.

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Certification and translation
Foreign companies must submit notarized and court-translated documents, including the company’s register extract and the responsibility statement, as these documents must meet Serbian legal standards.

The registration process
After preparing the necessary documents, the next step is submitting the registration application to the APR, paying the registration fee, and awaiting approval. If everything is in order, the APR usually processes the application within a few working days. However, if any discrepancies are found, the process may take longer.

Branch tax obligations
Although a branch does not have its own legal entity status, it still has tax obligations based on whether it’s a domestic or foreign branch. These taxes include corporate tax, value-added tax (VAT), payroll tax, employee contributions, withholding tax, and local taxes.

• Corporate tax: A domestic branch is not subject to separate profit tax because its income is attributed to the parent company. However, a foreign branch may be subject to a 15% profit tax if it generates income in Serbia. If the parent company is from a country with a double taxation avoidance agreement with Serbia, more favorable tax regimes may apply.
• VAT: If the branch’s annual turnover exceeds eight million dinars, it must register for VAT and pay it at a rate of 20% or 10%, depending on the type of goods or services provided.
• Payroll tax and contributions: If the branch employs workers in Serbia, it must calculate and pay a payroll tax of 10% on the gross salary. Additionally, it must contribute to pension, health, and unemployment insurance, totaling around 36.55% of the gross salary (split between employer and employee).
• Withholding tax: If the branch pays dividends, interest, royalties, or services to the parent company, it may be required to pay a 20% withholding tax, which could be lower if there is an agreement on avoiding double taxation.

Local taxes
In addition to national taxes, the branch may have to pay local taxes, such as property tax if it uses real estate, or environmental and utility taxes, depending on the nature of its operations.

Understanding these requirements and obligations is key to successfully establishing and operating a branch in Serbia, whether for a domestic or foreign company.