A software company in Serbia offers above all a low corporate income tax of 15 percent, a possible tax relief on copyright income from software, comparatively low living and operating costs and a European time zone. Against this stand obligations: real business activity on the ground, clean bookkeeping and the tax treatment in Germany if you still have a residence or management there.
This article sorts out which advantages of a software company in Serbia can be substantiated, where they end and which mistakes founders from German-speaking countries should avoid. We have broken down the concrete tax and cost structure of an IT company in Belgrade in our article Taxes for IT companies in Belgrade (in German). This article deals with the question that comes before: why Serbia as a location, and for whom it is not the right choice.
The advantages at a glance
| Advantage | What stands behind it | What to watch for |
|---|---|---|
| Low corporate tax | Corporate income tax of 15 percent | Taxes on distributions and payroll costs come on top |
| Relief for copyright income | 80 percent of qualifying licence income can be excluded from the tax base | Only for rights entered in the register and for in-house development, evidence required |
| Support for research and development | Double deduction of R&D costs incurred in Serbia | Project documentation is required |
| Flexible legal forms | Sole proprietor (preduzetnik) or d.o.o. | The choice determines liability and tax burden |
| Costs | Office space, coworking and living costs lower than in many German cities | Salaries for good developers are rising, Belgrade is more expensive than Novi Sad |
| Time zone and proximity | Same time zone as Central Europe, short flights | Not an EU country, so separate rules for customs, data and residence |
Tax advantages: what can be substantiated
Corporate income tax and relief for copyright income
Serbian corporate income tax is 15 percent (Art. 39 of the Corporate Income Tax Act, Zakon o porezu na dobit pravnih lica). For remuneration from the use of copyrights and related rights, as it can arise with self-developed software, Art. 25b allows 80 percent of the qualifying income to be excluded from the tax base. For this, the work must be entered in the register of the competent authority, remuneration for the complete transfer of the rights is excluded, and development costs reduce the privileged amount. In addition, only the share that corresponds to the ratio of qualifying development costs to the total costs of the work is privileged. Arithmetically, this results in an effective rate of 3 percent on qualifying income. In practice this regime is called IP Box; how it works and where its limits lie is described in our article on the IP Box in Serbia (in German).
Important: the 3 percent rate applies only to the qualifying part of the income. Classic services such as contract development billed by the hour or consulting are taxed at the regular rate. Anyone doing both needs a clean separation in the books.
Support for research and development and for investments
Under Art. 22g of the Corporate Income Tax Act, costs directly related to research and development carried out in Serbia can be deducted twice. According to PwC, there is also a tax credit of 30 percent of the investment for investors in newly founded, innovative companies, capped at 100 million dinars. This concerns potential backers more than the founder. Whether your activity meets the requirements is something to clarify with a Serbian tax advisor before you plan on it.
What you should not assume across the board
Comparison articles often claim that a software company in Serbia pays "hardly any tax". That is not correct. The 15 percent relates to the profit of the company. If you distribute profits to yourself as a dividend, a capital income tax of 15 percent additionally applies to private individuals (Art. 64 of the Personal Income Tax Act), and wage tax and social contributions apply for employees. How this adds up for a d.o.o. is shown in our articles on the costs of founding a d.o.o. and on the IT company in Belgrade. The Serbian tax rate is only one building block. What counts is what remains for you after tax in Germany.
Legal forms: sole proprietor or d.o.o.
Founders from the software industry usually face the choice between the sole proprietor (preduzetnik) and the limited liability company (d.o.o.).
- Preduzetnik: Quick to set up, simple administration, suitable for solo developers with modest turnover. If you work mainly for one client, however, you should check the independence test (in German) under Art. 85 of the Personal Income Tax Act. Liability is not limited to business assets.
- d.o.o.: A separate legal entity, liability limited to the company, better suited for teams, investors and the sale of shares. In return, bookkeeping and annual accounts are more demanding.
You will find help with the decision in the article d.o.o. or preduzetnik (in German). As a rule of thumb: anyone who wants to build a product, hire employees or sell shares usually ends up with the d.o.o. Anyone working alone as a freelancer for clients should look at the sole proprietor first.
Advantages in staff, costs and location
Skilled workers
Serbia has several universities with technical faculties, among them in Belgrade, Novi Sad and Niš. How many developers are available on the market and what they earn varies greatly with experience and city, and published salary figures mostly come from recruiters with their own interests. We therefore deliberately give no salary figures. Obtain current offers and salary comparisons for your positions before you start calculating.
Operating costs and choice of location
Belgrade offers the widest choice of talent, coworking space and international connections. Novi Sad is smaller and cheaper for offices. For corporate and income tax there is no difference between the cities, because these laws apply nationwide. Local levies may differ. A comparison of both locations is in the article on the IT company in Belgrade (in German).
Residence through your own company
Anyone who works in their own company in Serbia can under some circumstances use this as a basis for a residence permit. The Foreigners Act names employment as the ground for this in Art. 40; clarify the details beforehand with a specialist advisor on site. General information is in our article on the residence permit in Serbia. The company does not replace the duty to act in good time before the 90 permitted visa-free days run out.
Typical mistakes when founding a software company in Serbia
Mistake 1: Running the company without substance
A d.o.o. with a letterbox and nothing else is a risk. If you as managing director continue to live in Germany and steer the company from there, the German tax office may ask questions about the place of management. The problem then lies not in Serbia but in the German review. What matters are real decisions, real contracts and actual activity on the ground.
Mistake 2: Treating relocation and company formation separately
Anyone who holds shares in a German GmbH and moves to Serbia may be affected by exit taxation (Wegzugsbesteuerung). This is independent of the new Serbian company. An overview is in the article on exit taxation on GmbH shares (in German). Clarify this before the move, not after.
Mistake 3: Planning the IP relief without documentation
The favourable rate for software income requires that you can prove your own development: registration of the rights, allocation of costs, clean separation from service revenue. Without these documents, the normal rate is at risk in an audit. With very small revenues, the effort can exceed the savings. Discuss this with your accountant before you include it in a calculation.
Mistake 4: Looking only at the export case for VAT
Services to foreign business customers are often subject to different rules than services to domestic customers or to consumers in the EU. Have the treatment of your revenue clarified before the first invoice. The ongoing obligations of a Serbian company also include bookkeeping under Serbian law, as we explain in the article on accounting in Serbia.
Mistake 5: Forgetting the deadlines after formation
After registration come the business account, registration of employees, an accountant, ongoing filings and the annual accounts. Anyone who tackles this only at the first missed deadline risks needless trouble. Plan the first weeks after formation as a project of its own with a checklist.
Process: from the idea to a working company
The following timeline is a guide and not a guaranteed sequence. It depends on the legal form, the workload of the authorities and the completeness of your documents.
- Clarify legal form and tax model. Talk to a tax advisor, in particular about the German side.
- Prepare documents. ID, a power of attorney if applicable, proof of a registered office. Foreign documents often need an apostille and translation.
- Registration with the Business Registers Agency (APR). The agency must decide on an application within five working days. A d.o.o. has been registered electronically since 17 May 2023.
- Open a business account. The bank decides on the opening, so allow time for it.
- Appoint an accountant and set up ongoing obligations.
- Apply for a residence permit if you yourself want to work in Serbia permanently. Start in good time before the 90 days run out.
Who a software company in Serbia suits
A location in Serbia suits founders who genuinely want to live and work there, want to build a team on site or serve customers outside Germany. It is less suitable if you remain resident in Germany, look after your customers there and want to found the company only because of the tax rate. In that case the advantages are often eaten up by German taxation and the risk of an audit.
How Exgentum helps
Exgentum is not a tax advisor or a law firm and gives no tax or legal advice. We support the formation of a d.o.o. or a sole proprietorship organisationally, help with documents, authority visits and the business account, and work with advisors who know German and Serbian law. For tax planning we recommend a tax advisor on site and in Germany. You get an English-speaking contact. The first conversation is non-binding and free of charge.
Frequently asked questions
Do I need a special licence for a software company in Serbia?
For pure software development we are not aware of any sector-specific licence, but we have not confirmed this officially. This does not apply to regulated activities, for example in finance or crypto. Have your activity classified before registration.
How high is the corporate income tax?
15 percent on profit. Of qualifying income from registered copyrights, 80 percent can be excluded, which arithmetically gives an effective rate of 3 percent. The conditions must be met and documented.
Do I have to live in Serbia to run a software company there?
Legally, residence is not a requirement for formation in every case. For tax purposes, however, a lack of a centre of life on site can cause problems, above all in Germany. What matters is where the management actually sits.
Is a sole proprietorship or a d.o.o. better?
For solo developers the sole proprietorship is often simpler, for teams, investors and limited liability the d.o.o. The decision depends on turnover, risk and goals.
How long does formation take?
The register must decide on the application within five working days, and preparing the documents comes on top. With account, accountant and residence permit you should allow more time. Nobody can guarantee these deadlines.
Conclusion
A software company in Serbia has real advantages: a low corporate income tax, possible relief for self-developed software, flexible legal forms and low operating costs. However, these advantages apply only with real business activity and clean documentation, and they do not replace a review of your German tax position. Anyone who really wants to use the location plans legal form, relocation and bookkeeping together and brings in a tax advisor for it. For the organisation in Belgrade you are welcome to get in touch with us.
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