The River Danube and Belgrade at Dusk
Peter Macfarlane explores a European freedom, wealth and privacy haven you’ve probably never heard of – at least not in this respect!
Serbia is a small European country, bordering but independent from the European Union – and one that has a surprising array of benefits for the international investor, PT or freedom seeker. What are the pros and cons of Serbia in terms of banking, residence permits, lifestyle and business?
Most likely you’ve never thought of Serbia in this respect – and that’s one of the attractions! Over the last few years I’ve shared this secret with some of my private consulting clients who have been very happy with Serbia for business, banking and lifestyle… but now that we are in the process of relaunching Q Wealth I thought I would share for the first time some more Serbian insights with long-time readers.
Here then, without further ado, are ten reasons why you should take a serious look at Serbia if you haven’t already done so. I’ll start off with the business reasons to look at Serbia, then I will also cover lifestyle reasons – because at the end of the business day, Serbia is actually a great place to physically spend time.
- Serbian Official Residence
Serbia’s pro-business government is careful to welcome and nurture foreign investment. They have therefore made it easy to obtain a residence permit in Serbia. The application process just involves you forming a local company (takes 1-2 days) showing up in Belgrade for a couple of days, and depositing EUR 1,500 in a local bank. Yes you read that right – forget golden visas where you have to invest hundreds of thousands! After that, you are free to leave the country again.
A few weeks later you obtain a one year, easily renewable Serbian residence visa – a sticker in your passport that, as one of our lawyers in Belgrade pointed out, looks something like a USA or Schengen visa.
Belgrade’s Nikola Tesla airport, and Serbia’s other international airport in Niš named after Constantine the Great, are both short hops from most European cities. Belgrade also enjoys direct flights from the USA and Asia, and Toronto is likely to be added soon. You can also easily drive from nearby countries such as Italy, Austria, Germany, Hungary, etc.
A Serbian residence permit does not make you tax resident in Serbia by default, but it can if you want – depending on your circumstances.
- Privacy Haven
Although Serbs are generally social, warm and outgoing, Serbia is a country where the “right to be left alone” is still very much respected as part of the culture. Ordinary people still have notions of the right to the protection of personal data, that are seen as old-fashioned in so much of today’s “big data” world.
Probably as a consequence of this, banking secrecy remains intact. The OECD recently announced, to great fanfare, that Serbia signed a Convention which is an “instrument for swift implementation” of CRS. This is not, needless to say, the same as having actually implemented CRS. At the time of writing, there is no automatic reporting of Serbian bank or brokerage accounts to foreign authorities and automatic reporting is some way off. In any case, there will be no outward reporting on Serbian resident permit holders. Serbia remains, as my lawyer friends there like to call it, a “CRS-free zone.”
- Banking Haven
For a country of its size, Serbia has a very developed banking business. Serbia’s banking industry is reflective of the country’s status as the regional business hub, its long history as a trade crossroads, and its openness to foreign investment. Those who are leery of dealing with small, unknown banks can find comfort in the brand names present on the Serbian banking market.
From the EU there are strong Austrian banks like Erste Bank, Raiffeisen and Addiko, and other major players such as Credit Agricole, UniCredit and Intesa. The Hungarian-based regional bank OTP recently bought out the substantial operations of French Societe Generale.
Istanbul is not far from Serbia, either – Turkish giant Halkbank has a multi-branch retail banking operation, as does Mirabank of UAE. Then there is an active Bank of China operation, and investment from Russia via the likes of Sberbank and ExpoBank. US capital is represented in Komercijalna banka and Opportunity Bank, while those looking for a Latin American connection could try Pro Credit Bank, a German-owned bank that is also present in Latin America.
Not forgetting, of course, plenty of local banks, including the huge government-owned Poštanska štedionica Bank (Postal Bank).
Basically all these banks are on the menu for local resident permit holders and companies, with neither minimum or maximum deposits. You can take your pick between major Western European household names, or banks that stand up and fight US influence like Sberbank and Halkbank. There are not many fintechs in Serbia yet, but the sector is developing and there are hundreds of currency exchange businesses willing to buy and sell Euros and Dollars.
What about non-resident accounts in Serbian banks? Non-resident bank accounts in Serbia are still relatively easy for “western” passport holders, though the trend is to tighten up restrictions – things have become a lot harder in the last couple of years. If you fancy a non-resident account in Serbia, now is the time to take advantage of this opportunity, since I’m not sure how long it will remain open. Americans, by the way, are welcome in Serbian banks.
Talking of non-resident accounts, what about opening non-resident bank accounts for offshore companies in Serbia? In theory and according to the law, yes it is possible. In the recent past it was quite popular to use Serbian banks for offshore commercial operations. But if you don’t already have your non-resident corporate account, you’re late to the party – the reality is Serbian banks are now declining most non-resident corporate accounts due to the constant international political pressure, so I can no longer recommend this solution.
Fortunately, there is a solution that is better still and well adapted to those who need accounts in major international banks for their offshore companies in 2020! That leads us to our next topic…
- Serbian Bank Accounts and Substance for Offshore Companies
PROBLEM: Your existing offshore company finds it hard to open bank accounts and to do business. People tell you “you have to pay tax somewhere.” Banks are asking you for proof of substance such as tax ID number, office rental contracts and audited accounts showing day-to-day business activity.
EASY SOLUTION: Open a Serbian branch for your offshore company. For a matter of a couple hundred euro per month you can quickly and easily set up the substance needed. Your offshore company will have a Serbian tax number, utility bills and publicly filed accounts produced by an authorized accountant. All this can easily be verified online or by certificates etc. Yes, you will pay some tax, and have the receipts to prove it. But you decide how much – because you have the option of booking business through the branch or the parent company (remember both are the same legal entity but they have separate accounting).
As a basic plan, this solution could work in many countries. However, I’ve found Serbia to be particularly good for this. The cost of professional services like accounting and legal advice in Serbia is quite low, there are plenty of decent inexpensive offices and co-working spaces, and the authorities and banks don’t bother you too much. As far as banks are concerned, a locally registered branch is equivalent to a local company, so it’s easy to open an account in the name of your offshore company with the local tax number.
- Registering a Company in Serbia
As an alternative to a local branch, setting up a local company could be a good option. There is no minimum capital requirement and it only takes a day or two to register a company. You can then open a bank account almost immediately and start doing business.
Although Serbia is not a low tax country, there are special tax incentives for certain businesses, such as the IT sector and viniculture. I’ve personally set up several companies for clients under both these incentives. There are others, including free trade zones where goods can be imported and exported tax free.
- Citizenship by Investment in Serbia
There is no formal citizenship by investment programme in Serbia, but that doesn’t mean you can’t ask the government to design one for you.
If you have a decent-sized investment plan of any sort, you can literally sit down and negotiate incentives directly with the government. These might range from tax breaks, to Serbian citizenship and passport within a few months. There are many documented cases where this has been done successfully.
There is an odd list of naturalized Serbs, ranging from actors Ralph Fiennes and Steven Seagal, to Thailand’s former Prime Minister Yingluck Shinawatra, with many lower profile businessmen from other parts of the world included.
Serbia is an EU candidate country. EU membership ain’t happening very soon, but if you obtain Serbian citizenship now you might find you have an EU passport for your retirement, which could be a nice bonus.
- Serbian Endowments
What on earth is a Serbian endowment and why would you need one?
In legalese, an endowment under Serbian law is a “not-for-profit, non-membership, and non-governmental legal entity whose founder designated specific property to support its public or private interest objectives” (Law on Foundations Article 2). Broadly speaking, an endowment is a hybrid of a common-law trust, or a private interest foundation – similar to Panama’s.
The bottom line is you, as a non-resident, can set up a Serbian endowment for asset protection, wealth and tax planning purposes. The endowment could hold stocks, bank accounts, and even underlying commercial businesses, located anywhere in the world.
As with other Serbian legal entities such as companies, there is now a public register of beneficial owners, following the EU and OECD standard. This makes it quite easy to do business, including opening bank accounts, because banks can easily verify beneficial ownership.
The twist, however, is in how beneficial ownership is defined. The government-issue guidance states that the Manager or Trustee of the endowment should be registered as the Beneficial Owner. Neither the Founder nor the Beneficiaries need to be listed.
- Living in Serbia
Over the past years I spent some time in Belgrade and have really enjoyed it. The old part of Belgrade has the charm of an old central European capital city like Vienna or Budapest, but for a fraction of the price.
People are very friendly, and in the capital you can get by easily speaking English. Most younger people speak fluent English and are keen to practise it.
Belgrade is a food lover’s paradise, with Mediterranean, Germanic and Turkish influences reflecting its history and geographic location. Serbia produces great wines, and the quality of the produce in stores is high – much of it is organically produced.
Belgrade is also known as the “Ibiza of South East Europe” – its club scene is famous all over Europe, taking place on fixed river barges during the summer season and going indoors and underground in the winter.
Outside Belgrade, Serbia has beautiful mountains, lakes and rivers to enjoy. If you want the beach or yachting, just head down to next-door Montenegro. The Croatian and Italian coasts are also a short hop away.
- Business Opportunities in Serbia
For all these reasons and more, Serbia has become a popular base for digital nomads from all over the world. Belgrade has a number of trendy co-working centres and there are frequent networking events.
Real estate investment is another sector that I believe will boom. The Covid pandemic has taught us that it’s better to buy real estate you would actually want to live in. Belgrade has plenty, and it is still reasonably priced.
- Legal Advice
Legal advice in Serbia is something that is relatively inexpensive in Belgrade. I work with several lawyers there who specialize in inward investment, banking law and helping new businesses.
Now that you’ve read this article your mind must be buzzing with all the opportunities: maybe you could obtain residence, set up an endowment to securely package your offshore assets, obtain citizenship based on that, and set up an IT business or plant a vineyard and benefit from tax incentives while exporting your products and services worldwide… receiving the money in international banks… and all the while keeping your name private!
Yes, but for each step of this you will need reliable and trustworthy local guidance. And this is where good legal advice comes in. I am happy either to point you in the direction of the various specialists you might need, or co-ordinate your Serbian project through my consulting firm as a one-stop-shop.
Forthcoming Q Wealth Serbia Report
We are currently working on a brand new Serbia report for Q Wealth readers. It will be uploaded to the Members Area early in 2021. Remember that as of now, while our relaunch is still a work in progress, you can sign up now for the absolutely ridiculous price of just $5 to get the benefit of all our past and upcoming members-only research. Once we finish the relaunch, prices will jump substantially.
So now is the time to act! Click here to sign up.