There is a special law in Serbia that regulates the establishment of Free Economic Zones in the country. Such Zones make resident producers of goods tax exempt if the goods are exported outside Serbia. Moreover, if materials or components are imported to a Free Zone, no customs duties nor import taxes are due either.
The number of Free Zones is growing in Serbia because they help attract foreign capital and promote local communities. At the moment when the article is written, there are 15 Free Zones in Serbia: FZ Subotica, FZ Zrenjanin, FAS FZ Kragujevac, FZ Novi Sad, FZ Šabac, FZ Užice, FZ Svilajnac, FZ Smederevo, FZ Pirot, FZ Apatin, FZ Kruševac, FZ Vranje, FZ Priboj, FZ Beograd, and FZ Šumadija. The Zones are equally distributed around the country.
In addition to tax incentives, resident companies enjoy extensive administrative support in Serbian Free Zones and have access to efficient information services. Qualified personnel is also readily available in the Zones because Serbia has an advanced education system. Multiple business opportunities that can be found in Free Zones as well as mainland Serbia are listed here.
The Free Zone Act
In accordance with the Serbian Free Zone Act, a Free Zone in Serbia is a fenced territory with clear borders that guarantees favorable fiscal and economic conditions to resident companies.
In accordance with the Act, a Free Zone can be established by a local Government body, a business entity or an entrepreneur who signs an agreement with other founders of the zone. In other words, a Free Zone can be only a collective enterprise. The founders of the Zone have to form a Zone management company and this company is authorized to file an application for an official establishment of the Zone. The application has to be filed to the Serbian Ministry of Finance that will pass it on to the Government of Serbia.
The power to establish a Free Zone in Serbia rests with the Government of the Republic of Serbia.
Zone users are legal and natural persons that conduct their business activities within the Zone. The Zone founders, the Zone management company, Serbian and foreign companies and individuals working in the Zone are considered Zone users.
Zone users carry out their operations in accordance with the contract signed with the Zone management company. This contract regulates their mutual rights and obligations.
How can a Free Zone be formed in Serbia?
The Zone management company can file an application for Free Zone formation only of the following conditions are satisfied:
1. The founders of the Zone management company are the founders of the Zone itself;
2. A Free Zone can have only one Zone management company;
3. The Zone management company has to be registered with the Serbian Register of Business Entities;
4. The authorized person of the Zone founders and the Zone management company has to have no criminal past. In particular, he or she cannot have been accused of economic crimes, crimes against property, illegal trade or breach of duty;
5. The authorized person of the Zone management company cannot have held a public office for three years prior to the application date. Besides, he or she cannot be a manager of a company that is undergoing a bankruptcy procedure;
6. If a Zone management company loses its license, the same company cannot apply for Free Zone formation again.
In Accordance with the Free Zone Act, The Ministry of Finance of the Republic of Serbia assesses the economic expediency of the application and sends its opinion to the Government of the Republic of Serbia.
Formation of the Zone is deemed economically expedient if one can make a conclusion that the proposed Zone will be able to attract foreign capital, produce important goods, create new jobs, develop modern technologies, and contribute to the achievement of strategic economic goals of the Republic of Serbia. The conclusion has to be based on research results and other evidence.
Criteria for assessing economic expediency of the proposed Free Zone
The Serbian Ministry of Finance creates a committee to consider the application for Free Zone formation. The committee evaluates the fulfillment of technical and energy conditions, environmental protection aspects, and compliance with customs control measures. The date when the Ministry of Finance approves the application for Free Zone formation is the date of birth for the Free Zone.
The Zone management company determines the technical and organizational conditions for launching the Zone. These conditions have to be approved by the Free Zone Committee, a division of the Ministry of Finance. The Committee monitors the activities of all Free Zones in Serbia.
The Free Zone has to be fenced, labeled as a Free Zone, and its borders have to be clearly marked. Persons and goods can enter and leave the Zone only through specially designated entry/ exit points. Customs authorities determine the places of entry and exit for each Free Zone. The Zone management company is responsible for providing facilities for the operations of customs authorities in the territory of the Zone.
A Free Zone can consist of several parts on the condition that they make up a single business entity.
Export/ import operations in Serbian Free Zones
Export of goods and services from the Zone as well as import of goods and services to the Zone are free from quantitative restrictions and any other control measures regulating foreign trade. The customs authorities stationed in the Zone confirm that the exported goods have been manufactured inside the Zone.
Goods can be temporarily removed from a Free Zone or temporarily brought to the Zone in order to test, fix, or promote them.
No import duties, nor the VAT, nor any other taxes are levied on the materials and components imported to a Free Zone in order to manufacture goods or to build something there. Goods and services produced inside a Free Zone and exported to foreign countries are not taxed in Serbia either.
However, goods produced in a Free Zone and sold to the Serbia market are taxed. These goods have to be registered with the customs authorities. The tax obligations arise on the day when the goods enter mainland Serbia.
Serbian Free Zones are an especially powerful business instrument for companies wishing to engage in export/ import operations in the heart of Europe.
Rizwan Ali