Branch of a Foreign Company as a Corporate Income Taxpayer in Serbia
The business activities of foreign legal entities in the Republic of Serbia may be carried out through a permanent establishment, which may exist either as a registered entity or as an unregistered form under applicable tax regulations. When formally registered, a permanent establishment typically operates as a branch when conducting business activities in Serbia, or as a representative office when activities are limited to preparatory and auxiliary functions without engaging in commercial operations.
The distinction between a branch and a representative office has significant legal, tax, and accounting implications. This text focuses exclusively on branches of foreign legal entities, while representative offices will be addressed separately.
In practice, foreign companies often operate in Serbia through a branch registered with the Serbian Business Registers Agency. The branch maintains accounting records in accordance with the Accounting Law and is a corporate income taxpayer on profits generated in Serbia, under rules largely comparable to those applicable to resident companies.
Legal and Accounting Nature of a Branch
A branch is an organizational unit of a foreign company through which business activities are conducted in the territory of the Republic of Serbia. Although it does not have legal personality, it acts in legal transactions on behalf of and for the account of its parent company.
Accordingly, a branch is not an independent legal entity separate from its foreign head office; however, it may have operational autonomy, including the ability to conclude contracts, participate in judicial and administrative proceedings, and submit applications to competent authorities.
From a tax and accounting perspective, a branch is treated as a separate reporting and tax unit. It may be liable for VAT, corporate income tax, property tax, and other public charges, and is required to maintain accounting records and prepare financial statements in accordance with Serbian legislation.
The Accounting Law explicitly applies to branches of foreign legal entities conducting business activities in Serbia.
Tax Treatment of Profit
Since a branch is a recognized form of conducting business activities of a foreign company in Serbia, maintains accounting records, and has taxpayer status, the taxation of its profit is generally carried out under rules similar to those applied to resident companies, with certain specific differences regarding expense recognition.
In certain cases, branch income may be exempt from taxation in Serbia in accordance with applicable double taxation treaties, or if the same income has already been taxed in Serbia, in order to avoid double taxation.
