Published on and written by Cyril Jarnias
Investing in real estate abroad is attracting a growing number of European savers seeking return, diversification, and a more flexible tax framework. In this context, the tax advantages for real estate investors in Serbia hold a unique position: moderate taxation, numerous targeted exemptions, no wealth tax, and powerful schemes for large projects as well as long-term individual investors.
For an investor, the essentials are not limited to knowing the tax rates. It is crucial to understand how the Serbian tax architecture can be leveraged to optimize a rental project, a property flipping operation, or a large-scale development. This detailed analysis is made possible by specialized tax guides and expert studies.
A Tax Framework Broadly Favorable to Investors
Serbia’s primary asset is the combination of low nominal rates and a relatively simple-to-understand system for a foreign investor. The country applies a 15% corporate income tax and a flat 15% tax on real estate capital gains for residents, while non‑residents are taxed at 20% on certain capital gains in the absence of a more favorable tax treaty.
The three tax blocks structuring a real estate project, along with their specific favorable regimes.
Applies to the acquisition of new properties. Benefits from favorable regimes like reductions or conditional exemptions.
Concerns the taxation of rental income and capital gains. Mechanisms like depreciation or tax credits may apply.
Includes the transfer tax upon purchase and the annual property tax. Temporary exemptions or reductions are possible.
The main standard rates applicable to real estate transactions can be summarized in the following table.
| Tax | Standard / Maximum Rate | Key Comment |
|---|---|---|
| General VAT | 20% | Applies notably to new non-residential buildings |
| Reduced VAT (new residential) | 10% | First transfer of new dwellings |
| Corporate Income Tax (CIT) | 15% | On worldwide profits of resident companies |
| Capital Gains (Individuals) | 15% | Residents and non‑residents, with broad exemptions |
| Capital Gains – Non-resident companies | 20% | On Serbian real estate or shares, unless a treaty applies |
| Tax on Rental Income (PIT) | 20% | On net rental income of individuals |
| Standard Withholding Tax (WHT) | 20% | Dividends, interest, royalties, rent paid to non‑residents |
| Withholding Tax for “Tax Havens” | 25% | If the beneficiary is based in a preferential jurisdiction |
| Real Estate Transfer Tax | 2.5% | On transfers outside the VAT scope |
| Property Tax (maximum legal rate) | 0.4% | Rate set by municipalities, based on market value |
Beyond these rates, it is above all the tax mitigation mechanisms that interest the real estate investor: accelerated depreciation, exemptions linked to holding period, tax reductions for primary residences, favorable regimes for large operations or special economic zones.
Residents, Non‑residents, and Tax Treaties: Who Pays What?
Before delving into the details of each tax, it is crucial to understand who is taxed in Serbia and on what basis. The country operates on a classic principle: worldwide taxation for residents, limited taxation on Serbian-source income for non‑residents.
An individual is a tax resident in Serbia if their vital interest center is located there, if they have their residence there, or if they stay there for at least 183 days in a 12-month period. A company is resident if it is incorporated in Serbia or if its place of effective management is located there. Residents are taxed on their worldwide income. Non-residents are taxed only on their Serbian-source income, such as rental income from property located in Serbia or capital gains on the sale of Serbian real estate.
Another important pillar for an international investor: the tax treaty network. Serbia has concluded over sixty double tax treaties, covering almost all European Union states, as well as Canada, China, the United Kingdom, Russia, the United Arab Emirates, and Switzerland. These treaties, largely inspired by the OECD model, allocate taxing rights between Serbia and the investor’s state of residence, particularly for dividends, interest, royalties, and capital gains.
For a real estate investor, the most sensitive clauses in a tax treaty concern the taxation of capital gains on the sale of shares in real estate-rich companies and the reduced withholding tax rates applicable to repatriated rent, interest, or dividends. A treaty can often reduce the standard Serbian withholding of 20% to a lower rate, or even neutralize it for certain flows to foreign banks or public institutions.
VAT on Real Estate: A Modifiable Cost for the Investor
VAT represents a significant item in the overall cost of a transaction, but the Serbian system offers several levers to reduce the financial impact for professional investors. The basic rule is as follows: the first transfer of buildings constructed after January 1, 2005, is subject to VAT, with a reduced rate of 10% for new residential buildings and a rate of 20% for new non-residential buildings (offices, retail, warehouses, etc.).
Sales of older buildings are generally subject to a 2.5% transfer tax and not to VAT. Similarly, land, as well as its rental and the rental of residential dwellings, are in principle exempt from VAT, without the possibility to deduct VAT paid upstream.
For a taxable investor, one of the main advantages lies in the VAT reverse charge mechanism applicable to certain real estate and construction operations. If both the seller and the buyer are VAT-registered in Serbia, and if the buyer is entitled to a deduction, the parties can opt for a reverse charge on the sale of a building. The VAT is then not advanced to the seller: the buyer accounts for it simultaneously as output and deductible VAT, which limits the impact on cash flow.
This threshold in Serbian dinars triggers the VAT reverse charge for construction services, thereby reducing temporary financing needs.
For foreign investors, the obligation to register for VAT only arises beyond 8 million dinars of turnover over twelve months, but voluntary registration is possible. An investment group developing a commercial rental portfolio can therefore structure its flows to recover VAT on its costs and benefit from reverse charge options, provided it uses a fiscal representative when necessary.
Taxation of Rental Income: Fixed Rates but an Optimizable Tax Base
Rental income often constitutes the core of a real estate investor’s business model. In Serbia, the taxation of this rental income remains simple in principle, especially for individuals, while offering optimization possibilities through the deduction of expenses.
For individuals, whether resident or not, rental income from a property located in Serbia is taxed at a flat rate of 20%. The taxable base is not the gross rent. An expense deduction is applicable: either based on actual receipts for taxpayers taxed on actual income, or in the form of a standard 25% deduction from the gross rent when both the landlord and the tenant are individuals. This deduction simplifies tax management for small landlords and accounts for the unavoidable costs related to leasing (maintenance, repairs, insurance, management, etc.).
When the tenant is a company, it often acts as the tax collector. It withholds the amount of tax due on the rent at the time of payment, files the corresponding return, and remits the amount to the Serbian tax authority. The non‑resident landlord then does not have to manage the relationship with the local administration directly, which secures the collection of income.
For a company holding a rental portfolio, rental income is taxed at the reduced corporate tax rate of 15%. Taxation occurs after deduction of all actual expenses (loan interest, repairs, depreciation, management fees, taxes). This structure allows, especially in the first years of a heavily indebted project or one requiring significant renovation, to significantly reduce the tax due through depreciation and the deductibility of financing costs, subject to compliance with thin capitalization rules.
The overall logic is summarized in the table below.
| Landlord Profile | Nominal Rate on Rent | Main Taxable Base | Collection Mechanism |
|---|---|---|---|
| Individual (resident or non-resident) | 20% | Net rent after expenses or 25% deduction | Self‑assessment or withholding by corporate tenant |
| Resident Company | 15% (CIT) | Net profit (rents − expenses & depreciation) | Annual CIT return |
| Non-resident Company (without PE) | 20% (WHT) | Gross rent (with possibility of more favorable treaty) | Withholding at source by Serbian payer |
For certain types of short‑term tourist rentals, mitigated regimes can be applied locally, enhancing the attractiveness of the seasonal rental market in tourist areas.
Real Estate Capital Gains: A Very Favorable Regime for the Long Term
This is probably one of the most attractive schemes for long‑horizon investors: Serbia offers a full exemption from capital gains tax for resident individuals who have held a property for more than ten years. Concretely, if a resident individual buys an apartment, holds it for at least ten years, and then sells it with a substantial capital gain, the entire gain can be exempt from the 15% tax normally due.
When an apartment is transferred by donation or inheritance, the holding period for tax exemption is calculated from the initial acquisition date by the donor or the deceased. Thus, a property received by children from their parents can benefit from an already long holding history, facilitating access to the exemption upon a future sale.
This very powerful advantage, however, comes with two important limitations: it is reserved for resident individuals and does not apply to properties held via a company. A foreign investor wishing to benefit from this regime must therefore consider, at least in the long term, obtaining tax residency in Serbia, or structuring their project in their own name rather than through an intermediary structure.
The capital gain realized from the sale of a property can be exempt from tax if the proceeds are reinvested in the purchase of another dwelling for the needs of the seller or their family. The reinvestment must occur within 90 days for a direct exemption, or within 12 months to obtain a refund if the tax has already been paid, subject to approval by the tax authority. If only part of the price is reinvested, the exemption is proportional.
The general scheme for capital gains taxation can be summarized as follows.
| Taxpayer / Situation | Basic Rate on Capital Gain | Main Possible Exemptions |
|---|---|---|
| Individual (resident or non‑resident) | 15% | Holding period > 10 years (resident); direct line inheritance; reinvestment in a dwelling; transfers between spouses and ascendants/descendants |
| Resident Company | 15% | No holding period exemption, but capital losses can be carried forward for 5 years |
| Non‑resident Company without establishment | 20% | Possible reduction via tax treaty |
For large infrastructure concessions, an even more specific regime provides for the exclusion of capital gains from the taxable scope when the concession value exceeds 50 million euros, confirming the use of taxation as a tool to attract structuring investments.
Transfer Tax and Registration Fees: A Controlled Cost
In the secondary market, i.e., for older buildings not subject to VAT, the main acquisition tax is the property transfer tax, at a flat rate of 2.5%. This rate applies to the agreed price, provided it is not lower than the market value estimated by the authorities; if it is, the base is adjusted to the estimated value.
Notary fees for a real estate transaction are capped at approximately 6,000 euros.
The total of these costs represents on average between 5.6% and 8% of the purchase price for the buyer, and around 7.6% to 10% for a complete round trip (purchase then resale). In a European context, these levels remain competitive, especially as there are no specific stamp duties or real estate wealth tax.
Annual Property Tax: Low Rates and Targeted Exemptions
Once the property is acquired, the owner—whether an individual or legal entity, resident or not—is liable for the annual property tax. Here again, Serbia stands out with capped rates and reductions targeting occupancy as a primary residence and certain social situations.
The calculation base is generally the property’s market value. For companies using fair value accounting, the book value may be used. Municipalities set the rates within a limit of 0.4% for most property owners, and 0.3% for certain holders of land without accounting obligations.
In practice, the system is progressive for individuals, with several brackets based on cadastral value, with rates potentially exceeding 0.4% on the highest value portion. But two significant reductions alleviate the bill:
– a 50% reduction in property tax for the taxpayer’s primary residence, capped at 20,000 dinars per year;
– a 75% reduction for houses or apartments under 60 m², not rented, occupied by persons over 65 years of age.
Companies holding property as stock for resale, such as property dealers and developers, benefit from a property tax exemption in the year of acquisition and the following year. This advantage concerns properties held before their commercialization.
The property tax calendar is also structured: the return must be filed by March 31 and payment is spread over four equal installments. Since 2019, the entire process—checking the valuation, filing the return—can be done online via a unified local tax management system, facilitating remote management for foreign investors.
Depreciation and Amortization: A Structural Advantage for Companies
For investors who choose to operate through a company (which is common to circumvent certain land ownership restrictions or to structure a rental portfolio), the tax depreciation treatment of buildings is decisive. In Serbia, capitalized assets are divided into five groups, with predefined depreciation rates.
Buildings and other real estate fixed assets (excluding land) are classified in Group I, depreciated linearly at a rate of 2.5% per year. Other equipment is subject to higher rates (10, 15, 20, or 30% depending on the categories), also on a straight-line basis for assets acquired from 2019 onward.
For a 10 million euro investment in commercial real estate, the 2.5% rate entitles an annual depreciation charge of 250,000 euros, deductible from taxable profit at 15%. For buildings accounted for as ‘investment property’ at fair value (without accounting depreciation), a separate 2.5% tax deduction remains applicable, thus preserving the tax advantage despite valuation on the balance sheet.
Another notable point: tax losses from business activity (excluding capital gains) can be carried forward for five fiscal years and are not challenged in case of a change in ownership. Capital losses on disposal are also carried forward for five years, but can only be offset against capital gains of the same nature.
Corporate Income Tax, Loss Carryforwards, and Interest: A Pro-Investment Environment
The 15% corporate income tax rate positions Serbia among the most attractive jurisdictions in Europe on this front. For real estate companies or development vehicles, this moderate rate is further softened by the possibility to carry forward losses for five years, which aligns well with the long cycle of real estate projects (acquisition, renovation, then full operation phases).
Interest paid to related parties is deductible only up to four times equity (ten times for banks and leasing companies). Excess interest is non-deductible, unless proof of compliance with an arm’s length rate is provided via transfer pricing documentation in line with OECD guidelines.
For a real estate investor, the challenge is therefore to calibrate intra-group debt and to use, if necessary, external bank debt to optimize both financing and deductibility. The Serbian framework offers a certain flexibility, with the possibility to use reference rates published by the Ministry of Finance or comparables studies to justify financial terms.
Highly Incentivizing Schemes for Large Projects and Special Zones
Beyond the general rules, Serbia has clearly chosen to make taxation a lever to attract large projects, whether industrial, tourist, or real estate. Several schemes combine to offer a particularly competitive environment for investors developing large-scale projects.
Companies investing more than one billion dinars (≈ 8.5 M€) in their assets and creating at least 100 additional permanent jobs can benefit from a tax credit of up to 10 years of corporate income tax exemption. This scheme, conditional on meeting commitments, applies for example to developers of large tourist complexes or operators of logistics platforms.
Special Economic Zones (SEZ) and free zones reinforce this scheme. Companies operating there often benefit from reduced CIT rates, property tax exemptions lasting up to ten years, simplified procedures for obtaining building permits, and sometimes direct subsidies for job creation or infrastructure upgrades. In free zones, activities may even be exempt from VAT, and profits realized can be transferred abroad without additional withholding.
Grant programs can finance up to 25% of investment costs for strategic tourism or infrastructure projects.
Dealing with Double Taxation and Repatriating Income
A foreign investor always considers the question of double taxation: how to avoid paying taxes twice, in Serbia and in their country of residence, on the same rental income or capital gains? This is precisely the purpose of the double tax treaty network: they provide for either exclusive taxation in one of the states, or taxation in both, coupled with a tax credit in the state of residence equal to the tax paid abroad.
Serbia generally retains the right to tax real estate income (rent, capital gains, dividends). However, tax treaties cap the withholding tax on income paid to non‑residents (dividends, interest, royalties) at preferential rates, often between 5% and 15%, instead of the domestic rate of 20%. The investor can then credit this withholding in their country of residence, up to the limit of the local tax due on the same income.
To benefit from treaty rates, the beneficiary must prove their tax residency in the partner state, using a certificate of residence issued by their tax authority, and demonstrate that they are the beneficial owner of the income. These formalities are technical but well mastered by local tax advisors and international firms present in Belgrade.
Possibility to Reside and Structure Ownership
Beyond purely tax aspects, Serbian law offers a certain flexibility regarding property ownership by foreigners. Foreign nationals can acquire apartments and houses, subject to reciprocity with their country of origin, even though restrictions exist for agricultural land. The latter can, however, be held through a Serbian company, which allows circumventing the prohibition for individuals.
The purchase of a habitable dwelling can serve as a basis for obtaining a temporary, and eventually permanent, residence permit. This option is strategic for an investor wishing to settle, manage their real estate portfolio directly, or optimize their tax status, particularly to benefit from the capital gains exemption after ten years of ownership.
Limited liability companies (“d.o.o.”), equivalent to LLCs, are quick to set up, with a symbolic minimum share capital. They are widely used by foreign investors to hold real estate assets, hire staff, and invoice rent or management services.
Other Tax Advantages: No Wealth Tax, Low Overall Pressure
Serbian real estate taxation cannot be evaluated in isolation from the rest of the system. For a high‑net‑worth private investor, the complete absence of a wealth tax or specific luxury goods tax is a major argument. Employment income is taxed at a base rate of 10%, with limited progressivity for very high incomes, while dividends and certain securities capital gains are taxed at aligned or slightly higher rates (around 15 to 20%).
Pensions are generally tax-exempt in Serbia, a significant advantage for retired investors. Furthermore, the tax and social framework regarding employment offers multiple exemptions, particularly for hiring the long-term unemployed, recent graduates, or specialized talents. This can be an asset for an investor who manages their properties directly or develops a hotel project, despite a relatively high overall level of social charges.
Taxation Designed as a Tool for Real Estate Attraction
Looking at the schemes described in the various guides and reference texts as a whole, a common thread clearly appears: Serbia uses its taxation as an instrument of economic policy to modernize its real estate stock, attract foreign capital, and develop structuring projects.
An overview of the three pillars of tax incentives that make the Serbian real estate market attractive to investors.
Simple taxation with low rates on rental income and capital gains, ensuring competitive net returns for classic acquisitions.
Powerful measures such as the capital gains exemption after 10 years of ownership (residents), property tax reductions for primary residences, or temporary exemptions for developers’ stock.
Large-scale advantages for major investors: corporate tax credits for up to 10 years, property tax exemptions, aid, and facilities in special economic zones and free zones.
For a foreign investor, the key is to combine these different blocks according to their profile: intended holding period, use of debt or not, rental or speculative objective, willingness to establish a long-term presence or not. Well-structured, a real estate strategy in Serbia can then benefit from a remarkably favorable tax environment, while taking advantage of a developing market and acquisition costs that remain competitive compared to many neighboring countries.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
