Opening a Sole Proprietorship (Paušal) in Serbia: A Complete Guide

What is Paušal and Who is it For?

Paušal taxation in Serbia is a simplified system with a fixed tax rate that does not depend on the entrepreneur's actual profit. This regime is considered the simplest and most convenient, especially for freelancers, IT specialists, and consultants working with foreign clients.

The main advantage of the paušal system is its simplicity: complex accounting is not required, and the registration process takes no more than 5 working days with a minimal set of documents. This makes it an attractive option for those who want to quickly and legally start a business in Serbia.

Important Warnings Before Registering a Sole Proprietorship

Before starting the registration process, it is necessary to consider several critically important points to avoid problems with the law and the migration service.

First, opening a sole proprietorship solely to obtain a residence permit without conducting real business activity is a risky strategy. The initial residence permit may be approved, but if there is no turnover in the account (approximately from 2000 euros per month), it will not be renewed, even if taxes are paid on time.

Second, any schemes for cashing out funds or creating fictitious activities are strictly prohibited. You cannot receive money on personal or foreign cards and then deposit it into the sole proprietorship's account. This can be regarded as money laundering. All income must come directly to your Serbian business account from clients through legal channels, such as SWIFT transfers.

Finally, make sure in advance that you can open a corporate bank account. Some banks may refuse, especially if your activity is related to parallel imports or re-exports. It is also worth considering that receiving payments in US dollars in Serbia can be difficult.

List of Documents for Sole Proprietorship Registration

To register a sole proprietorship under the paušal taxation system, a minimal set of documents is required. It is important to note that having a 'white card' (registration of stay) is not a mandatory requirement.

1. A completed application form (Registraciona prijava osnivanja preduzetnika). It can be filled out on a computer or by hand, using Serbian Latin script and capital letters. The first and last name should be written as in your international passport.
2. A copy of the first page of your international passport (with the photograph).
3. Payment of the state fee. Currently, it is 1670 RSD, but an increase to 2500 RSD is planned from 2026. You can pay on-site with a card or cash.
4. (Optional) If you already have a residence permit and you specify your JMBG (personal number) in the application, you will need a copy of the passport page with the visa sticker (nalepnica) or your ID card.

In the application, you can specify that the business activity will start at a later date. In this case, taxes are not accrued until you submit a notification of commencement of work, but the fee for the legal address remains mandatory.

Choosing a Legal Address: Coworking Space or Apartment?

Choosing a legal address is an important step that affects taxation and interaction with government agencies. It is recommended that the legal address be in the same city where you plan to live and apply for a residence permit.

• Virtual office in a coworking space. This is a suitable option for freelancers, programmers, and consultants. The cost in Belgrade is about 44 euros per month, and in Novi Sad - about 41 euros. The contract with the coworking space does not need to be submitted to the registration authority (APR), but it must be signed after the sole proprietorship is opened.
• Registration at your residential address. If the apartment owner gives consent, you can register the sole proprietorship at your place of residence. However, this comes with additional obligations: you must conclude a separate lease agreement for office space (even if it's part of the apartment) and independently pay a 20% tax on the rental amount. Payments must be made exclusively from the business account to the landlord's account.

Changing the city or municipality (opština) of the legal address for a paušal entrepreneur can lead to a significant tax increase (up to 50-60%).

Activity Codes (NACE) and Tax Calculation

The correct choice of the activity code (šifra delatnosti) is crucial, as the amount of the monthly tax directly depends on it. It is recommended to choose a code that most closely matches the wording in your contract with the client.

It is important to remember that changing the activity code in the future will lead to a tax increase of 10% or more. Also, be aware that some activities, such as advertising, trade, and real estate operations, are not eligible for the paušal regime.

• Activity code
• Entrepreneur's age
• Year of SP establishment
• Registration address

There is a common misconception about a 50% discount for new entrepreneurs. In reality, a reduction coefficient of 0.5 is applied to them, which increases annually, but by no more than 10%. This mechanism is already included in the calculator and is designed to prevent fraud involving re-registration of sole proprietorships.

Step-by-Step Registration at APR (SBRA)

The document submission process takes place at the Serbian Business Registers Agency (APR or SBRA). There are offices in major cities, for example, in Belgrade (Brankova 25) and Novi Sad (Modene 7).

1. Before your visit, print all necessary documents. It is highly recommended to use the free service of having a lawyer check your application right in the APR building.
2. At the APR, get a ticket for the information desk, where you will be given a payment slip for the fee.
3. Pay the fee at the post office counter, which is usually located in the same building.
4. Get a new ticket for document submission.
5. Submit the complete package at the window: the application, a copy of your passport, and the payment receipt. You will be given a confirmation of receipt with a case number (e.g., БП 123456/2023).
6. Track the status of your application online on the APR website using the case number.
7. After receiving a positive status (usually within 1-5 working days), return to the APR with your passport and the confirmation slip to collect the decision on the registration of the sole proprietorship.

After receiving the registration documents, you can open a bank account, and a week later, contact the tax office for tax payment details.

Rules for Running a Sole Proprietorship and Financial Management

After registering the sole proprietorship, it is important to follow the rules of business conduct to avoid fines and problems with the tax authorities.

When working with legal entities (B2B), an invoice must be issued for each money transfer, specifying the sole proprietorship's details (name, address, PIB, matični broj). All contracts and invoices must be kept. It is also important that your activity meets the criteria of the 'independence test' to avoid being reclassified as an employment relationship.

Working with individuals (B2C) requires the use of a fiscal cash register. You cannot issue invoices to them; every service or product must be accompanied by a fiscal receipt. All revenue received in cash must be deposited into the business account.

The annual income limit for the paušal system is 6 million dinars. As you approach this amount, you must apply in advance to switch to the 'knjigaš' system (bookkeeping), as the transition is not automatic. Late submission of the application can result in inspections and fines.

Frequently Asked Questions

Many questions arise during the process of registering and running a sole proprietorship. Below are the answers to the most common ones.

Any application to the APR, including the registration of a sole proprietorship, is processed within 5 working days.

No, one person cannot own multiple sole proprietorships simultaneously, regardless of the taxation system (paušal or knjigaš).

Yes. If you do not yet have a Serbian residence permit, you will need to obtain a qualified electronic signature (QES), which costs around 5000 RSD and is only suitable for interacting with the APR. If you already have a residence permit, you can submit the application using the free ConsentID system.

No, such a procedure is not provided for by law.