Umbrella Companies or Rent-a-Company in Serbia, a.k.a Re-Invoicing

Businesspeople who keep their eyes on current trends will have noticed a worldwide sharing economy made possible by the internet. “Rent-a-Company” or “umbrella” services are part of this trend. This article explores how you can rent a company with the specific advantages of doing business in Serbia, using the well-known umbrella company concept. 

Renting a company has become popular in recent years with consultants and digital nomads. Unsurprisingly, this trend has already found its way to Serbia, South East Europe’s business-friendly hub country. 

Renting a company in Serbia is particularly attractive for IT professionals, international business consultants and e-commerce companies, to name just a few. Below, we will explain first how renting a company works, then we will talk about the specific advantages and disadvantages of renting a company in Serbia. Serbiawealth.info can provide Serbian umbrella company services to our clients.

Introducing the Rent-a-Company Concept

Renting a company is perfect if you just need to conduct a few transactions per month. It’s become common practice in many western economies. For example, Forbes has recently published articles on the popularity of renting a company, and the UK government has issued special guidance on the topic since around 14% of consultants in the UK currently work under this system. In the UK, the rent-a-company concept is better known as Umbrella company invoicing. Essentially, an umbrella company and a rent-a-company are the same thing, and the rent-a-company service is also known as Re-Invoicing.

Some of the advantages of renting a company, whether in Serbia or elsewhere, are:

• Absolutely no fixed monthly overhead
• Pay only as you use the services
• Less paperwork and bureaucracy
• Reduce your tax burden by making tax-deductible payments to suppliers.

The basic concept behind renting a company is that somebody else (let’s call them the “landlord”) takes care of all aspects of managing the company. That means you don’t need to worry about issuing invoices, accounting, tax returns, employment law compliance, insurance, social contributions, and all the other administrative burdens that come with running a company. One email or timesheet is all it takes to have your Serbian rent-a-company issue an invoice to your debtors.

A Serbian Umbrella Company Makes Banking Easy

Probably the biggest single advantage of renting a company, however, is that the Company takes care of all the banking business. You don’t need to spend time opening and running one or multiple bank account, you don’t need to travel to Serbia to open an account, and since you don’t own any bank account you don’t need to worry about tax reporting of the business bank account. With your rent-a-company comes immediate access to multi-currency accounts at various Serbian banks. More can be opened, depending on your needs.

You – as the “tenant” – have the benefit that you can  issue professional invoices from an established company with real economic substance, in a reputable jurisdiction, based on a contract to be agreed between the landlord and your client. Your client settles the invoice to the landlord’s Company. As far as they are concerned, that Company is their supplier and they don’t need to dig any deeper.

As well as freelance consultants, small IT firms, digital nomads etc, Offshore E-commerce companies will find Serbian umbrella companies particularly useful as well – due to the strict economic substance regulations now imposed by the major card associations.

So how do you actually get your money? What happens in the background? Very simply, the Company signs a back-to-back contract either with you as an individual, or with your company. You then present an invoice for your services to the Serbian company. The Serbian company can send funds worldwide to settle your invoice. Funds can be sent from your Serbian rent-a-company for example to your personal bank or e-wallet account, your home country company bank account, or to any third parties.

Obviously, the company takes its commission or fee. This can be a percentage or a fixed monthly cost, or a combination of both. In Serbia the most common fee structure for an umbrella company is the percentage of turnover model.

How Umbrella or Rented Companies Work in Serbia

In Serbia, there are some particularities you should know about when it comes to rent-a-company deals. There are some advantages that make Serbia a particularly attractive place to rent a company, and some disadvantages compared to other jurisdictions – particularly when it comes to paying out funds to offshore tax havens. You therefore need to weigh up carefully your business model to see whether renting a company or using an umbrella company in Serbia makes sense in your particular case.

The first thing you should know is that Serbia, unlike the UK for example, has no particular legislation regarding Umbrella Companies. Umbrella companies act as normal Serbian commercial companies, on the basis that they are selling services, and hiring subcontractors to fulfil those services.

Serbia, as an EU accession state, has a VAT system that is almost identical to that used in European Union countries. But since Serbia is not part of the EU’s single market, any export of services from Serbia (services not performed in Serbia) does not fall within the scope of the VAT system. In other words, if you are a non-resident of Serbia invoicing foreign countries through a Serbian company, for services performed outside Serbia, there is no need to concern yourself with VAT. This is a big benefit if your company is not subject to VAT.

Serbia has a good reputation worldwide, and is not blacklisted as a tax haven. As an EU accession state it maintains particularly good relations with the European Union. Therefore you can easily receive payments from the European Union, USA and elsewhere. Serbian banks are fast and efficient. Serbian banks transact routinely in all the major currencies such as dollars and euros, as well as other currencies such as the Russian Rouble and Chinese Yuan. Bank accounts in Serbia have multi-currency facilities by default.

Serbia has not imposed sanctions against the Russian Federation, so it is worth pointing out that Serbian banks and Serbian companies can freely send and receive bank transfers to and from Russia. Russia is currently a major trading partner of Serbia. Needless to say, clients would need to comply with any local legislation if they live in a place that has imposed sanctions on Russia or in a country that is restricted by the Russian authorities.

On the other hand, an important factor to consider is that Serbia does have its own tax blacklist, which is different to the EU’s list of tax havens. This only affects payments going out of Serbian companies. There is no problem with receiving funds from these countries, but you cannot make outgoing payments to countries on the Serbian tax blacklist.  (Well, technically you can, but there is a 25% withholding tax and lots of burdensome paperwork, so it is not recommended at all).

Another disadvantage of the rent-a-company system is that it is not suitable for holding long-term assets. For example, the company cannot hold vehicles, real estate, or plant and machinery on your behalf. That is why the rent-a-company system is perfect for IT contractors or anybody selling knowledge-based services, but it is not suitable for manufacturing businesses. It is also generally not suitable for trading in import-export of physical goods, although there may be exceptions to the latter rule.

Cost of Reinvoicing Service in Serbia

Clients often ask how much it will cost to invoice via a “rent-a-company” service in Serbia. This is hard to answer since each case is different. There is no standard set fee. It simply needs to be a win-win situation for the company in Serbia and the foreign contractor. The company in Serbia must take on legal responsibility for the transaction, and spend a lot of time dealing with banks, Serbian tax authorities etc. 

A rule of thumb is that the cost should be around 10% of the total amount invoiced. But this can vary up or down depending on the work involved, the volume of transactions and money throughflow etc.

Paying Other Business Expenses from a Serbian Re-Invoicing Company

Is it possible to receive and send funds between multiple third parties using a Serbian umbrella company? Yes, absolutely. As long as the transactions are for genuine work, and are properly documented with timesheets, contracts and invoices, you can send and receive money from almost anywhere – subject to the Serbian tax blacklist mentioned above.

Let’s say, for example, that you set up a deal to provide IT services to a company  called ABC Ltd, so the Serbian company receives funds from ABC Inc.

You can then contract with Company XYZ to provide the services. So the Serbian company receives funds from ABC and sends the out to XYZ. Your profit as middleman is separate. The Serbian rent-a-company can pay all other legitimate business expenses for you (for example flights, hotels etc) before making a final payment of the remaining profit to your personal account. Therefore the work of filing a tax return in your home country becomes much simpler, since all the accountancy work and deductions have already taken place at the Serbian umbrella company.

This aspect also means a Serbian umbrella company can be attractive when combined with tax regimes intended for small businesses and digital nomads in other countries. For example you could be living in Croatia on a digital nomad visa, or in Romania under the micro-company regime paying 1-3% tax on turnover.

Are you interested in finding more about our re-invoicing or rent-a-company services in Serbia? Simply give us a call or send us an email to discuss your personal situation with our experienced consultants.