Navigating Serbia’s Foreign Exchange Regulations

Understanding Serbia’s foreign exchange regulations is crucial for both residents and non-residents involved in cross-border financial transactions. As global business operations continue to grow, knowing the legal framework governing money transfers from Serbia to abroad becomes more vital than ever. This commentary explores the key aspects of Serbia’s Foreign Exchange Operations Law, including current and capital transactions, direct investments, and compliance measures needed to avoid legal risks. Whether you’re a business owner, investor, or financial professional, this guide provides essential insights into Serbia’s rules for moving money across borders.

Conditions for Opening and Operating Non-Resident Accounts

The Foreign Exchange Operations Law (“Official Gazette of the Republic of Serbia,” Nos. 62/2006, 31/2011, 119/2012, 139/2014, and 30/2018 – referred to as the Law) allows non-residents to hold foreign currency and dinars in Serbian bank accounts without restrictions. The National Bank of Serbia (NBS) prescribes the conditions for opening these accounts and managing them.

Non-residents can legally open accounts with Serbian banks. However, some regulations and positions of certain authorities suggest otherwise. Despite this, the Law’s provision on deposit transactions for non-residents remains clear and undisputed.

Regulations for Managing Non-Resident Accounts

The Decision on the Conditions for Opening and Managing Foreign Exchange Accounts of Residents, along with Dinar and Foreign Exchange Accounts of Non-Residents (“Official Gazette of the Republic of Serbia,” Nos. 51/2015, 82/2017, 69/2018, and 96/2018 – hereinafter: the Decision), provides more detailed conditions. It outlines how banks should open and manage these accounts.

Types of Non-Resident Accounts

The Decision defines two types of accounts:

• Foreign Exchange Accounts: Hold foreign currency for both residents and non-residents.
• Dinar Accounts: Hold dinar funds for non-residents.

Both foreign exchange and dinar accounts can be current or deposit accounts. A current account, whether foreign exchange or dinar, handles payment transactions and other banking services. A deposit account, on the other hand, opens based on a deposit agreement and can be sight or term, with or without a notice period or specific purpose.

Joint Current or Deposit Accounts

Since the implementation of the Law on Payment Services (“Official Gazette of the Republic of Serbia,” Nos. 139/2014 and 44/2018), non-residents, like other payment service users, can open joint current or deposit accounts. A bank may also open other types of accounts for non-residents, depending on the agreement concluded between the bank and the non-resident.

Opening a Non-Resident Account for a Legal Entity

To open a non-resident account, the non-resident must submit a written request to the bank. This request can be on paper or any other durable medium, as defined by the law governing payment services. The non-resident must also provide documentation as required by the Decision. After reviewing the request and documents, the bank and the non-resident conclude an agreement on paper or another durable medium. Depending on the type of account, the parties may sign a framework agreement, a deposit agreement, or an agreement for managing another account.

The bank may also open a non-resident account if required by law or another regulation.

Obligations for Opening a Non-Resident Account

The Decision does not specify all cases where a bank must open a non-resident account. Other regulations cover these requirements. For example:

• Securities Trading: Non-residents must open an account to participate in the market and manage securities rights.
• Representative Offices of Foreign Entities: A representative office operates through the non-resident account of its foreign founder. The Companies Law (“Official Gazette of the Republic of Serbia,” Nos. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019, and 109/2021) mandates this.

Thus, non-residents may open accounts in Serbia, but there is no general legal obligation to do so. The obligation might arise from other laws, but these instances are rare.

Payments Involving Non-Resident Accounts

The difference between direct payments to a non-resident’s foreign account and payments to a non-resident’s account in Serbia often depends on the type of transaction. For instance:

• Current Transactions: A non-resident can freely transfer profits from investments or dividends earned from a Serbian company to their foreign account.
• Capital Transactions: When a non-resident sells their share in a Serbian company to another resident, they must receive the payment in their dinar account in Serbia. They cannot receive the payment directly to a foreign account.

The law aims to support fiscal policy objectives, as seen in the conditions for transferring funds abroad from non-resident accounts.

Closing a Non-Resident Account

Banks close foreign exchange or dinar non-resident accounts at the non-resident’s request or when the non-resident ceases to exist as a legal entity. The closure request must be in writing and include the account number for closure and the account number for transferring funds. If the account is joint, all holders must submit the closure request.

Regulation of Payment Transactions Through Non-Resident Accounts

The Instructions for Implementing the Decision on Payment Transactions (“Official Gazette of the Republic of Serbia,” Nos. 24/2007, 31/2007, 41/2007, and others) regulate domestic and foreign payment transactions. They outline how to collect, pay, and transfer funds through non-resident accounts, whether in dinars or foreign currency. Payment orders to foreign countries require documentation proving the payment obligation, unless a written agreement states otherwise.

Tax Obligations for Fund Transfers

Non-residents transferring funds from their Serbian accounts abroad must first settle any tax obligations related to the transaction. They need a certificate from the competent tax authority to confirm that all tax obligations have been met. Exceptions exist for savings accounts, foreign banks, and securities trading accounts, which are free from this requirement.

Current Issues in Opening and Operating Non-Resident Accounts

Opening non-resident accounts in Serbia remains a complex issue due to strict regulations and current geopolitical situations, such as the war in Ukraine. The National Bank of Serbia has clarified that banks have the discretion to choose their clients. However, banks must comply with anti-money laundering laws and other regulations. This complexity often leads to misunderstandings and delays in opening accounts for non-residents.

Conclusion

Understanding Serbia’s foreign exchange regulations is essential for ensuring compliance and safeguarding financial transactions. This guide outlines the key elements, including account types, obligations, and tax requirements. Staying informed and adhering to these regulations allows both residents and non-residents to navigate Serbia’s financial landscape confidently. For complex transactions, consulting with a financial expert in Serbian regulations is highly recommended.