If you have decided to buy real estate in Serbia, you have to know that this procedure is governed by specific legal rules which refer only to foreign citizens and foreign companies, which will be pointed out in the text below. Can foreigners buy real estate in Serbia? Can Serbian citizens living abroad purchase property in Serbia without being present in Serbia?
1. THE RIGHT TO BUY A REAL ESTATE
While domestic natural persons and legal entities registered in the Republic of Serbia can buy a real estate without any restrictions, foreign natural persons and foreign companies can buy a real estate under certain conditions.
FOREIGN NATURAL PERSONS
Serbian legislative allows foreign natural persons doing business in Serbia to buy any real estate, only if it is necessary for the activity they perform under their business and under the existence of reciprocity. On the contrary, foreign natural person which do not perform any business can also buy real estate, but they are limited only to flats, houses or apartments, under the existence of reciprocity.
Additionally, foreign natural persons can inherit real estate in the Republic of Serbia, under the existence of reciprocity. Term reciprocity is explained in the text below.
Foreign companies can also purchase real estates in the Republic of Serbia necessary for performing their business, under the existence of reciprocity, or if they establish a company in Republic of Serbia.
It is important to point out that foreign natural persons and foreign companies cannot be the owners of the agricultural land, except the citizens and legal entities from the European Union, which are authorized to acquire agricultural land, but under strict conditions prescribed by this law. Is there still any other legal way to acquire real estate? Yes, there is!
Foreign citizens can use alternative ways to buy agricultural land, which are listed below:
a) Establishing a company in Serbia
If a foreign natural person or foreign company establishes a company in Serbia, it can use this company to buy any type of land including agricultural land, because this company will be treated same way as any other domestic company established in Serbia.
b) Purchase of a domestic company
Buying a domestic legal entity by foreign citizens or foreign companies will make them owners of its entire property, including the agricultural land.
What is reciprocity?
Reciprocity means the right of the foreign citizens or company to buy real estate in the Republic of Serbia under the same conditions which are required by the citizens of the Republic of Serbia when buying real estates in their country. The reciprocity can be diplomatic, legal, or factual.
Diplomatic reciprocity means Serbia and the other country have concluded a bilateral agreement governing the issue of acquiring real estate by foreigners. The Republic of Serbia has concluded around 70 bilateral agreements this type so far.
On the other hand, when there is no diplomatic nor legal reciprocity, factual reciprocity may be applied. Factual reciprocity implies that the law of the country in question allows citizens of the Republic of Serbia to acquire real estate under the same conditions as citizens of that country are allowed to acquire real estate in Serbia. It is required when acquiring real estate in the form of Sales and Purchase Agreement or Gift Deed (inter vivos), which means that it is necessary to obtain a legal opinion of the Ministry of Justice of Serbia on reciprocity. In case of inheritance, factual reciprocity is assumed, so you do not need to obtain a legal opinion of the Ministry of Justice.
What do you need to know when buying an apartment or other real estate?
Before you buy real estate, you should check whether there is an encumbrance or mortgage related to real estate. Practice has shown us that analysis of real estate requires specialized knowledge in the field of real estate law. Buying an apartment under construction, buying a property using loan and buying a property with mortgage are particularly sensitive and legally demanding issues, so it is common that such purchases are conducted by lawyers in order to avoid long-term negative consequences for the client.
2. PURCHASE AND SALE AGREEMENT, GIFT DEED
Since a foreign citizen or foreign company is interested in buying property in the Republic of Serbia, the best solution is to engage an attorney at law specialized in real estate law and related transactions. In order to protect the interests of both parties, contractual clauses in the form of down payment, advance payment, installment payments, consent to registration of real estate, etc. are often agreed upon and can be understood properly by attorney at law.
After the contracting parties have agreed on all terms under the agreement, it is necessary for such agreement to be certified before the notary public.
3. DO I HAVE TO BE PRESENT IN SERBIA WHEN FOUNDING A COMPANY OR SIGNING A CONTRACT? HOW TO USE POWER OF ATTORNEY?
No, you do not have to be present at all. All activities related to the establishment of a company by foreign citizens or foreign companies, but also by Serbian citizens living abroad, can be performed using Power of Attorney that is usually issued to the lawyer. Power of Attorney may include the right of the authorized lawyer to found a company, negotiate, sign pre-contract and contract, make or receive payments, report taxes and perform other activities. Therefore, your presence in Serbia is not necessary to complete the process of establishment of a company nor buying real estate.
4. TAXES AND FEES
Absolute rights transfer tax and VAT
The subject of taxation is the transfer of ownership from the seller to the buyer. The tax rate is 2,5% of the market value and it will be paid only once. If the selling price is higher than the market value of real estate, then the tax is calculated based on the selling price.
However, there are also cases when VAT is paid instead of absolute right transfer tax. VAT is always paid in the case of the first transfer of new real estate when sold by VAT tax payer. VAT is 10% for the purchase of apartments and buildings and 20% for the purchase of buildings that are not residential buildings.
It is paid quarterly with a low tax rate.
Capital gains tax
Capital gains tax is paid at a 15% tax rate, which is applied on the tax base that represents the difference between purchase and sale price. This tax is paid by the seller.
Notary public and real estate registration fees
The amount of the fee for certification of the agreement before the Notary Public and registration fee depend on the market value of the property.
Also, it is necessary to make sure there are no debts for electricity, water supply, etc. related to real estate.
The real estate market is expanding and Serbia is mostly known for its low real estate prices and quite simple procedure for the transfer of ownership. This fact makes it attractive for foreign investors to purchase real estate in Serbia. We hope that this text helps you decide buying real estate in the Republic of Serbia.