The Foreign Trade Act specifies that a foreign legal entity can perform business-related activities in the Republic of Serbia as forms of foreign trade operations through direct investments and capital projects of a foreign person in Serbia, i.e. of a domestic person in another state or customs territory. Direct investment has been defined as the incorporation of a company, branch, purchase of equity or capital shares of a company, recapitalization of a company and any other shape of investment by a foreign person in the Republic of Serbia, i.e. a domestic person in another state or customs territory.  

A foreign company can incorporate its representative office in the Republic of Serbia by a decision of its competent body that has to be further registered in the register of business entities. The representative office can be defined as a separate organizational unit of a foreign legal entity that can perform particular advance and preparatory actions to conclude legal transactions of the company. As can be seen, a representative office forms an integral component of a foreign company and does not contain the capacity of a legal person. Hence, the foreign company that incorporated the representative office remains liable for the obligations towards third parties resulting from the operation of its representative office. The decision of the foreign company’s competent body to form a representative must necessarily contain certain pieces of information, such as the name and seat of the registry in which a foreign legal entity is registered; business name, legal form and founder’s headquarters; identification/registration number of the founder; address of the representative office itself, as well as the personal name, i.e. business name of the representative of the representative office. In the Republic of Serbia, a legal entity can be registered in the Agency for Business Registers, and it is necessary to attach certain subsequent documentation when submitting an application.  

Similar to a representative office, a branch office of a foreign company can be defined as the company’s separate organizational unit through which the company performs business-related activities in the Republic of Serbia in accordance with the law. To incorporate a branch office, the foreign company’s competent body has to issue a decision as well. Specifically, a branch is formed by a decision passed by the general meeting, i.e. partners and general partners, unless otherwise provided in the memorandum of association or articles of association. Similar to the representative office, a branch office doesn’t contain legal capacity, but one significant difference arises here. Namely, according to relevant Serbian legislation, a branch office is treated as a resident in the tax sense. To break it down, a representative office operates on the Serbian soil through its non-resident account and the authority of its founder, and cannot, as is the case with a branch office, perform a plethora of business-related activities. A branch of a foreign company has its predominant activity that may differ from the founder’s predominant activity, and has the ability to perform other activities that have not been prohibited by law, regardless of whether they have been specified by the decision of the foreign company’s competent body on the incorporation of the branch office or not. A clear line can be drawn here to establish the main difference between a branch and a representative office. As stated above, a representative office can only perform advance and preparatory actions regarding ongoing operations and the conclusions of the foreign company’s transactions, while a branch office provides more opportunities in the economic aspect.  

The particularities of incorporating a foreign company’s branch office are evident in the mandatory elements that the decision issued by the company’s competent body must contain. Article 573 (3) of the Serbian Companies Act stipulates that the specified decision must contain particular pieces of information such as the name and address of the branch office; predominant activity of the branch office; personal name, i.e. business name of the representative and the scope of the representative’s authority; business name, legal form and headquarters of the foreign company and its registration number; personal name, i.e. business name of the foreign company’s representative; an e-mail address, and lastly, data on the registered capital of the branch office’s founder in case such data is required by the law of the state in which the founder is registered. As for the dissolution of a representative and branch office, there’s no big difference indeed. Namely, Article 572 of the Companies Act stipulates that the branch office shall cease by the decision made by the foreign company’s competent body unless something different has been set forth in the memorandum of association or the articles of association. A representative office, in accordance with the wording provided in Article 576 of the Companies Act, simply ceases by a decision to dissolve the representative office. Both the branch office and the representative office dissolve by the founder’s dissolution, unless, in the event of a status change, the legal successor decides that the branch office or the representative office should continue to operate. 

The Law on Foreign Currency Transactions encompasses provisions significant for the operation of a foreign company’s branch office in the Republic of Serbia. For instance, Article 18 specifies that a resident may attain a line of credit or a loan from abroad with maturities longer than one year, which are used by payment of the loaned funds to the bank account of that resident, while such lines of credit and loans may be obtained by a resident, namely a branch office from its foreign non-resident founder. Furthermore, the above-mentioned Act stipulates that tax residents, such as legal entities, branch offices of foreign legal entities and entrepreneurs may set off debts and claims on the ground of realized resident’s foreign trade of goods and services which is not considered to be a commercial credit facility and loan. Setting off debts and claims arising from international credit facility operations in foreign currency may also be carried out on the basis of realized foreign trade of goods and services, as well as from direct investments and investments in real estate, under conditions prescribed by the National Bank of Serbia.