Sole Proprietor or DOO in Serbia: What Foreigners Choose

In Serbia, a foreigner who wants to work legally and pay taxes here has two basic forms available: the sole proprietor (preduzetnik) and the limited liability company (društvo sa ograničenom odgovornošću, DOO). Both are registered with the APR (Business Registers Agency), both can work with foreign clients and receive payments into an account with a Serbian bank. The difference lies in liability, taxes, running costs and in what each form offers when it comes to obtaining a temporary residence permit.

Below we go through both forms without simplifications: what taxes each one pays, how much accounting costs, what happens as revenue grows and which typical scenarios suit a freelancer, a small studio and a company with employees on the payroll.

The sole proprietor: what it is and who it suits

A preduzetnik is a natural person registered with the APR in order to carry on business activity. No legal entity comes into being: the person signs contracts personally, and is liable for the obligations of the business with all of their property. In exchange, registration is faster and cheaper, and if the lump-sum regime is chosen, accounting comes down to a single book of revenue records.

A sole proprietor can choose one of three tax regimes. The first is the lump-sum tax (paušalno oporezivanje): the tax authority assigns a fixed monthly amount that covers income tax and social contributions, and does not look at actual profit. The second is self-assessment (samooporezivanje) based on actual income and expenses: 10% tax on profit plus contributions. The third is paying yourself a personal salary (lična zarada): the sole proprietor sets a salary, tax and contributions are paid on it, and the remaining profit is taxed at 10%.

The lump-sum regime is not open to everyone. Annual revenue must not exceed 6,000,000 dinars (RSD), the type of activity must not fall within a closed list (trade, advertising and marketing, accounting and audit services, financial intermediation, real estate), and the sole proprietor must not be registered for VAT (PDV). We cover the limits and the calculation in detail in a separate article on the lump-sum tax in Serbia.

The DOO: what it is and who it suits

A DOO is a fully fledged legal entity with share capital starting at 100 dinars (about one euro). The founder and the director can be the same person, including a foreigner without a residence permit. The company is liable for its debts with its own property, and the member is liable only up to their contribution. This is the main argument in favor of a DOO if you sign large contracts, work with subcontractors or plan to hire people.

The taxes on a DOO are different: 15% on company profit, then 15% when dividends are paid out to an individual. If all profit is distributed, the combined burden works out at roughly 27.75% — higher than for a lump-sum sole proprietor with modest revenue, but quite comparable to the self-assessment regime at income levels that no longer fit within the lump-sum limit. Salaries for the director and employees are taxed separately: 10% income tax and social contributions, which together come to around 35% of the gross amount.

The mandatory accounting for a DOO is far more demanding: double-entry bookkeeping, annual financial statements filed with the APR, a corporate profit tax return, monthly advance payments. Handling this alone is close to impossible for a foreigner — you need an accountant, and their fees become a permanent line in your budget. We have described exactly what a company files and by when in our article on accounting in Serbia.

A comparison on the key parameters

The tax burden in worked examples

Take a developer with annual revenue of about 4,000,000 dinars (roughly 34,000 euros). As a lump-sum sole proprietor in Belgrade, they pay a fixed amount every month regardless of revenue — that amount depends on the municipality and the activity code, and usually turns out to be noticeably lower than the actual 10% plus contributions. No expenses need to be documented, and reporting is minimal.

The same revenue through a DOO: the company pays 15% on profit after deducting expenses (office rent, equipment, accounting fees, the director’s salary), then the owner pays 15% when withdrawing dividends. Add monthly accounting and mandatory contributions for the director. With revenue below the lump-sum limit, a DOO is almost always more expensive. The picture changes once revenue exceeds 6,000,000 dinars, several corporate clients appear and you take on employees: at that point limited liability and the ability to retain profit inside the company outweigh the cost.

Residence: what each form gives you

Both a sole proprietor and the owner or director of a DOO can apply for a temporary residence permit (privremeni boravak) on business grounds. Since 2024 Serbia has operated a single permit for residence and work (jedinstvena dozvola), issued for up to three years and submitted through the portal for foreigners. After three years of continuous temporary residence you can apply for permanent residence (stalno nastanjenje).

In practice, when you renew, inspectors look at whether the business carries on real activity: whether taxes and contributions are being paid, whether there is turnover on the account, whether there is an office or at least an address where the company can be found. A lump-sum sole proprietor looks straightforward in this respect: contributions are paid automatically every month. With a DOO, the director needs formal grounds for working and must pay contributions on their remuneration. We have set out the detailed procedure in our piece on Serbian residence through business.

When a sole proprietorship is enough

• You work alone or with two or three subcontractors, and revenue fits within the lump-sum limit.
• You have several clients, none of them accounts for more than 70% of revenue, and you do not work in their office on their schedule.
• Your activity is not on the list excluded from the lump sum: development, design, consulting, translation and training all qualify.
• Minimal accounting and a predictable monthly tax amount matter to you.
• You are not planning to sell the business or bring in an investor in the next few years.

When you need a company

• Revenue consistently exceeds 6,000,000 dinars a year, or you are required to register for VAT (PDV).
• There is more than one founder, or you plan to raise investment and sell stakes.
• You are hiring employees, signing contracts that carry liability, and want to separate personal property from the business.
• Your clients are large companies that prefer to work with legal entities and ask for contracts issued by a company.
• You want to retain profit inside the company and reinvest it without paying out dividends straight away.

Can you start as a sole proprietor and switch to a DOO

Yes, this is a common path. Many people start out as a lump-sum sole proprietor and, once revenue or the client mix no longer fits within those limits, register a DOO and move their contracts over to the company. The sole proprietorship can then be closed or suspended. Bear in mind that the switch changes your payment details, contracts with clients have to be re-signed, and the company’s registered seat must be a real one — we write about this in our article on the registered seat in Serbia.

If you are still deciding, start with an honest answer to three questions: what your revenue will be in the first year, how many clients you have and whether you need to hire. The answers almost always point to one of the two forms. You can open a sole proprietorship in Serbia or register a DOO remotely, but changing form after the fact costs more than choosing correctly from the start.