Serbia is currently a popular destination for those who seek to invest in real estate for personal or business purposes. However, the purchase and ownership of property are connected with the payment of taxes and fees, and you’d better be aware of them before you go too far. If you want to buy an apartment to rent it out and receive passive income, you should understand how much tax will be due.
Buying Real Estate in Serbia: Advantages
Foreign citizens can benefit from buying Serbian real estate in the following ways:
- Affordable real estate prices. If you look at other European countries, you will see that the real property prices in Serbia are not very high, which turns it into a real draw for foreign investors looking for good deals.
- Unlimited foreign ownership. Non-residents can buy and own Serbian real estate and enjoy the same rights (and perform the same obligations) as Serbian citizens.
- No property tax. Real estate owners in Serbia are not liable for any property taxes, which results in considerable savings.
- Easy immigration. If you buy real estate in Serbia, you will be able to easily obtain a residence permit, and this is a really affordable opportunity to become a resident of a European country.
- Transparent and efficient purchasing process. You will not have to follow tricky procedures to buy real estate in Serbia, and there are no limitations on profit repatriation.
- Prospering tourism industry. The tourist industry in Serbia is booming, which gives non-resident real estate owners ample opportunities for income generation from their property.
- Visa-free traveling. There are many countries you can enter without a visa if you are a Serbian resident, so you will be able to travel freely and manage your property from afar.
Buying real estate in a foreign country may run less smoothly than you expect, of course, due to language barriers and bureaucratic obstacles. In this case, all you need to do is to find a local lawyer or a real estate agent to go through the whole procedure hassle-free.
Fees Payable by Foreigners Who Buy Real Estate in Serbia
Let’s take a close look at the expenses typically incurred by those who buy real property in Serbia:
- The property transfer tax equals 2.5%
- Legal fees range between 0.05% and 1%
- A real estate agent will charge 3%
- The registration fee varies between 0.01% and 0.05%
- Transaction-related expenses payable by the buyer range between 3.06% and 4.05%
- Transaction-related expenses on the seller’s part amount to 2.5%
- The total costs of the transaction (purchase and subsequent sale) vary between 5.56% and 6.55%
Here are some explanations for the fees above:
- Registration charge. You will need to submit a relevant application to the Land Cadastre to transfer ownership. This requires payment of an administrative application processing fee of about 26 euros.
- Real estate agent’s fee. The commission based on the property cost is usually paid by the buyer. The cases when the seller covers these costs are not that frequent.
- Property transfer tax. If you want to transfer the real estate ownership in Serbia, you are liable for a 2.5% tax. However, the parties will pay zero tax if the asset is sold through the transfer of shares.
- Legal fees. The maximum amount of legal fee is limited to 325 euros.
- VAT. VAT is not provided in the table as it is not applicable to the secondary market. The standard VAT in Serbia amounts to 20%, while the reduced rate equals 10%. VAT is charged in the case of an initial ownership transfer for newly constructed buildings and structures commissioned after January 1, 2005. The VAT applicable to residential buildings is paid at a reduced rate, while other buildings are subject to a standard rate.
Fees Incurred During Acquisition and Purchase Procedure
When a potential buyer finds something interesting, he or she makes an offer to the seller. If the seller accepts the offer, both parties sign a preliminary agreement which is then certified by a notary. The buyer usually has to pay a 10% deposit when the agreement is signed. If the buyer later decides not to proceed with the purchase, the deposit will not be refunded.
Then it is the buyer’s lawyer who starts working. He or she carefully studies the history of encumbrances, the relevant property rights, and the seller’s legal rights to sell the piece of real estate. The process typically does not take less than 6 weeks. During this period, the potential buyer is required to complete due diligence on the property to make sure the purchase is exactly what he or she needs.
If no issues arise, the date for transaction closure is set, and the parties meet and sign a final sale and purchase agreement in the presence of a notary public. As soon as the agreement has been signed, it serves as a document that confirms the buyer’s legal right of ownership to the real estate in Serbia.
Once the property rights confirmation is over, a tax inspection is conducted to determine the property value. Following that, a certain amount of property transfer tax will be charged for the assignment of ownership rights. In the end, the buyer is required to pay the necessary price in full to complete the purchase.
Taxes and Fees Payable by Property Owners
- Property tax. It ranges between 0.3% and 2% depending on the property type and location.
- Rental income. Residents that receive profits from rental have to pay a 20% tax. They have the right to a 25% deduction if they incur expenses on property maintenance for rental.
- Capital gains tax. The seller of real estate in Serbia has to pay a fixed rate tax of 15% on the capital gains earned from the sale.
Want to know more about taxes payable by real estate owners in Serbia? Interested in buying Serbian property? Feel free to follow the above link and explore the portal for more information or get in touch with an expert to ask any questions. Prices are expected to rise, so don’t miss a chance to invest profitably!