Why Entity Form Matters
Your choice of business entity determines:
- Tax rate (corporate vs personal);
- Deductions and expenses allowed;
- Compliance and reporting burden;
- Liability protection;
- Ease of doing business and access to banking, contracting, etc.
We’ll compare Serbia and North Macedonia using a typical IT services business with €200,000 annual revenue and €120,000 deductible costs.
Serbia: Limited Liability Company (DOO)
Tax & Costs Overview
- Corporate Income Tax: Flat at 15 % on taxable profits after expenses. + dividends taxed at 15 % / 20 % when distributed to non-residents (depending on treaty).
- VAT: Standard rate at 20 %; registration required if turnover exceeds RSD 8 million (~€70-80k) in a 12-month period.
- Social & Payroll Taxes: Employer + employee contributions required; rates vary depending on sector.
Sample Calculation
| Item | Value (EUR) | Calculation | Tax Payable |
|---|---|---|---|
| Revenue | 200,000 | — | — |
| Costs | 120,000 | — | — |
| Profit before tax | 80,000 | — | — |
| Corporate tax (15 %) | — | 0.15 × 80,000 | €12,000 |
| Dividend (after tax) | — | remaining profit | taxed again per treaty rate (say 15 %) |
| Total effective rate | — | including payroll & dividend | ~30 % depending on structure |
North Macedonia: Limited Liability Company (DOOEL / DOO)
Tax & Costs Overview
- Corporate Income Tax: 10 %, significantly lower than Serbia.
- VAT: Standard rate at 18 %; registration threshold MKD 1.000.000 (~€16-17k), lower than Serbia.
- Dividend Withholdings: 10 % for non-residents, per treaty.
- Payroll & Social Contributions: Rates are also comparatively lower, though mandatory contributions remain substantial.
Sample Calculation (Same Assumptions)
| Item | Value | Calculation | Tax Payable |
|---|---|---|---|
| Revenue | €200,000 | — | — |
| Costs | €120,000 | — | — |
| Profit before tax | €80,000 | — | — |
| Corporate tax (10 %) | — | 0.10 × 80,000 | €8,000 |
| Dividend taxed at 10 % | — | dividend | €7,200 (assuming full payout) |
| Total effective tax ~ | — | including payroll etc. | ~25-28 % depending on structure |
Other Considerations
- Regulatory complexity: Serbia generally has more formalities (e.g., stricter accounting, audits, notarized filings); Macedonia tends to have lighter admin burden.
- Local incentives: Both countries occasionally offer tax credits or incentives for R&D, export-oriented work, and digital businesses. Macedonia has been more aggressive in digital innovation incentives.
- Treaties & Access: Serbia has broader network of tax treaties; Macedonia also has treaties but fewer; domestic withholding rates might differ.
- Currency, banking & operational costs: While tax may favor Macedonia in some cases, operational costs (office, staff) and ease of banking might balance things in Serbia depending on location.
Recommendation Framework
- Compute your tax base (revenues minus realistic costs including salaries, rent, tech).
- Estimate both corporate and dividend withholding taxes, and social contributions.
- Project total compliance & admin cost, including accounting, legal, filings.
- Inspect tax treaties in your jurisdictions (if distributing profits to non-residents etc.).
- Factor in non-tax issues: banking, intellectual property protection, access to clients.
If your profit margin is moderate to high, North Macedonia often offers a lower corporate + dividend burden. But if administrative ease, banking options, broader market access, or treaty networks are more important, Serbia may still compete favorably.
Take-away: There’s no one-size-fits-all. Run full model with your numbers. But for many tech or service firms, North Macedonia often wins on baseline tax cost; Serbia offers stronger infrastructure and treaty coverage. Always plan ahead and revisit as both jurisdictions evolve policy.