Small and medium-sized enterprises (SMEs) in Serbia, which account for around 99 per cent of the country’s economy, employ the largest share of the private-sector workforce, contribute to local economic development, and represent the most common route into entrepreneurship for Serbian citizens, according to an analysis by NALED. Although Serbia has relatively strong macroeconomic indicators, the SME sector faces regulatory constraints that are hindering its development.
NALED warns that current tax policy is not favourable to SMEs. “Despite the significant digitalisation of the Tax Administration and administrative reforms introduced in recent years, the SME sector, particularly sole proprietors, still faces a disproportionate tax and administrative burden compared with large companies,” Nevena Janjić, Coordinator for Regulatory Reform at NALED, told Bloomberg Adria.
According to her, the key difference lies not only in the amount of tax obligations but also in the ability to absorb administrative requirements without significantly affecting business operations. “Large organisations have in-house legal, tax and finance teams capable of monitoring regulatory changes and absorbing administrative costs, whereas for small businesses even relatively minor regulatory changes often represent an additional financial and operational burden,” Janjić points out.
Flat-rate taxation: A long-standing problem
One of the most sensitive issues within Serbia’s tax system is the flat-rate taxation regime. The turnover threshold of six million dinars, which determines eligibility for the simplest tax regime, has remained unchanged since 2013. “Meanwhile, inflation, wages and operating costs have risen significantly,” Janjić reminds us.
In practice, this means that entrepreneurs frequently move into a more complex tax regime not because they have become “large companies”, but because the threshold has lost its relevance. Although Serbia has increased the VAT registration threshold to eight million dinars in recent years, the flat-rate taxation limit has remained unchanged, creating a fiscal gap that many small businesses struggle to bridge.
As a result of this discrepancy, Janjić explains, entrepreneurs “enter a more complex taxation and bookkeeping regime prematurely”, forcing them to incur accounting and administrative costs before their businesses have achieved stable growth. While large companies generally maintain their own finance departments, small entrepreneurs often rely on external accountants.
“Consequently, many entrepreneurs engage accountants and begin preparing for a more administratively demanding business model even before reaching the six-million-dinar threshold, which represents an additional cost and burden for small businesses,” says Janjić. This is particularly disadvantageous because businesses are entering a phase where funds could otherwise be directed towards expansion, new hires, or other investments.
Although Serbia has improved its business environment in recent years through digitalisation and support programmes, interviewees believe that without reforms to tax treatment and easier access to investment capital, the SME sector will be unable to realise its full growth potential.
By the time the article was published, Serbia’s Ministry of Economy had not responded to Bloomberg Adria’s enquiry regarding the current situation and potential reforms to the flat-rate taxation system.
What financing options are available to Serbia’s SME sector?
Formally, Serbian SMEs have access to a range of financing options, including bank loans, government subsidies and development programmes, as well as international funds such as the European Union’s IPARD programme. However, Serbia remains “the only country in Europe” where tax credits are, in practice, available only to large enterprises and not to small and medium-sized businesses, despite there being no formal restriction, economist Nemanja Šormaz told Bloomberg Adria.
“Businesses are becoming increasingly aware of state incentives such as tax credits. This instrument could be implemented relatively quickly and could boost investment growth by as much as 40 per cent,” Šormaz emphasises.
Data from the Statistical Office of the Republic of Serbia show that SMEs invest more in innovation than large companies. According to the Innovation Activity Indicator, more than 48 per cent of large companies used innovations during the previous year, compared with around 58 per cent of medium-sized enterprises and as much as 67 per cent of small businesses.
There are two key factors contributing to underinvestment in this sector. “One is financial literacy, which remains relatively low in Serbia, as is awareness of other financial instruments,” says Šormaz. The second, in his view, is a lack of trust between SMEs and banks.
“In Serbia, small and medium-sized enterprises do not view banks as partners but rather as a last resort – institutions they turn to in order to plug financial gaps, rather than to obtain funding for investment and growth,” Šormaz argues.
The European Bank for Reconstruction and Development invested more than €800 million in Serbia through 42 projects during 2025, with the majority directed towards the private sector and strengthening SME competitiveness. Additional investment support this year is also being provided by Serbia’s Ministry of Economy, which offers non-repayable grants covering up to 50 per cent of investment costs. Funding per project is capped at approximately three million dinars (€24,000).
Has digitalisation helped SMEs as much as expected?
In recent years, the government has invested heavily in the digitalisation of public administration. Electronic communication with government institutions, online applications and the development of eGovernment services have undoubtedly transformed the way businesses operate.
“Digitalisation of public administration has certainly helped reduce administrative burdens and accelerate certain procedures, particularly regarding communication with institutions, submission of applications and access to services through the eGovernment portal and the Tax Administration’s electronic systems,” says Janjić.
She also notes that the reform of freelancer taxation and improvements to the flat-rate taxation regime represented significant steps towards a more predictable system. However, research conducted by NALED in 2025 found that half of small businesses and entrepreneurs do not use any form of digital tools in their operations.
“Among those who do use digital tools, the most popular are social media platforms (38 per cent), followed by digital marketing and advertising platforms (14 per cent), and company websites (11 per cent),” she stated in a written response.
According to Janjić, this indicates that administrative tasks still largely rely on accountants, despite businesses having accounts on the eGovernment platform and other digital services. “As a result, in practice digitalisation often makes work easier for accounting firms rather than for entrepreneurs themselves,” she concludes.
(Bloomberg Adria, 04.06.2026)