Member Article

Serbia – Executive Summary of Qualification of a Director's Mandate (in a local or foreign company)

This article, authored by Jelena Danilović, was originally published in the 2016 'Social Security for Directors Working in Multiple Jurisdictions', published by World Services Group.

Domestic Rules

1. Social security regime

Registered legal representatives i.e. directors of Serbian entities (including local representative office or branch) must enter into a separate agreement with such local entity. They can be engaged on the basis of either:

• employment agreement in Serbia - when they have status of regular employees; or
• non-employment Agreement on Rights and Duties of Director (the "Managerial Agreement") – in the case when director does not wish to enter into employment or when director is already employed (abroad or with another local company). This agreement may be concluded without any remuneration due by the local entity, if the person in question is already employed for affiliated company at the same time and receives remuneration in that regard for the work he/she is performing as director of local entity.

For Serbian citizens, all taxes and contributions are paid locally in both cases (with certain differences regarding the type level of levies paid in the case when director enters into employment agreement and when he/she enters into a non-employment agreement).

2. Possibility to combine the director's mandate with an employment contract

Director may freely enter into employment contract with local entity, if he/she is not already full time employee with another company. Such employment contract may be concluded for indefinite term or for definite term - for the duration of director's corporate mandate.

If employment is concluded for definite term, expiry of mandate triggers automatic termination of employment. However, if the employment is concluded for indefinite term, end of term of office does not lead to automatic termination of employment, but the employer would be obliged to offer to such ex-director a new, adequate position for transfer, or to declare him/her as redundant if such position does not exist.

On the other hand, if director is already employed he/she should enter into Managerial Agreement instead. Such Managerial Agreement is regularly linked to duration of term of office and ends once the term of office expires.

In International Situations

In the case when the foreigners establish employment in Serbia as local directors, they are locally registered as employees and fall under Serbian social security regime.

However, if the foreigners enter into the Managerial Agreement (without establishing employment locally), their social security regime depends on the fact whether they are receiving any remuneration from the local entity based on this agreement. If remuneration is received, his/her social security regime will depend on the principles set in the social security convention concluded between Serbia and the country of nationality of the director in question. Usually, such conventions anticipate application of Serbian social security regime in the case when the foreigner is considered as Serbian resident, depending on the length of his/her residence in Serbia, but the provisions of such conventions may differ. On the other hand, if director is not receiving any remuneration, he/she is not considered to fall under Serbian social security regime. A separate complex set of rules is applicable in the case when the director is at the same time the founder of the respective local company.

The rules presented above are equally applicable to registered director of Serbian company and to registered representative of the rep. office /branch of the foreign company registered in Serbia.

The rules presented above are equally applicable to registered director of Serbian company and to registered representative of the rep. office /branch of the foreign company registered in Serbia.

We have elaborated here only the case when foreigners in question will be acting as formally registered, legal directors of local entities. However, if foreigners would not be formally registered legal directors, their status would be equal to any other foreigner working in Serbia. If such person will be locally employed, he/she would fall under Serbian social security regime for regular employees. Otherwise, if such foreigner would only be seconded to Serbia (without establishing employment locally), the social security status would depend on the social security convention between Serbia and his/her country.