Sale of Shares of a Public Joint Stock Company in Serbia When the Seller is a Non-Resident

Unlike private joint stock companies, the shares of a public joint stock company, i.e. a company whose shares are traded on a regulated market, are sold in accordance with the precisely defined procedures. In the Republic of Serbia, the multilateral trading platform is the Belgrade Stock Exchange (“Stock Exchange”), and the shares of companies involved in trading on the Stock Exchange may be sold only in accordance with the rules and regulations of the Stock Exchange.

What is a block transaction?

Block transaction, i.e. block trading means agreeing on the price of a security and other terms of sale at a meeting between one buyer and one seller, outside the prevailing price method or the method of continuous trading, all according to the conditions prescribed by the Stock Exchange acts.

A block transaction is concluded on the basis of purchase orders and sale orders for the same security, in the same quantity, at the same price, which orders are issued by one or two members of the Stock Exchange. In other words, regardless of whether the shares are traded through a block transaction or in some other way, the purchase and sale of shares cannot be done independently by the buyer and seller, but trading in shares must be done through a broker-dealer company, a member of the Stock Exchange. The buyer and seller of shares must have ownership accounts with the broker, where the shares are deposited, as well as cash accounts for the transfer of money for the value of the shares. These accounts are special accounts maintained by brokers on behalf of the seller and the buyer, which are not subject to blockade or enforcement.

During a block transaction, the seller and the buyer simultaneously issue orders for the purchase and sale of shares, where the seller gives an order for the transfer of shares from his ownership account to the ownership account of the buyer. At the same time, the buyer gives an order to his broker to transfer funds from his account to the seller’s account. The seller’s broker initiates a block transaction in BelexFIX (the unique information system of the stock exchange) by entering all elements of the transaction in the block trading order, except for the customer data, and it directs the buyer’s broker for confirmation. Confirmation of a block transaction by the buyer’s broker is considered to be the entry of the required buyer data and submission of the thus confirmed block transaction to the Exchange within 15 minutes from the moment when the seller’s broker sent the block transaction to the buyer’s broker for confirmation. Confirmation of a block transaction by the buyer’s broker must be performed at the same stock exchange meeting at which the seller’s broker initiated the block transaction, and no later than the time determined by the stock exchange calendar.

Clearing and Settlement

During the purchase and sale of shares, as financial instruments, clearing and settlement of liabilities and receivables in financial instruments and money must be performed by the Central Securities Depository and Clearing House. Clearing and settlement can be performed by methods from T + 0 to T + 2, depending on whether the clearing and settlement is done on the same day as the conclusion of the transaction, the first business day after the conclusion or the second business day after the transaction. The most common method of clearing and settling shares on a regulated market / MTP is the T + 2 method, unless a shortened process from T + 0 to T + 1 is required.

After that, at the seller’s order, the funds from the seller’s cash account opened with the broker are further transferred to the seller’s account opened with the commercial bank. If the seller is a foreign legal entity or a foreign natural person, it must have a non-resident account with a commercial bank in the Republic of Serbia. What needs to be especially emphasized is that, if there is already an open, non-resident account of the seller in Serbia, e.g. if the account was opened when the shares were acquired, it is necessary to check whether the account is in active status. If not, it is necessary to submit certain documentation to the bank in order to activate the account, primarily in relation to the current ownership structure of the non-resident.

After the sale of shares, regardless of whether all shares have been sold or the percentage of ownership of shares has fallen below the appropriate threshold (5%, 10%, 15%, 25%, 50% or 75%), the seller is obliged to inform the Securities Commission and the Stock Exchange, submitting to them forms of significant participation for publication. These forms are submitted electronically, which means that the seller’s representative or proxy must have a qualified electronic certificate, in accordance with the regulations of the Republic of Serbia. In principle, the submission of forms is done by the seller’s broker, who also communicates with the Commission, but the obligation of the seller to electronically sign these forms certainly remains.

Tax Liabilities

If the seller is a foreign natural person or a foreign legal entity, the money can be transferred from the Republic of Serbia to the accounts abroad after obtaining a certificate of paid tax liabilities to the Republic of Serbia. A non-resident must have a registered tax representative in the Republic of Serbia through which he will submit the relevant tax return, and later obtain a decision on settled tax liabilities. Therefore, a non-resident cannot file a tax return on his own, nor can that be done by a proxy from the ranks of attorneys or any third party if not authorized as a tax representative.

Considering that the seller gains a certain profit by selling shares, it is first necessary to determine whether a capital gain was made on this occasion, i.e. whether it is necessary to file a tax return for capital gains tax. In connection with the sale of shares, the basis for capital gains is the difference between the purchase and sale price of shares. The purchase price is the price that the taxpayer documents as actually paid, and if he does not have the appropriate documentation – the lowest market price realized on the organized market in the period of one year preceding the sale of the security or in the trading period, if traded less than a year. The capital gains tax rate is 20%.

If the capital gain is realized, and if the seller is a non-resident, it is necessary to determine whether there is an agreement between the Republic of Serbia and the state of which the seller is a resident on the avoidance of double taxation. If so, it is necessary to determine whether the capital gains tax will be paid in Serbia or in the country of which the seller is a resident.


Vladimir Milošević

Vladimir Milošević

Attorney-at-law | Partner

Mila Drljević

Attorney-at-law | Senior Counsel