Benefits of Making Business in Serbia | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN SERBIA WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN SERBIA WWW.MERGERSCORP.COM

4. Country Overview Serbia became a stand-alone sovereign republic in the summer of 2006 after Montenegro voted in a referendum for independence from the Union of Serbia and Montenegro. The end of the Union marked the closing chapter in the separation of the six republics of the old Socialist Republic of Yugoslavia, which was proclaimed in 1945 and comprised Serbia, Montenegro, Slovenia, Croatia, Bosnia-Herzegovina and Macedonia. Yugoslavia's communist leader, Josip Broz Tito, kept the lid on ethnic tensions. The federation lasted for over 10 years after his death in 1980, but under Serbian nationalist leader Slobodan Milosevic it fell apart through the 1990s.The secession of Slovenia and Macedonia came relatively peacefully, but there were devastating wars in Croatia and Bosnia. Serbia and Montenegro together formed the Federal Republic of Yugoslavia between 1992 and 2003 before forming a looser union. Serbia has a population of 7.2 million people , capital and largest city is Belgrade , official language is Serbian written in Cyrillic.

5. Executive Summary Serbia, the former core republic of Yugoslavia is now a landlocked country in the central part of the Balkan Peninsula in Southeastern Europe. It is bordered by four of the six former Yugoslavian socialist republics, Bosnia and Herzegovina, Croatia, Republic of Macedonia, and Montenegro. It shares also borders with Albania, Bulgaria, Hungary, and Romania. Serbia is a landlocked country in Central Southeast Europe. It is bordered by Hungary to the north; Romania and Bulgaria to the east; the Republic of Macedonia to the south; and Croatia, Bosnia and Herzegovina, and Montenegro to the west. Its capital and largest city is Belgrade. The official language of Serbia is Serbian, and the currency is the Serbian dinar (RSD). The Kingdom of Serbs, Croats, and Slovenes was formed in 1918. Its name was changed to Yugoslavia in 1929. Yugoslavia (i.e. the Socialist Federal Republic of Yugoslavia) joined the United Nations (UN) as an original member in 1945. By 1992, it had been effectively dissolved into five independent states which were all subsequently admitted to the United Nations

6. Introduction – Doing business in Serbia Companies in Serbia can be established by any natural or legal person, both domestic citizens and non-residents. Therefore, the following basic rules of establishment could be of interest for the foreign readers. Serbian Company Law recognizes four types of companies: Joint Stock Company, Limited Partnership, Partnership and Limited Liability Company. In this post we will focus on the latter, describing in a few lines the process of establishing a LLC in Serbia. In Serbia, the EBRD helps small and medium-sized businesses grow, succeed, then grow again, becoming genuine catalysts for their local economies, then their region. We connect our clients to local consultants and international advisers who can help transform a huge range of businesses. From the smallest looking to grow to those going global, our expert network of doers, thinkers and advisers help our clients to step up and start thinking big.

7. Conducting business in Serbia There are several steps to take in order to open a business in Serbia. These include the following: Prepare the articles of association and have them notarized at a Basic Court or at a municipality or public notary - you need to authenticate the incorporation act and obtain a signature from the representative court in Serbia. These will allow you to open a temporary bank account and deposit the share capital. Note that several fees must be paid during this step of company incorporation. A Serbian law firm can help you draft the articles of association and incorporate the company on your behalf; Register the incorporation act and the share capital deposit with the Business Registry - you have to obtain a certificate of registration from the Business Registers Agency and then address the tax authority for acquiring the tax identification number. Several documents need to be submitted with the Serbian Business Registration Agency (SBRA) in order to register the company. This procedure usually takes three days to complete and relying on the legal services of a local law firm may significantly simplify this step;

8. Taxation in Serbia The standard Corporate tax rate in Serbia is 15%, although some deductions might apply. The standard VAT rate is 20% and the lower rate is 10%. Income from dividends is a subject to a 15% tax. The Personal Income Tax Rate in Serbia stands at 10 percent. Capital gains are subject to a 15% tax for residents (included in the annual income tax return) and 25% for non-residents (based on the tax assessment) unless the rate is reduced under a tax treaty. Dividends paid by a Serbian resident company to another Serbian company are exempt from corporate income tax. Dividends received by a Serbian resident company holding at least 10% of the shares in a non-resident representative office are eligible for a credit for foreign tax paid on the dividends. Payments of dividends, interests, royalties, income from the lease of property and payments made for services provided by entities resident in preferential tax jurisdictions are subject to 20% withholding tax. Technical services fees and branch remittance tax are not subject to withholding tax..

9. Trade Serbia is the 71st largest export economy in the world and the 40th most complex economy according to the Economic Complexity Index (ECI). In 2017, Serbia exported $16.8B and imported $20.1B, resulting in a negative trade balance of $3.28B. In 2017 the GDP of Serbia was $41.4B and its GDP per capita was $15.4k. The top exports of Serbia are Cars ($1.06B), Insulated Wire ($895M), Rubber Tires ($592M), Electric Motors ($391M) and Frozen Fruits and Nuts ($382M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Crude Petroleum ($859M), Vehicle Parts ($718M), Packaged Medicaments ($669M), Refined Petroleum ($559M) and Cars ($539M). The top export destinations of Serbia are Germany($2.15B), Italy ($2.11B), Bosnia and Herzegovina($1.24B), Russia ($1.03B) and Romania ($695M). The top import origins are Germany ($2.5B), Italy ($1.94B), China ($1.41B), Russia ($1.4B) and Hungary ($1.07B).

10. Banking in Serbia There were no major changes in basic parameters of the Serbian banking sector according to the criterion of the origin of ownership. The number of organisational units declined by 30, while employment contracted by 270. Foreign-owned banks kept their dominant position in the market, accounting for the overriding portion of banking sector assets and capital. These were primarily banks from Italy (which recorded a mild increase in assets and banking sector capital), followed by banks from Austria and Greece. Banks in domestic ownership, primarily due to the contribution of state-owned banks, had a somewhat larger share in business network and number of employees than in the assets and capital of the Serbian banking sector. In terms of the level of balance sheet total, loans and deposits, the top ten banks accounted for 76.3% of balance sheet total, 75% of total loans and 77.8% of total deposits. With a 16.2% share in total banking sector assets, a 14.6% share in total loans and a 16.5% share in deposits, Banca Intesa a.d. Beograd remained the largest bank in Serbia.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com