Freedom of Association – Constitutional and International Framework
To promote human rights and fundamental freedoms, the freedom of association has been guaranteed at the European level by the European Convention on Human Rights, signed in Rome in 1950. It recognizes the right of individuals to form groups or organizations in order to pursue a common goal.
Recognizing the importance of free association in structures that can achieve objectives which an individual alone cannot, or cannot achieve effectively, freedom of association is also guaranteed as a constitutional right to all citizens of Serbia.
Legal Definition of an Association
The Law on Associations defines an association as:
“A voluntary, non-governmental and non-profit organization based on the freedom of association of several natural or legal persons, established for the purpose of achieving and promoting a specific common or general goal or interest that is not prohibited by the Constitution or law.”
In other words, an association is a non-profit entity formed by at least three persons (individuals or legal entities) to pursue lawful common or general interests.
Difference Between a Citizens’ Association and a Business Association
Citizens’ Association
A citizens’ association is a non-profit, non-governmental organization established by several natural and/or legal persons to pursue a common or general goal which they cannot achieve individually or cannot achieve as efficiently.
Key features:
non-profit character,
goals must be lawful and in line with the Constitution,
registration is carried out with the Serbian Business Registers Agency (APR).
Business Association
A business association is a non-profit organization established by several business entities in order to pursue their common interests.
It:
cannot itself perform activities for profit, unlike its members,
but it may generate a surplus of income over expenses, which must be used in line with its non-profit purpose.
Who Can Establish an Association?
An association can be founded by at least three founders, provided that at least one founder has a registered residence in Serbia.
Founders may be:
legally competent natural persons, or
legal entities.
A minor who is at least 14 years old may also be a founder, with the written consent of their legal representative (with a certified signature).
Foreign Associations and Their Representation in Serbia
A foreign association is an association with its registered seat in another country, established in accordance with the laws of that country for the purpose of pursuing a common or general interest, without profit-making as its primary goal. This also includes international associations and other foreign or international NGOs whose members have voluntarily joined to pursue a non-profit objective.
Registration of a Foreign Association’s Representative Office
A representative office of a foreign association may operate in Serbia only after registration in the Register of Foreign Associations maintained by the Business Registers Agency (APR).
Registration is based on an application for entry of the representative office.
The decision on registration is published in the Official Gazette of the Republic of Serbia, at the expense of the foreign association.
Publication marks the completion of the registration procedure.
Applicable Law for Employees
For foreign nationals employed in a representative office, regulations on the movement and residence of foreigners apply.
For Serbian nationals employed in such offices, Serbian labour and related regulations apply.
Funds for Operations
A representative office of a foreign association may:
bring in financial resources from abroad for its operations and program implementation, in accordance with foreign exchange regulations;
after settling all due tax and other obligations in Serbia, freely transfer out any remaining unused funds.
Prohibition of Activities
A representative office is free to operate in Serbia as long as its goals and activities are not contrary to the Constitution and laws.
If they are, proceedings may be initiated for prohibition of its activities, and the decision on prohibition is made by the Constitutional Court.
Deletion from the Register
A representative office of a foreign association is deleted from the Register of Foreign Associations in the following cases:
the foreign association ceases to exist;
the foreign association decides to close the representative office;
the Constitutional Court issues a decision prohibiting its activities.
In such cases, a decision on deletion is published in the Official Gazette of the Republic of Serbia at the expense of the foreign association.
Steps to Found an Association in Serbia
1. Founding Assembly
An association is founded at a founding assembly, which is its highest body and consists of all members.
At the founding assembly, the founders:
adopt the founding act and the statute of the association, and
elect the person(s) authorized to represent the association.
2. Legal Representative of the Association
The association may have one or more representatives.
They must:
be legally competent persons, and
have residence or temporary residence in the territory of the Republic of Serbia.
Documentation Required for Registration
The registration procedure begins by submitting two applications to the APR:
Application for registration of the association in the Register of Associations;
Unified registration application for the establishment of legal entities and other entities and registration in the unified register of taxpayers (assignment of a Tax Identification Number – PIB).
The applicant is the representative of the association or a person authorized by them.
Along with duly completed forms, the following documents are submitted:
Founding act of the association;
Statement of the legal representative of a minor (if a minor is a founder), with certified signature;
Original copy of the Statute of the association;
Decision on the appointment of the association’s representative;
Certified copy of both sides of the representative’s ID card, or certified copy of passport and proof of residence (if residence is not visible on the ID card; an electronic ID card printout may also be used, which does not require certification);
Proof of payment of the registration fee.
Upon receipt of the application, the APR examines whether the application and documents are in order. Within 5 business days from receipt, the Agency:
issues a decision on registration and publishes the Statute on its website, or
if the conditions are not met, issues a decision rejecting the application, stating which conditions were not fulfilled, and publishes it on its website.
Correcting Deficiencies After Rejection
If the application is rejected, the applicant may, within 30 days from publication of the decision:
submit a new registration application for the same data, referring to the number of the previous decision and correcting the deficiencies, or
submit the missing documentation in the manner indicated in the decision.
In that case, the applicant pays half of the prescribed registration fee.
Registration of Economic (Business) Activities
The primary purpose of an association cannot be profit-making business activity. However, an association may perform certain economic activities in order to secure additional funds for achieving its statutory (non-profit) objectives.
Under the Law, an association may directly perform economic activities if:
the activity is related to its statutory goals (“related economic activity”);
such activity is explicitly provided for in the Statute;
the activity is of limited scope, i.e. it is carried out only to the extent necessary to achieve the association’s goals.
The association is liable for its obligations with all of its assets.
Members and bodies of the association do not personally respond for the association’s obligations with their own assets.
Once the association acquires legal personality (upon registration in the APR), it may request registration of any economic activity it performs, provided that activity is foreseen in the Statute.
Mandatory Registration of Beneficial Owners
The Law on the Central Register of Beneficial Owners (in force since 31 December 2018) established a Central Register of Beneficial Owners as a public, unified, electronic database on natural persons who are beneficial owners of legal entities and other subjects registered in Serbia.
The obligation to register beneficial owners applies to:
business associations and associations (with the exception of political parties, trade unions, sports organizations and associations, churches and religious communities),
representative offices of foreign associations.
For associations, the beneficial owner is generally the natural person registered as the representative of the association, unless that person has officially reported another natural person as beneficial owner.
The authorized representative must register beneficial owner data in the Central Register no later than 15 days from:
establishment of the association,
changes in ownership structure or members of its bodies, or
any other changes relevant for assessing beneficial ownership status.
Assets of the Association
No initial capital is required to establish an association. However, an association may acquire assets from various lawful sources, such as:
membership fees,
voluntary contributions and donations,
gifts, subsidies, inheritances,
interest, rental income,
and other permitted income.
Donors may, under certain conditions, qualify for tax relief.
Since associations are non-profit, their assets may be used only to achieve the association’s statutory goals.
Therefore, association assets may not be distributed to:
members,
founders,
members of its bodies,
directors,
employees, or related persons.
Exceptions include:
appropriate symbolic rewards,
reimbursement of justified expenses incurred in pursuing statutory goals (travel costs, per diems, accommodation costs),
contractual obligations for services,
payment of employees’ salaries.
Failure to comply with these rules may result in misdemeanour sanctions.
Taxes and Fiscal Obligations
From the moment it is registered with the APR, an association must:
keep double-entry accounting records,
submit financial statements (or a declaration of inactivity if there were no transactions),
maintain income and expense records,
submit a tax balance and corporate income tax return in accordance with the Corporate Income Tax Law.
Failure to comply may result in serious economic offence liability for both the association and its legal representative, with high monetary fines.
Given that an association’s main purpose is not profit-making, its tax position differs from that of commercial entities.
Under the Corporate Income Tax Law, an association is exempt from corporate income tax for the tax period in which the surplus of income over expenses does not exceed 400,000 RSD, subject to certain conditions.
However, the association loses this exemption if:
its income exceeds 400,000 RSD, or
it holds a dominant market position, as defined by competition law.
When an association carries out activities that generate income, it becomes a corporate income taxpayer. The tax base is the surplus of income over expenses from sales of goods or services, and it is taxed at the general rate of 15%, just like a company.
Bookkeeping Rules and Reporting
As legal entities, associations must comply with regulations on accounting and audit. Sanctions for non-compliance are mainly monetary, but in severe cases, the association may be deleted from the Register of Associations.
The association is liable for its obligations with all its assets.
Members and bodies of the association may also incur personal liability if they:
treat association assets as their own, or
abuse their membership for illegal activities.
An association must:
maintain accounting records,
submit financial statements, and
may be subject to audit, in accordance with the Accounting Law and related regulations.
As a non-profit organization, the association must open a current bank account and conduct all payment transactions through that account.
Public Interest Programs and Public Funding
Funds for programs of public interest may be provided from:
the state budget,
the budget of an autonomous province, or
local government budgets.
Associations that receive such funds:
must make an annual public report on their work and on the volume and method of acquiring and using funds,
must submit that report to the public body that awarded the funds,
and may use these funds exclusively for the implementation of approved programs.
Legal Assistance in Founding an Association
Founding an association requires knowledge of the relevant regulations and procedures. Like any registration process, it is strictly formal and document-based.
It is essential to:
properly draft the founding act and Statute,
correctly complete and submit registration forms,
observe all legal deadlines and formalities.
By engaging a lawyer experienced in founding associations, the entire process is handled professionally. Any deviation from legal requirements may lead to rejection of the application, causing delays and additional costs.
Conclusion
Depending on whether the focus is on business interests and economic activities, legal entities may opt for establishing a business association rather than a classic citizens’ association.
Regardless of the type of association you intend to establish, it is strongly recommended to seek professional legal assistance to ensure:
that all founding documents are drafted correctly and lawfully,
that the registration procedure before the Business Registers Agency is duly followed, and
that the risk of rejection or subsequent legal issues is minimized.
If you need legal assistance or advice regarding the founding, registration or operation of an association in Serbia, feel free to contact us and schedule a consultation. Our team of lawyers will help you find the best possible solution tailored to your goals and activities.