US Tax Obligations When Moving to Serbia: The Complete 2026 Guide

The United States is one of only two countries in the world (alongside Eritrea) that taxes its citizens on worldwide income regardless of where they live. Moving to Serbia, establishing Serbian tax residency, and spending 183+ days per year in Belgrade does not exempt you from US tax obligations. You will continue to file US federal tax returns every year for the rest of your life as a US citizen — unless you formally renounce citizenship.

There is no US-Serbia tax treaty and no totalization agreement between the two countries. This means there is no coordinated framework for preventing double taxation or allocating tax rights between the two systems, and no coordination of social security contributions. Both of these absences have specific consequences this guide covers in detail.

The FEIE is the most powerful tool available to Americans living abroad for reducing US income tax — and the most widely misunderstood.

Current FEIE Limits

• Tax year 2025 (return filed in 2026): $130,000 per qualifying person
• Tax year 2026 (return filed in 2027): $132,900 per qualifying person
• Married couples where both spouses qualify can each claim the exclusion: $260,000 combined for 2025
• The limit adjusts annually for inflation under IRC §911

The figure in the existing version of this blog ($120,000) was the 2023 limit. It is materially out of date.

What the FEIE Covers

The FEIE applies exclusively to foreign earned income — wages, salaries, bonuses, and self-employment income earned for services performed while physically outside the US. If you are employed by a company (Serbian or foreign), paid a salary for work performed in Serbia, and you qualify, you can exclude up to $130,000 of that income from US federal income tax.

What the FEIE Does NOT Cover

This is where the most dangerous misconceptions arise. The FEIE cannot be applied to:

• Investment income — dividends, interest, capital gains
• Pension and retirement income — including Social Security, 401(k) distributions, IRA withdrawals
• Rental income — from properties in the US or elsewhere
• Passive income of any kind

All of the above remain fully subject to US taxation regardless of where you live. The claim in the previous version of this blog that "investment income is not taxed in Serbia" compounded the error — investment income (dividends and interest) is taxed in Serbia at 15%. US taxpayers in Serbia do not escape investment income taxation in either country.

Qualifying for the FEIE: Two Tests

You must pass one of two tests to claim the FEIE:

Physical Presence Test: You must be physically present in a foreign country or countries for at least 330 full days during any 12-month period. The 12-month period does not need to coincide with the calendar year — it can straddle tax years, which means first-year movers can often still qualify. Days in international waters and time spent in the US do not count.

Bona Fide Residence Test: You must have been a bona fide resident of a foreign country for an uninterrupted period that includes a full calendar year (January 1 to December 31). This test is based on your demonstrated intention to live abroad permanently — lease agreements, local bank accounts, Serbian residency permits, family presence, and minimal ties to the US all factor in. Note: if you claim non-resident status for Serbian tax purposes, you cannot simultaneously claim bona fide residence for the FEIE.

Form 2555 and the Discontinued Form 2555-EZ

The FEIE is claimed on IRS Form 2555, attached to your Form 1040. Important for 2025 and 2026 filings: Form 2555-EZ has been permanently discontinued. All filers claiming the FEIE must now use the full Form 2555 regardless of the simplicity of their situation.

Employees living abroad can also claim the Foreign Housing Exclusion — an additional exclusion for housing costs above a base amount:

• 2025 base amount: $20,800 (16% of the FEIE limit)
• 2025 housing amount cap: $39,000 (30% of the FEIE limit)
• You can exclude housing costs between the base amount and the cap

If you rent an apartment in Belgrade for €800/month (~$870), your annual housing cost is approximately $10,440 — below the base amount, meaning the housing exclusion adds no benefit at Belgrade's typical rent levels. For higher-cost housing, it can provide meaningful additional relief.

Self-employed Americans claim this as the Foreign Housing Deduction rather than an exclusion, with broadly similar effect on taxable income.

The Foreign Tax Credit (FTC) provides a dollar-for-dollar credit against US tax liability for income taxes paid to Serbia or another foreign government. It is an alternative — and sometimes superior — tool to the FEIE depending on your situation.

Key characteristics of the FTC:

• Applies to income types the FEIE cannot cover: investment income, rental income, and earnings above the FEIE limit
• You cannot claim the FTC on income that has already been excluded under the FEIE — these are separate mechanisms for separate income pools
• The FTC is subject to "basket" limitations under IRC §904 — separate calculations for general income, passive income, and other categories — which means you cannot always fully offset your US liability even when you've paid Serbian tax
• Because Serbia's income tax rate (10%) is below the US rate on equivalent income, the FTC often does not fully eliminate US tax liability on its own

FEIE vs. FTC: the strategic choice

For Americans earning primarily through employment or self-employment in Serbia, the FEIE is typically the better starting tool — it directly zeroes out the first $130,000 of earned income before calculating US tax. For income above the FEIE limit, the FTC on Serbian taxes paid can reduce additional US liability.

For Americans with significant investment income, the FTC is the applicable mechanism — the FEIE is irrelevant for passive income.

One critical interaction: If you claim the FEIE on a return, you cannot claim the FTC or deduction for foreign taxes paid on the excluded income. If you later revoke the FEIE to switch to a pure FTC strategy, you generally cannot reclaim the FEIE for five years without IRS approval. This is a structural decision with long-term implications — it belongs in your tax advisor's analysis, not a blog post.

The FEIE reduces your US income tax on qualifying earned income. It does not reduce your US self-employment tax.

Self-employment tax is 15.3% on net self-employment earnings (12.4% Social Security + 2.9% Medicare) and applies to self-employed Americans regardless of where they live. If you are a freelancer, consultant, or sole proprietor earning $130,000 working from Belgrade, and you exclude the full amount under FEIE (eliminating your US income tax liability to zero), you still owe approximately $19,000 in US self-employment tax.

The totalization agreement problem: The US has totalization agreements with many countries that prevent Americans abroad from contributing to both the US Social Security system and the host country's social insurance system simultaneously. There is no totalization agreement between the US and Serbia. This means self-employed Americans in Serbia may owe:

• 15.3% US self-employment tax (Social Security and Medicare)
• Serbian social contributions (~20% on the employee side for employees; different calculation for entrepreneurs)

For the right corporate structure in Serbia, this situation can be managed — but only if the structure is designed with both Serbian and US tax law in mind simultaneously. This is another reason why professional advice before structuring matters.

Once you spend 183+ days in Serbia in a calendar year, you become a Serbian tax resident and Serbia taxes your worldwide income. Here is the accurate picture:

Employment income: 10% flat income tax (plus social contributions). The newly-settled taxpayer incentive — a 70% reduction on both the tax base and social contributions for five years — is available to qualifying newly-arrived foreign workers. See our Serbia Tax Guide for Expats for full details.

Investment income (dividends, interest): 15% withholding tax in Serbia. This is explicitly different from what the previous version of this blog stated.

Capital gains: 15% in Serbia for residents.

Corporate income (d.o.o.): 15% on profit, plus 15% dividend tax on distributed profits.

No wealth tax. Serbia does not impose an annual wealth or net worth tax.

If you open a Serbian bank account — which you will need to do for any extended stay — you are subject to Foreign Bank Account Report (FBAR) filing requirements if your aggregate foreign financial accounts exceed $10,000 at any point during the year. This is not a tax — it is a reporting requirement filed separately from your tax return.

Key details:

• Form: FinCEN Form 114, filed electronically through the BSA E-Filing System
• Deadline: April 15, with an automatic extension to October 15
• Threshold: $10,000 aggregate across all foreign accounts at any point during the year — not just at year-end
• What counts: Bank accounts, brokerage accounts, mutual fund accounts, and certain other foreign financial accounts

Penalties for non-compliance are severe:

• Non-willful violation: up to $10,000 per violation per year
• Willful violation: up to the greater of $100,000 or 50% of the account balance per violation
• Criminal penalties apply in cases of wilful failure

Many Americans moving to Serbia are surprised by FBAR because it is entirely separate from the income tax system and has its own filing system and deadline. Missing it is not a minor paperwork error.

Beyond FBAR, Americans with significant foreign assets must file Form 8938 (FATCA) with their Form 1040. The thresholds for Americans living abroad:

• Single filers abroad: $200,000 on the last day of the year, or $300,000 at any point during the year
• Married filing jointly abroad: $400,000 on the last day of the year, or $600,000 at any point during the year

Form 8938 covers a broader set of assets than FBAR — including interests in foreign entities and certain foreign contracts — and is filed with your main tax return rather than separately.

Note: FBAR and Form 8938 are not redundant. You may be required to file both, and they report different things. Filing one does not satisfy the obligation for the other.

Many Americans moving to Serbia establish a Serbian limited liability company (d.o.o.) to operate their business and structure their residency. The corporate tax rate (15%) and the ability to take the newly-settled taxpayer incentive on a salary from your own company make this an attractive structure on the Serbian side.

However: US persons who own 10% or more of a foreign corporation are subject to specific US anti-deferral tax rules that the Serbian side of the analysis does not account for.

The two most relevant are:

Controlled Foreign Corporation (CFC) rules (Subpart F income): If a US person owns 10%+ of a foreign corporation and the corporation has certain categories of income (passive income, related-party income, financial services income), that income may be taxable in the US in the year it is earned by the company — even if no dividend has been paid. This is Subpart F inclusion.

GILTI (Global Intangible Low-Taxed Income) under IRC §951A: Introduced in 2017, GILTI requires US shareholders of CFCs to include a portion of the CFC's income in their US taxable income annually, at rates that depend on the amount of tangible assets the CFC holds. For a typical consulting or services d.o.o. with minimal tangible assets, GILTI can cause most of the company's profits to be included in the US shareholder's personal return each year — partially eliminating the benefit of deferral.

What this means in practice: A US person who creates a Serbian d.o.o. thinking they can shelter income at Serbia's 15% corporate rate without US consequences may be in for a significant surprise. The structure can still be efficient — but only when designed with knowledge of both CFC rules and Serbian law, with appropriate elections (the 962 election, for example) considered.

A blog post cannot substitute for a US-qualified international tax advisor in this analysis. The previous version of this blog suggested using a Serbian corporate structure to "lower your personal tax liability" without any of this context. That framing is incomplete to the point of being dangerous for US readers.

US federal taxes are one obligation. But some US states continue to assert tax residency over former residents even after they move abroad — these are commonly called "sticky states."

States with notably aggressive residency rules for departing residents include:

• California — the most aggressive, known to audit former residents who moved abroad; requires demonstrable severance of all significant ties, not just physical departure
• Virginia — a "safe harbour" rule requires 183 days outside the state, but assessment of "domicile" continues
• New Mexico and South Carolina — also known for continued residency assertions

If you are moving to Serbia from one of these states, simply leaving does not end your state tax obligation. Establishing that you have changed your domicile — updating your voter registration, drivers licence, and all professional and financial addresses — is a necessary step before departure.

Americans moving from states with no income tax (Florida, Texas, Washington, Nevada, Wyoming, South Dakota, Tennessee, New Hampshire) have no state income tax obligation to manage.

Important: The June 15 automatic extension extends the filing deadline. It does not extend the payment deadline. Any taxes owed are still due by April 15, and interest accrues from that date regardless of when you file.

FEIE limits updated:

• 2025 tax year (filed 2026): $130,000 per person
• 2026 tax year (filed 2027): $132,900 per person

Form 2555-EZ permanently discontinued: All FEIE claims must use the full Form 2555 going forward.

The One Big Beautiful Bill Act (OBBBA, 2025): Made several provisions from the 2017 Tax Cuts and Jobs Act permanent, including the 37% top marginal rate, the increased standard deduction, and the Child Tax Credit (increased to $2,200 per qualifying child). Note: claiming the FEIE disqualifies you from the refundable portion of the Child Tax Credit — a relevant trade-off for Americans abroad with children.

New 1% remittance excise tax (effective January 1, 2026): Under IRC §4475, a 1% excise tax now applies to specific outbound international fund transfers where the funding method triggers the provision. This affects some US-to-Serbia transfers — consult your bank and tax advisor to understand whether your regular transfers fall within scope.

IRS residency verification: The IRS has enhanced data-matching for Physical Presence Test claims, cross-referencing against passport entry/exit records. Accurate day-count records are not optional.

Despite the complexity, Serbia's tax environment is genuinely favourable for most Americans — particularly employed and self-employed workers:

• For earned income under $130,000: FEIE eliminates US income tax. Serbian income tax at 10% (potentially reduced 70% under the newly-settled taxpayer incentive in the first five years) is the effective rate.
  
  
• For earned income between $130,000 and higher thresholds: Foreign Tax Credit on Serbian taxes paid reduces (though rarely eliminates) additional US liability
  
  
• For investment income: taxed in both countries at different rates, with FTC providing partial relief
  
  
• Self-employment tax: 15.3% US self-employment tax applies regardless of where you live and regardless of FEIE

The absence of a US-Serbia treaty is the most significant structural disadvantage compared to Americans living in treaty countries. It means no pre-agreed framework for allocating tax rights, no Social Security totalization, and no formal mechanism for credit on pension income. These gaps require individual planning — not generic guidance.

For a complete picture of the Serbian tax side — income tax rates, social contributions, the newly-settled taxpayer incentive, and the optimal income structure for US expats — see Relocation Serbia's Serbia Tax Guide for Expats.

Relocation Serbia handles the Serbian side of the tax picture for US expat clients: company formation, residency applications, Serbian income tax registration, social contribution setup, ongoing bookkeeping, and annual filing with the Serbian Tax Administration.

For the US side — federal returns, FBAR, FATCA, FEIE and FTC strategy, state tax obligations, and CFC/GILTI analysis for clients with Serbian companies — we work alongside US-qualified expatriate tax advisors. We do not provide US tax advice directly, but we ensure the Serbian structure is correctly built to support whatever approach your US advisor recommends.

For US clients at the research stage, the most efficient first step is usually a consultation covering Serbian residency and company structure options — which we can then align with US tax planning advice from a specialist.

Book a consultation with Relocation Serbia →
View our Tax & Compliance service →
Read our full Serbia Tax Guide for Expats →