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Double Tax Treaties in Serbia

Updated on Wednesday 16th September 2020

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Double tax treaties in Serbia.jpgEven if Serbia has only a few double taxation agreements signed with countries worldwide, this represents a major step in developing the business relations on an international scale. It is mandatory to be aware of how the double taxation can be avoided when opening a company in Serbia as a foreign entrepreneur. The company registration in Serbia is subject to less bureaucracy, and it can be guided by our Serbian team of specialists in company incorporation.

 

Countries which signed DTT with Serbia

 
A number of 65 states have signed double tax treaties with Serbia, and here we mention the following: Armenia, Albania, Azerbaijan, Austria, Belarus, Bosnia and Herzegovina, Belgium, Bulgaria, Croatia, China, Czech Republic, Canada, Cyprus, Denmark, Estonia, Egypt, France, Finland, Greece, Germany, Guinea, Ghana, Georgia, Hungary, Iran, Italy, Ireland, India, Indonesia, Kazakhstan, Kuwait, Libya, Latvia, Luxembourg, Lithuania, Malaysia, Macedonia, Moldova, Morocco, Malta, Montenegro, Norway, the Netherlands, North Korea, Poland, Pakistan, Palestine, Qatar, Russia, Romania, Slovenia, Slovakia, South Korea, Sri Lanka, Sweden, Spain, Switzerland, Tunisia, Turkey, Ukraine, the UAE, UK, Uganda, Zimbabwe, and Vietnam.
 

Tax provisions mentioned in the double tax treaties of Serbia

 
When registering a company in Serbia, one should consider if a tax treaty has been signed and how the double taxation can be avoided. In this matter, the entrepreneurs must know that there are two important ways of enjoying the benefits of a DTT. The first one is the credit offered after the revenues are levied in Serbia. The second one is related to the exemption of taxation meaning that the profits of a company are only taxed in the home country and not in the country where the activities are performed, in this case, Serbia.

 

The withholding taxes for member states in the DTT

 

Usually, the double tax treaties prevent the taxation of the incomes of a foreign company in the country of origin or in the country where it performs the business. The avoidance is made trough exemption (when there is no tax paid in Serbia) or through credit (when the paid tax is deducted in the foreign country). The double tax agreements between Serbia and the above-mentioned participant countries mention smaller withholding taxes imposed on royalties, dividends, and interests, but there are situations in which such taxes are non-existent, being influenced by the amount of participation in the Serbian enterprises or subsidiaries.
 

Do I need to make proof of the taxes paid in other countries?

 
Yes, company owners in Serbia are obliged to demonstrate to the authorities that the taxes have been paid in the home country, especially if they own at least 25% of the shares in a business with origins from Malta, Austria, Libya, Ireland, Qatar, Estonia, or Spain. In such cases, the dividends are taxed at a 5% rate. As for countries like Egypt and Belgium, the withholding tax is set at 10%. Belarus is subject to a withholding tax of 8%, but there are also exemptions for states like Germany, Sweden, Finland, the Netherlands, and France. The countries which are part of the double taxation agreements with Serbia are subject to taxes on royalties not exceeding 10%.
 

What are the returns of double tax treaties signed with Serbia?

 
Entrepreneurs from abroad who want to expand their portfolios by incorporating companies in Serbia should know that there are varied benefits stipulated by the double taxation agreements. For instance, the companies are subject to low rates of withholding taxes on royalties, interests, and dividends, with rates between 0% and 10%. Furthermore, the capital gains of a company with foreign capital established in Serbia shall not be levied in the home country, if certain conditions are respected. 
 

What is a permanent establishment?

 

A permanent establishment is a fixed place of your business in Serbia which can be a workshop, an office, a factory or a branch that has operations in this country. Such permanent establishments are mentioned by the double taxation agreements signed by Serbia and the countries mentioned above.
 

Supplementary details about the taxes in Serbia

 
Foreign citizens who work in Serbia are also protected by the double tax treaties signed with states mentioned earlier, meaning that the revenues gained in Serbia will only be taxed in this country. In general, the gains derived from the sale of real estate are taxed, but also the gains derived from the sale of shares with a majority of value derived from the real estate located in the country of origin. The following withholding tax rates apply as mentioned:
 
  • a 10% rate applies for the right to use the trademarks, for the use of scientific or commercial equipment of companies with origins from the contracting states;
  • a 10% rate applies on dividends of Malaysian residents;
  • there is no withholding tax applicable on dividends for UAE tax residents;
  • if Switzerland imposes no withholding taxes on royalties, dividends, and interests, then Serbia won’t apply such tax, in accordance with the signed treaty.
We also mention that for taking advantage from the provisions of the double taxation conventions signed by Serbia, and particularly from the withholding tax rates, the resident taxpayer needs to provide to the authorities the residence certificate translated into the Serbian language.
 

News about DDTs of Serbia

 
In 2020, Serbia signed double taxation agreements with Japan and Hong Kong, the next stage referring to the ratification of the treaty, in order to enter into force. Serbia continues the business collaboration with countries worldwide, Portugal, Liechtenstein, USA, Singapore, and Algeria being next on the list.
 
More than that, Serbia is part of the Multilateral Convention since 2018, helping the country amend the double tax treaties in a simple manner. So far, Serbia amended the conventions signed with UK, Lithuania, France, Slovakia, Malta, Poland, Finland, and Slovenia. For more details about the new revisions of the double taxation treaties signed by Serbia, you may simply address one of our company formation specialists in Serbia. The same team can help you register a company in Serbia, open a business bank account, apply for licenses and permits or register for taxation in Serbia.
 

Types of revenues protected by the DTT signed by Serbia

 
The third chapter of a double tax treaty signed by Serbia comprises complete information about the types of incomes, the taxation, and the protection against fiscal evasion. The incomes from immovable properties, revenue related to international traffic, remuneration of athletes, professors, and artists, capital gains, royalties, interests, dividends, pensions, and independent personal activities are protected by the double taxation treaties signed by Serbia.
 

Particularities of DDTs signed by Serbia

 
Each double taxation arrangement signed by Serbia is unique and reflects the collaboration, the terms, and the provisions agreed with a specific country. For example, the double taxation treaty signed with Sweden mentions a series of incomes with zero taxation. The DTT signed with Germany (one of the main investors in Serbia) is also extremely favorable, considering that there is no tax for loan interest. Preferential tax systems are offered to countries like Cyprus, Malta, the Netherlands, Estonia, Luxembourg, and Ireland. It is important to note that Serbia continues to expand its business and economic relations with Asian and American countries.
 

Short conclusion about Serbia’s DTTs

 
Serbia persists on negotiating and dealing with other countries too, in terms of protection of double taxation. As mentioned earlier, Serbia is about to sign double tax treaties with Portugal, the USA, Liechtenstein, to name a few. Further changes and improvements of double taxation treaties enter the attention of the Serbian authorities who continue to consult with other countries too, in terms of business and tax protection. One should also note that the double taxation agreements signed by Serbia respect the directives and rules established by the European Union. Feel free to talk to our specialists in company formation in Serbia and find out more details about the taxation in Serbia.
 

Making investments in Serbia

 
Serbia is a flourishing business hub that provides permissive legislation related to foreign investments, allowing international entrepreneurs to generate profits in a wide range of important business sectors. The manufacturing field is quite consistent and thriving, and it sustains a large percent of the country’s GDP. Besides the business possibilities of Serbia, foreign entrepreneurs also benefit from a relaxed taxation system that allows further investment possibilities. The double taxation treaties also play a great role for entrepreneurs from abroad who want to protect their incomes against fiscal evasion and extra taxation. We have gathered some interesting facts and figures that highlight the economy and business environment of Serbia:
 
  1. Approximately USD 44 billion was the total FDI stock of Serbia in 2019.
  2. Around 56% of the greenfield projects registered in Serbia in 2019 were directed to the manufacturing sector.
  3. The skilled labor force, the economic reforms, and the strategic location make Serbia a preferred business destination for a wide range of foreign investors.
  4. The 2020 Doing Business report issued by the World Bank ranks Serbia 44th out of 190 economies in the world.
  5. Even though Serbia is not part of the EU, the country is a member of the Central European Free Trade Agreement (CEFTA), alongside Turkey and Russia.
 
The double taxation agreements signed by Serbia are meant to protect the incomes of foreign companies and natural persons generating revenues in this country. If you believe you need more details about these important treaties signed by Serbia, you can simply talk to one of our consultants.
 
 
Please feel free to contact our team of agents in company formation in Serbia and solicit information about the avoidance of double taxation in Serbia

 

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