Special tax treatment of certain non-resident income
Tax treatment of income paid by a resident legal entity to a non-resident individual, based on programming services that that person actually provides outside the territory of the Republic of Serbia.
Bearing in mind the above, we point out that the performance of independent personal activities excludes the performance of industrial and commercial activities, as well as the performance of professional activities based on an employment relationship.
In accordance with the theory and practice of international tax law, and for the purposes of implementing double taxation agreements, this is an activity of natural persons that is carried out on their own account in order to generate income, which implies bearing the risk of potential losses incurred while performing the activity.
When it comes to the criterion of “fixed base”, as a condition for the income of persons performing independent personal activities to be taxed in the source country (in this case, in the Republic of Serbia), in accordance with international practice when concluding, interpreting and applying agreements on the avoidance of double taxation, it is not customary to define the meaning of the term “fixed base”. However, it is customary to understand the term “fixed base” as a center of activity of a permanent nature (minimum 6 months) that a resident of a contracting state has in another contracting state.
The above applies, provided that a valid certificate of residency is held. Otherwise, the relevant provisions of the Personal Income Tax Law apply, and not the provisions of the Agreement.
This will be the case even if the non-resident natural person who creates (designs) the computer program retains all rights, including copyright in that computer program (which, according to the request for an opinion, is not the case – because the intellectual property over the computer program remains the property of the resident legal entity).
This will be the case even if the non-resident natural person who creates (designs) the computer program retains all rights, including copyright in that computer program (which, according to the request for an opinion, is not the case – because the intellectual property over the computer program remains the property of the resident legal entity).
However, if a non-resident natural person (as the owner of the copyright on a previously developed computer program) granted a resident legal entity the right to modify or reproduce the developed computer program, whereby the non-resident natural person would not perform any additional work, the fee paid by the resident legal entity to the non-resident natural person (for granting such a right to use the computer program) would be considered royalties, which would be taxed in the Republic of Serbia at a withholding tax rate of 10 percent of the gross amount of royalties.
