Paypal, payoneer, tax treatment of import of services

March 17, 20230

The third industrial revolution, which began in the mid-80s of the last century, significantly accelerated at the start of the 21st century, but few could have anticipated, such a speed of development of digital transformation, which will follow the natural course of human development, as it did during the epidemic of the corona virus. We have all seen first-hand how quickly and extensively digital platforms for electronic payments have advanced.


The popularity of digital platforms was boosted by the epidemic, particularly among the natural persons. Yet, it was inevitable that the question of whether legal entities and entrepreneurs could make payments through these platforms arose. We are referring primarily to the platforms which enable electronic payments such as PayPal, Skrill, Payoneer, Paysafe, Google Payments, Payeer, etc. That is, an electronic money institution (i.e., a platform that enables electronic payment) that is registered as a legal entity with its headquarters in Serbia and has the National Bank of Serbia’s authorization for these activities may perform payment operations in the Republic of Serbia.



                  Domestic and international payments


By visiting the National Bank of Serbia’s website, i.e. going to the link: we can observe that none of these institutions have met the requirements and are not an electronic money institution in Serbia. This means that domestic payments cannot be made through these institutions, but only through Telekom, LED pay, Chip card and Payspot. This further means that persons who are residents of Serbia cannot pay for or be charged for the good and services via PayPal, Skrill, Payoneer, Paysafe, Google Payments, Payeer and similar platforms.

Payments inside the country are regulated by the Law on Payment Services, whereas the payments operations foreign countries are governed by the Law on Foreign Currency Transactions, and in this case, the rules of payments to foreign countries are very different. The Law on Foreign Currency Transactions permits collections and payments to foreign residents through foreign payment institutions, but only when done so on the basis of electronic buying and selling for of goods and services.

The NBS website contains a list of institutions from third countries that operate in accordance with the Law on Foreign Currency Transactions, through which the buying and selling of goods and services from foreign countries can be carried out. The list is available at the link:



Tax treatment of import of international services


The Law on Customs Tariffs imposes the same obligation of verification on goods that are purchased from foreign countries and paid for through payment institutions. When it comes to the “purchase” of services from foreign countries, there are considerably bigger doubts. For many consumers of these services, especially legal entities, the question whether there is any tax liability arises.

Regarding those services, there is often lack of comprehension in practice, especially when they are paid for through foreign payment institutions.  Amendments to the Corporate Income Tax Law from 2018, precisely Articles 40 and 40a which regulate the taxation by withholding tax regardless of the place of use or provision, i.e. the place where the services will be provided or used, namely:


1) market research services

2) accounting and auditing services

3) other services in the field of legal and business consulting


In order to eliminate doubts about the subject of taxation of services, the Rulebook on the types of services, on the basis of which a non-resident legal entity generates income that is taxed with withholding tax, was adopted. This rulebook regulates in more detail which market research services, which accounting and auditing services are taxed, as well as which services in the field of tax and business consulting are subject to taxation.


What was taxable even prior to these changes refers to taxation by withholding tax on the income of non-resident legal entities, namely:

– dividends and share in profit

– royalties, i.e. copyright and related rights and industrial property rights

– lease of immovable and movable property on the territory of Serbia

– income of non-resident legal based on performing in show business, as well as entertainment, art, sports and similar programmes in Serbia, if they are not taxed on the basis of the individual income tax

– income from all services regardless of the place of use originating from jurisdictions with a preferential tax system

– income from the exchange of secondary raw materials and waste


Hence, just as with payments made in foreign currencies, the following checks should be conducted before making a payment through a foreign payment institution:

– whether the foreign supplier is from a jurisdiction with a preferential tax system

– determining the type of service which is being paid for

– is there a possibility of applying Double Taxation Avoidance Agreement (DTAA) (Serbian: UIDO), i.e. obtaining a certified translation of the residency certificate for the current year that the non-resident legal entity is the actual recipient of the income

– determining the withholding tax rate

– submitting a tax return

– determining the tax debtor for the purpose of internal VAT calculation

Our team is at your disposal for all types of consultations regarding doubts and conducting necessary checks.


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