Royalties and double taxation avoidance agreements – Serbia
When it comes to paying withholding tax on royalties paid out by a resident legal entity to a non-resident legal entity, there are only two cases, i.e. only two countries which concluded double taxation avoidance agreement with the Republic of Serbia, which prescribes that the tax on royalties shall not be paid in the Republic of Serbia, i.e. that the other contracting country has the right to impose taxes on this revenue.
According to DTAA, non-residents from France and Sweden are not obliged to pay taxes on royalties. In all other cases, in accordance with DTAA provisions, royalties in Serbia are subject to 10% withholding tax rate, which is applied to the largest number of royalties, while some royalties are subject to 5% withholding tax rate.
For these rates to be applied, certain conditions shall be met and here are those conditions:
– at the moment of revenue payout, the payer shall have a corresponding certificate confirming that the revenue recipient is resident of the country with which the agreement was concluded
– a non-resident shall be the real revenue owner
Foreigners prove that they are residents of the country, which signed double taxation avoidance agreement with Serbia, by the means of:
–a POR-2 form, certified by the competent authority of the country of residence of a foreign legal entity or
–a certified translation of the certificate, issued in the form prescribed by the competent authority of the country of residence of a foreign legal entity.
If the conditions for the DTAA implementation are not met, the provisions of the Article 40 Paragraph 1 Item 2 of the Corporate Profit Tax Law are applied instead of DTAA decision. The Article 40 Paragraph 1 Item 2 of the Corporate Profit Tax Law stipulates that the corporate profit withholding tax shall be calculated and paid at the rate of 20% on the income earned by a non-resident legal entity from a resident legal entity based on copyright and related rights, as well as industrial property rights (royalties), unless otherwise regulated by an international agreement on the avoidance of double taxation.