The Agreement between the Government of the Republic of Serbia and the Government of Hong Kong, Special administrative region of the People’s Republic of China (“Hong Kong”) on elimination of double taxation relating to income and property taxes and prevention of tax evasion and avoidance entered into force at the end of December 2020. Its application in Serbia has started on January 1, 2021, while it will be applied in Hong Kong for each year of taxation starting from April 1 or after April 1, 2021.

The Agreement shall apply to profit taxes, income taxes and property taxes.

Conclusion of the Agreement is particularly important from the aspect of payment of withholding taxes for non-residents’ income. In cases where there is no agreement on avoidance of double taxation, a resident shall be obliged, upon payment of income under Article 40 of the Law on Corporate Profit Tax, to calculate and pay withholding tax at 20% rate or 25% in case of non-resident from a jurisdiction with preferential tax system.

Hong Kong was on a list of jurisdictions with preferential tax system, which means that income payment to legal entities with seat in Hong Kong was subject to 25% tax rate in the Republic of Serbia. Due to the agreement application, dividends and authors’ fees will be subject to 5-10%, interests to 10% rate etc.

By amendment to the Rulebook on the list of jurisdictions with preferential tax system, Hong Kong was deleted from this list starting from January 1, 2021.

At the end of December, the National Assembly of the Republic of Serbia ratified the Agreement between the Government of the Republic of Serbia and the Government of Japan on elimination of double taxation relating to income taxes and prevention of tax evasion and avoidance, however its application has not started yet.

In the Republic of Serbia, this agreement will be applied to income and profit taxes. Since the agreement was concluded with reference to the OECD Model of convention, it contains similar solutions as the agreement with Hong Kong (e.g. dividends and authors’ fees will be subject to 5-10% taxation, interests to 10% rate etc.).

This article is to be considered as exclusively informative, with no intention to provide legal advice.
If you should need additional information, please contact us directly.