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Serbia: Serbia-San Marino DTA enters into force

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Serbia and San Marino signed a double taxation agreement (DTA) on April 16 2018, thus effectively resulting in the removal of San Marino from the Serbian list of countries with a preferential tax regime. The Law on Confirmation of the DTA was adopted by the Serbian Assembly on September 25 2018 and San Marino is expected to start the application of the DTA as of January 2019.

The DTA introduces the following principles and rates:

  • A maximum 5% withholding tax rate for dividends paid by a company to its shareholder company directly owning at least 25% of the capital of the company paying the dividends;

  • A maximum 10% withholding tax rate for the payment of dividends to shareholders owning less than 25% of company's capital;

  • Interest and royalties are generally taxable in the country of residence of the receiving company; but if taxed in the country of residence of the paying company the tax may not exceed 10%.

  • In cases when more than 50% of the value of the company (for the 365 days preceding a sale) is derived from real estate, the capital gains from the sale of shares over such a company may be taxable in the country of residence of the company being sold; and

  • In all other cases, the capital gains from sale of shares will be taxable in the seller's country of residence.

As a result of San Marino's removal from the preferential tax regime jurisdiction list, transactions between legal entities from Serbia and San Marino will no longer be subject to the 25% withholding tax rate.

We advise companies doing business with San Marino to carefully review existing practices and evaluate whether the new treaty will have an impact on their transactions. Our team is ready to answer your questions on how the agreement will simplify administrative procedures and tax burdens related to withholding tax and to provide custom guidance on ensuring compliance with the treaty.

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