The Protocol between the Government of the Re-public of Serbia and the Swiss Federal Council on the amendments to the Double Taxation Treaty between Council of Ministers of Serbia and Mon-tenegro and Swiss Federal Council (Protocol) was signed in Belgrade on 19 September 2023.
Serbian Parliament adopted the Law on Confirma-tion of the Protocol on 27 October 2023 which was published on 31 October 2023 in the Official Ga-zette of the Republic of Serbia – International Trea-ty no. 6/2023
Note that the implementation of these amend-ments is expected from 1 January 2025, if the Republic of Serbia receives a diplomatic note by Switzerland authorities that the procedures pro-vided by Swiss law for entrance into force of the Protocol are completed.
Provisions of the Protocol shall have effect with respect to:
- Income taxes levied in the tax year starting on 1 January 2025 or after 1 January 2025, and
- Property taxes for properties owned in the tax year starting on 1 January 2025 or after 1 January 2025.
Exceptionally, the provisions of the Protocol relat-ing to the international exchange of information shall apply to the information relating to the tax year starting on 1 January 2025 or after 1 January 2025.
Purpose of concluding the Protocol is:
- harmonization with the concepts provided by the Multilateral Convention to Imple-ment Tax Treaty Related Measures to Pre-vent Base Erosion and Profit Shifting, primarily in the part of the minimum stand-ards that refer to the preamble of the dou-ble taxation treaties and prevention of the treaty abuse,
- regulation of new rules for the international exchange of information,
- explanation and specification of certain solutions and concepts from the Double Taxation Treaty.
An overview of significant changes is provided below.
New rules for easier international exchange of information for tax purposes
The subject of information exchange between tax authorities may be information related to any type of tax introduced and administered by Serbia and Switzerland.
Exchanged information must be required for a specific tax purpose, i.e. it must be relevant for a specific tax procedure (e.g. the procedure for de-termining undeclared income) or be important for preventing or detecting international tax evasion.
Exchange of information representing bank se-crecy enabled
Competent tax authority to which a request for the delivering of information is sent cannot refuse to provide specific information solely because the requested information is owned by a bank or other financial institution. Therefore, information that the bank possesses, for example, information on cur-rent account transactions, can be the subject of information exchange without restrictions. These amendments abolish the restriction on the ex-change of information representing bank secrets (as it was foreseen in the primary text of the Dou-ble Taxation Treaty).
Deprivation of contractual benefits – application of the Principle Purpose Test
The tax authority can deny tax benefits from the Double Taxation Treaty, if it can be reasonably concluded that achieving of tax benefits from the Double Taxation Treaty has been one of the main reasons for a certain transaction or arrangement.
Essentially, it is a measure against the abuse of tax treaties aimed at preventing the behavior of taxpayers, which is primarily motivated by the achieving of tax benefits provided by the network of tax treaties of a specific jurisdiction when plan-ning and implementing a certain transaction.
Application of Swiss rules on minimum taxation of groups of large multinational companies
If Swiss resident generates taxable income in Ser-bia, the rules on tax exemption do not apply to the extent that the Swiss rules on minimum taxation of groups of large multinational companies impose an additional tax in relation to a permanent estab-lishment located in Serbia.
Alienation of shares in limited liability compa-nies subject to capital gain taxation
The subject of capital gains taxation is the aliena-tion of shares in limited liability companies estab-lished in accordance with Serbian laws, which gen-erate more than 50% of their value directly or indi-rectly from real estates located in Serbia.
The Protocol includes limited liability companies In addition to joint stock companies.
Deadline for a tax audit of profit attributed to permanent establishment
Correction of profit attributed to a permanent es-tablishment of a company of another contracting state would not be performed after five years from the end of the tax year in which the profit could be attributed to the permanent business unit.
Exceptionally, this provision does not apply in the case of tax evasion or the existence of an inten-tion not to fulfill tax obligation.
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