What Is Needed for Withholding Tax Exemption or Reduction

1. Certificate of residence
   The tax authority of the recipient’s country issues this document. It must be an original or a certified copy and must relate to the year in which the income was earned. If issued in a foreign language, a Serbian translation by a certified court translator is often required.
2. Proof that the recipient is the beneficial owner of the income
   Serbia, like many other countries, requires proof that the recipient is not merely an intermediary. The non-resident must have the right to use and dispose of the income and must actually bear the economic risks and benefits related to it.
3. Agreement / documentation on the legal basis of payment
   This includes the contract between the Serbian resident and the non-resident, the invoice, or other evidence showing that the payment is genuinely made for services, loans, licenses, etc. This is important because the Tax Administration may check whether the income falls within the relevant treaty provisions.
4. Tax return to the Serbian Tax Administration
   Before payment to the non-resident, the Serbian resident payer must file the appropriate return (PP OPO – withholding tax return). The return should refer to the relevant article of the applicable treaty and include the residence certificate.
5. No permanent establishment in Serbia
   If the non-resident has a registered permanent establishment in Serbia, profits are generally taxed through that permanent establishment, rather than through withholding tax exemption. Therefore, to apply the exemption, the non-resident should usually prove that it does not have a permanent establishment in Serbia.

In short, to apply a treaty rate or exemption, you generally need:

• a certificate of residence,
• proof of beneficial ownership,
• a contract/invoice documenting the legal basis of payment,
• a PP OPO return filed with the Serbian Tax Administration before or at the time of payment,
• proof that the non-resident does not have a permanent establishment in Serbia.

It is important to remember that the Corporate Income Tax Law obliges the Serbian resident payer to calculate, withhold and pay withholding tax when making certain payments to non-residents. The obligation to file the return is further prescribed by by-laws governing withholding tax returns.

Even when a treaty exemption or a 0% treaty rate applies, the PP OPO return still has to be submitted.