Serbia-San Marino DTT enters into force

Serbia and San Marino signed a DTT 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 DTT was adopted by the Serbian Assembly on September 25, 2018 and San Marino is expected to start the application of the DTT as of January, 2019.

The DTT 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 of 10% withholding tax rate for to the payment of dividends paid to shareholders owning less than 25% of company’s capital;
• Interests 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.
• 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 its removal from the preferential tax regime jurisdiction list, transactions between legal entities from Serbia and San Marino will no longer be subject to 25% withholding tax rate.

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

Katarina Predic
Partner, Tax, VAT and Transfer Pricing
Eurofast Global Serbia
T. +381 11 3241 484

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