The Tax Hub

The income and capital tax treaty between Luxembourg and Serbia reportedly entered into force on 27 December 2016. The treaty, signed 15 December 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Luxembourg income tax on individuals, corporation tax, capital tax, and communal trade tax. It covers Serbian corporate income tax, personal income tax, and tax on capital.

Withholding Tax Rates

• Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
• Interest - 10%
• Royalties -
  • 5% for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting;
  • 10% for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State; and
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Serbia applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption with progression method. However, in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 17 (Artistes and Sportspersons income), Luxembourg applies the credit method.

MFN Clause

The final protocol to the treaty includes the provision that if Serbia signs a tax treaty with a third State that is a member of the EU and such treaty provides for a lower rate of tax in respect of income covered by Articles 11(Interest) and 12 (Royalties), then negotiations will begin for the revision of the rates provided for under the Luxembourg-Serbia tax treaty.

Effective Date

The treaty applies from 1 January 2017.