It is commonplace for foreign companies active in the Republic of Serbia, including Austrian firms, to second their employees to the country via their affiliates or business partners. In the practical application of such secondments, one must differentiate between secondments in which seconded employees are employed for a fixed term with an employer in Serbia, and those in which employees are not employed by an employer in the country.

In the second instance, the foreign employer is simply making its employees available to the employer in Serbia, with the seconded employees working for the Serbian employer but continuing to receive remuneration from their original (for the purposes of this article: Austrian) employer. In this instance, the local company, pursuant to an agreement concluded with the employer seconding the employees, reimburses the foreign employer for "seconded staff" services for an amount equal to that of the remuneration and expenses of the seconded employees.

In terms of taxing the remuneration of foreign nationals seconded to work in Serbia, attention should be paid as to whether the two countries (Serbia and the country from which the employees are being seconded) have concluded a double taxation treaty.

Serbia and Austria concluded such a treaty in 2010. Article 15(2) of the treaty provides that income generated by a non-resident employed Serbia shall be taxed only in the country of residency (i.e. Austria) if the following three conditions are fulfilled cumulatively:

1) the employees reside in Serbia for a period or periods not exceeding an aggregate of 183 days in the calendar year concerned;

2) the remuneration is paid by, or on behalf of, an employer which is not resident in Serbia;

3) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in Serbia.

It should be noted that above provisions represent a general rule and that exemptions exist in special cases.

However, it should be mentioned that local competent authorities interpret point 2 above broadly, in the sense that they consider an employer to be any company bearing the economic burden of remuneration paid to employees. In the event that remuneration and payroll expenses are borne by the local employer, with the local employer reimbursing the foreign employer for all labour costs (remuneration and other expenses) of the seconded employees, the authorities are likely to conclude that the condition referred to in point 2) above is not fulfilled and the right to tax the remuneration of the seconded employees would thus fall to the Republic of Serbia. There are a numerous opinions issued by the Ministry of Finance upholding this viewpoint, (e.g. opinion no. RS 011-00-475/2011-04).

Hence, the remuneration of Austrian nationals seconded to the Republic of Serbia by an Austrian employer shall be taxed in Serbia if the three conditions referred to under Article 15(2) of the Double Taxation Treaty between the Republic of Serbia and Austria are not met cumulatively

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.