On 24 February 2016, Serbia expanded its double tax treaty network by ratifying the Agreement for the avoidance of double taxation with respect to taxes on income, signed with the Republic of Korea on 22 January 2016.

The treaty closely follows the standard OECD contract model, but differs in terms of the withholding tax rates applicable, which have been defined as follows:

  • Dividends

    • 5 % ( if the recipient company holds at least 25% of the dividend-paying company)
    • 10% ( in all other cases);
  • Interest – 10%;
  • Royalties

    • 5 % (for the use of, or the right to use, any copyrights of literary, artistic or scientific work including cinematography films, films or tapes for television or radio)
    • 10% (applicable for the use of, or the right to use any patent, trade mark, design or model, plan, secret formula or process as well as industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience).

Some other specific details include:

  • A building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months.
  • Penalty interest rate shall not be regarded as interest for purposes of this Agreement ( article 11)

By signing the above-mentioned treaty, South Korea also becomes one of the countries exempt from the withholding tax on service fees paid t non-resident legal entities which was introduced in Serbia as of 1st March 2016.

Following the ratification of the agreement and the publishing of the ratification law in the Official Gazette - International Treaties No. 4/2016, the treaty becomes officially binding and will enter into force as of 1st January 2017.

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.