New DTT with Luxembourg

UniCredit Bank Serbia JSC
Summary: 
The Double Tax Treaty between Luxembourg and Serbia was ratified by the Serbian Parliament
Wed, 02/03/2016

 

The new DTT between Luxembourg and Serbia (each, a "Contracting State", and together, the "Contracting States") provides, among other things, for the following beneficial withholding tax rates that shall be applicable to income received by residents of the Contracting States after the DTT becomes effective:

Article 10 – Dividend Income:

i. 5% withholding tax rate will apply to the gross amount of the dividends if the beneficial owner (other than a partnership) holds directly at least 25% of the capital of the company paying the dividends;

ii. 10% withholding tax rate will apply to the gross amount of the dividends in all other cases. 

Article 11 – Interest Income: 

i. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State;

ii. Such interest may also be taxed in the Contracting State in which it arises and in accordance with the laws of that Contracting State, however if the beneficial owner of the interest is a resident of the other Contracting State, the tax charged in that way shall not exceed 10% of the gross amount of the interest.

iii. Notwithstanding the provisions of paragraph (ii), the interest referred to in paragraph (i) shall be taxable only in the Contracting State of which the recipient is a resident if the beneficial owner of the interest is a resident of that Contracting State, and:

a) is the State in which the interest arises or a political subdivision or a local authority of such State;

b) is the national or the central bank of the other Contracting State.

Article 13 - Capital Gains:

Capital gains derived by a resident of a Contracting State from the alienation of movable property:

  • forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or
  • belonging to a fixed base used by a resident of a Contracting State in the other Contracting State for the performance of independent personal services,

including such gains from the alienation of such permanent establishment (alone or with the whole enterprise) or fixed base, may be taxed in that other Contracting State.

The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by their domestic laws for the bringing into force of the DTT. The DTT shall enter into force on the date of the later of these notifications and shall have effect on or after 1 January of the calendar year following that in which the DTT has entered into force.  

The provisions of the DTT mentioned above are thus not expected to become effective before 1 January 2017.

Impact on investors: The new DTT between  Luxembourg and Serbia will create a more favorable tax environment for eligible investors from both countries.