Tax residency certificate is still an ambiguous proof of residency that formally allows you to use the benefits under the Double Taxation Avoidance Treaty (DTA) or apply the beneficiary tax rate under the local tax legislation (“equal treatment”). Tax residency certificate prescribed by the Serbian Tax office for residents and non-residents is set up in a manner that one certificate is issued on annual basis and is covering all types of direct tax and all the amounts received by the resident during that year.
On the other hand, the non-residents in Serbia provide the certificates issued by their domicile countries that vary in terms of form, validity period and scope of income covered. The most common type of transactions where the certificate is needed on regular basis are services (administrative, advisory, IT…).
Per Article 159a of the Serbian Act on Tax Procedure and Tax Administration, certificates issued in the domicile countries of the non-resident income beneficiaries are equal to locally prescribed form, POR-2 if they contain enough information on the status of non-resident and the purpose of the certificate issuance.
The biggest investor countries are issuing certificates in the following manner:
- Austria – the certificate is issued for each payment to an Austrian resident and is limited per list of documents it refers to, meaning that the number of payments defines the number of certificates issued during the year. For the companies charging services on monthly level, it means twelve visits to the Tax office on annual basis x number of Serbian customers;
- Germany – German Tax office was issuing a “general” tax residency certificate on annual basis that could cover various types of transaction throughout the year. It was also possible to obtain specific certificates that refer to certain transactions / amounts. In 2016, such practice was abolished, so the certificates are now issued for each payment documenting, with defined type of transaction. This gives certain flexibility compared to Austrian solution, since the list of transaction can include all the services provided on annual basis and requires an update in the case of scope of servicing being amended;
- Italy – the manner of certificate issuance is not defined and depends on the local authority (municipality/city level). In practice, this means that the certificate can be just a short statement containing the information that the individual/company is a tax resident of Italy, without stipulating for which purpose the certificate is issued and to which types of income it refers (also not mentioning the period of validity).
Now, another topic is whether the Serbian Tax office is obliged to simply accept any certificate issued by the foreign tax office. As for the domicile countries mentioned above, Austrian and German forms of certificates have been widely accepted by the local authorities in Serbia. On the other hand, Austrian and German authorities may or may not accept the Serbian residency certificate, depending on the municipality where the company resides (per Serbian Act on Tax Procedure and Tax Administration, Serbian Tax office is issuing Serbian tax residency certificate in defined form, POR-1). In such case, the requirement is that the Serbian Tax office signs the tax residency form issued by the foreign tax authority.
How to use this info?
- If you have a foreign supplier from the long list of countries where Serbia has concluded DTAs, try arranging a POR-2 form on annual basis – it saves your supplier from multiple visits to their local tax office and it saves you from translating each single certificate you get.
- On the other hand, there is no guarantee that you will have the same experience with two different suppliers residing in two different cities in one country.
Although the DTAs reflect the common intentions of two countries, the practical application still depends on the local administrations and their understanding and acceptance.