On July 21, “Convention between Japan and the Republic of Serbia for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (hereinafter referred to as the Convention) (English (PDF) / Japanese (PDF)) was signed in Belgrade, Serbia by H.E. Mr. Junichi Maruyama, Ambassador of Japan in the Republic of Serbia and H.E. Mr. Sinisa Mali, Minister of Finance of the Republic of Serbia.
1. For the purpose of eliminating double taxation arising between the two countries, this Convention clarifies the scope of taxable income in the two countries. In addition, this Convention will enable the tax authorities of the two countries to consult each other on taxation not in accordance with the provisions of this Convention and to exchange information concerning tax matters. It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries while eliminating double taxation and preventing international tax evasion and tax avoidance.
2. The following are the key points of the Convention.
(1) Taxation on Business Profits
Where an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country.
(2)Taxation on Investment Income
Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
|Dividends||5% (holding at least 25% of shares* for 365 days)
|Interest||Exempted (beneficially owned by the Governments etc.)
voting power (where paid by a company of Japan) or capital (where paid by a company of Serbia)
(3) Prevention of Abuse of the Convention
In order to prevent abuse of benefits under this Convention, any benefit under this Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction, or if the income is attributable to a permanent establishment in a third country and does not satisfy specified conditions.
(4) Mutual Agreement Procedure
Taxation not in accordance with the provisions of this Convention may be resolved by mutual agreement between the tax authorities of the two countries.
(5) Exchange of Information
In order to effectively prevent international tax evasion and tax avoidance, the exchange of information concerning tax matters between the two countries is introduced.
3. After the completion of the necessary domestic procedures in each of the two countries (in the case of Japan, approval by the Diet is necessary), this Convention will enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval and will have effect:
(a) in Japan:
(i) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1 January in the calendar year next following that in which this Convention enters into force; and
(ii) with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after 1 January in the calendar year next following that in which this Convention enters into force; and
(b) in Serbia:
with respect to the taxes on income derived in each fiscal year beginning on or after 1 January in the calendar year next following that in which this Convention enters into force.
(c) The provisions concerning the exchange of information will have effect from the date of entry into force of this Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.