Double Taxation between Hong Kong and Serbia

Agreement between Serbia and Hong Kong on elimination of double taxation confirmed

At its session held on December 24th, 2020, the National Assembly of the Republic of Serbia adopted the Law on Ratification of the Agreement between the Government of the Republic of Serbia and the Government of Hong Kong of the Special Administrative Region of the People’s Republic of China on the elimination of double taxation in relation to taxes on income and property and the prevention of tax evasion and avoidance.

The contract regulates the following issues:

  • Persons to whom the contract applies – residents of one or both parties;

The taxes to which this contract applies are:

In the case of the Hong Kong Special Administrative Region:

  • Income tax;
  • tax on profits;
  • Property Tax. (“Hong Kong Special Administrative Region Tax”);

In the case of the Republic of Serbia:

  • corporate income tax;
  • personal income tax;
  • Property Tax. (“Serbian tax”).
  • the term resident of a Contracting State shall be determined, as well as the criteria for determining the status of a natural person who is a resident of both Contracting States.

Method of taxation of special forms of income:

  • REAL ESTATE INCOME

Income derived by a resident of a Contracting Party from the direct use, rental or other use of immovable property situated in the other Contracting Party may be taxed in that Party.

  • OPERATING PROFIT

The profits of an enterprise of a Contracting Party shall be taxable only in that Party unless the enterprise carries on business in the other Contracting Party through a permanent establishment situated therein. If the enterprise carries on business in the other Contracting Party through a permanent establishment, the profits of the enterprise may be taxed in that other party but only so much of them as is attributable to that permanent establishment.

  • DIVIDENDS

Dividends paid by a company which is a resident of a Contracting Party to a resident of the other Contracting Party may be taxed in that other Party.

  • INTEREST

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

  • CAPITAL GAIN

Gains derived by a resident of a Contracting Party from the alienation of immovable property referred to in Article 6 of this Agreement and situated in the other Contracting Party may be taxed in that other Party.

Gains from the alienation of movable property forming part of the business property of a permanent establishment held by an enterprise of a Contracting Party in the other Contracting Party or from movable property belonging to a fixed base used by a resident of a Contracting Party in the other Contracting Party to carry out independent personal activities those permanent establishments (alone or together with the whole enterprise) or permanent bases, may be taxed in that other party.

Gains derived by an enterprise of a Contracting Party which uses ships or aircraft in international traffic, from the alienation of ships or aircraft or from movable property used for the use of such ships or aircraft, shall be taxable only in that Party.

Gains derived by a resident of a Contracting Party from the alienation of shares or comparable interests of any kind, including interests in a partnership or trust, may be taxed in the other Contracting Party if, in any period during the 365 days preceding the alienation, these shares or comparable interests more than 50 percent of their value was realized directly or indirectly from the real estate, as defined in Article 6 of this contract, which is located in the other party.

Gains from the alienation of property other than that referred to in the preceding paragraphs, shall be taxable only in the Contracting Party of which the alienator is a resident.

When it comes to property tax, the following is provided:

  • Property consisting of immovable property referred to in Article 6 of this Agreement and owned by a resident of a Contracting Party and situated in the other Contracting Party may be taxed in that other Party;
  • Property consisting of movables which form part of the business property of a permanent establishment held by an enterprise of a Contracting Party in the other Contracting Party or of movable property belonging to a permanent base serving a resident of a Contracting Party in the other Contracting Party for independent personal activities may be to tax on that other side;
  • The property of an enterprise of a Contracting Party consisting of ships or aircraft used by the enterprise in international traffic and movable property used for the use of such ships or aircraft shall be taxable only in that Party;
  • All other property of a resident of a Contracting Party shall be taxable only in that Party.

Measures to eliminate double taxation are envisaged:

In the case of Hong Kong:

  • In accordance with the provisions of the laws of the Hong Kong Special Administrative Region relating to the granting of loans in respect of taxes of the Hong Kong Special Administrative Region, for tax paid in a jurisdiction outside Hong Kong Special Administrative Region Serbian tax which is laws and in accordance with the provisions of this agreement (except to the extent that these provisions allow taxation of Serbia only because the income was earned by a resident of Serbia) in relation to income earned from a source in Serbia by a person resident in Hong Kong Special Administrative Region is recognized as a credit in respect of the Hong Kong Special Administrative Region tax paid in respect of that income, provided that the credit does not exceed the amount of the Hong Kong Special Administrative Region tax which, in accordance with the laws of the Hong Kong Special Administrative Region, is calculated in relation to on to that income.

In the case of Serbia:

Double taxation is eliminated as follows:

  • If a resident of Serbia earns income or owns property which, in accordance with the provisions of this Agreement, may be taxed in Hong Kong to the Special Administrative Region, Serbia shall approve;
  • as a deduction from the tax on the property of that resident, an amount equal to the property tax paid in Hong Kong to the Special Administrative Region. That deduction in both cases may not be greater than the part of the income tax or property tax, as calculated before the deduction is made, which corresponds, as the case may be, to the income or property which may be taxed in the Hong Kong Special Administrative Region.

If, in accordance with a provision of the Agreement, the income earned or property owned by a resident of Serbia is exempt from taxation in Serbia, Serbia may, when calculating the tax on other income or property of that resident, take into account the exempt income or property.