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According to the law governing companies, a branch of a company (further: branch) is a separate organizational part of a company through which the company performs its activities by the law, while the branch does not have the status of a legal entity, and in legal transactions, it acts in the name and on behalf of the company.
Tax treatment for a branch of a foreign company in Serbia
Income tax
The corporate tax rate is 15%.
The transfer of the profit of a branch, as an organizational part of a non-resident legal entity that does not have the status of a legal entity, to its head office abroad, after the payment of profit tax by the law, is not subject to withholding tax according to Article 40 of the Law on Profit Tax, bearing in mind that it is not about the distribution of dividends or profit shares to a non-resident legal entity by a resident legal entity.
Income tax withholding on certain services that a non-resident legal entity opens for a resident one
The branch has no obligation to pay withholding tax on certain services. In the case of dividend payments, withholding tax is paid by the Agreement on the Avoidance of Double Taxation if such an agreement is concluded between Serbia and the country of the seat of a non-resident legal entity.
Value-added tax
The branch is obliged to apply the provisions of the Law on Value Added Tax.
Salaries and other income of natural persons
The branch is obliged to calculate and pay the withholding tax to natural persons.
Transfer pricing report
The branch is obliged to prepare a report on transfer prices if it has transactions with a non-resident head office, as well as with related parties of the non-resident head office.
Municipal tax
The branch does not apply for local taxes.
For more information about the branch, visit our blog: https://welcometoserbia.org/en/why-should-you-set-up-a-remote-branch-office-in-Serbia/.
For all the specifics of the business of a branch of a foreign legal entity in Serbia, feel free to contact our tax experts by email dilic@welcometoserbia.org.
