The Tax Administration released an official opinion on 28 September 2026 regarding the tax treatment of income earned by a non-resident legal entity resident in Slovenia from providing business consulting services to a Serbian client. The analysis applies the Convention between Serbia and Slovenia for the Avoidance of Double Taxation (signed 2003, in force 2004), particularly Article 7 (Business Profits) and Article 12 (Royalties). The opinion concludes that business consulting services constitute “business profits” under Article 7, not “royalties” under Article 12, provided the services do not involve the transfer of rights to use intellectual property. Consequently, the income is taxable in Serbia only if the Slovenian enterprise carries on business in Serbia through a permanent establishment (PE). In the absence of a PE, Serbia must exempt the income from withholding tax. The opinion emphasizes that the mere provision of consulting services via digital means or periodic visits does not create a PE unless a fixed place of business exists. The Serbian payer must obtain a valid Certificate of Residence (Form RES) from the Slovenian provider and apply the treaty exemption (0% withholding) rather than the domestic 20% rate. This interpretation aligns with the OECD Model Tax Convention Commentary (2017) and recent Serbian court decisions (e.g., Supreme Court Ruling Rev 2025/45). Effective for payments made after 1 November 2026.
Key Takeaways
- Consulting Services Are Business Profits, Not Royalties: Fees for business consulting, management, or advisory services fall under Article 7 (Business Profits) of the Serbia-Slovenia treaty. Withholding tax applies only if the Slovenian provider has a permanent establishment in Serbia.
- Zero Withholding with Valid Certificate of Residence: Serbian payers must collect Form RES from the Slovenian provider before payment to apply the 0% treaty rate. Without it, the default 20% domestic withholding tax must be deducted and remitted.
- PE Risk Assessment for Digital Services: Companies engaging Slovenian consultants via remote platforms should document the absence of a fixed place of business in Serbia. Periodic physical presence for meetings does not constitute a PE under Article 5 of the treaty.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement