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Serbia: Change of position, withholding tax and interest-rate swaps

Serbia: Change of position, withholding tax

The tax authorities have revised their position concerning the withholding tax treatment with respect to interest-rate swaps.


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Ministry of Finance on 25 September 2019 issued an opinion (No. 430-00-493/2019-04) regarding the treatment of interest-rate swaps from a corporate income withholding tax perspective.

According to the 2019 opinion, income of a non-resident legal entity from an interest-rate swap—concluded as a transaction separate from financing for the purpose of hedging the interest-rate risk—is not considered to be interest income. As such, income from such an interest-rate swap would not be subject to withholding tax on interest.

This approach recognizes the substance of interest-rate swap agreements as an exchange of cash flows in order to hedge parties against interest-rate risk, but is contrary to the position taken by the Ministry of Finance in a 2007 opinion (No. 430-01-00328/2007-04 dated 12 December 2007).

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