Paying Foreign Suppliers From a Serbian Company: Withholding Tax and Reverse-Charge VAT
A Serbian d.o.o. that pays a foreign supplier — a parent company, a consultant, a software vendor — is not simply booking a cost. That single invoice can create two unrelated Serbian tax obligations: withholding tax on the supplier’s income, and Serbian VAT that your own company has to self-assess.
They come from different laws, have different deadlines, and one does not replace the other. Foreign owners usually discover both at the first tax audit — by which point the money has left the country and the tax is theirs to pay.
Withholding tax: 20%, but only on certain income
Article 40 of the Corporate Income Tax Law imposes a 20% withholding tax on income paid by a Serbian entity to a non-resident legal entity, unless a double tax treaty says otherwise. It applies to:
- dividends and profit shares;
- royalties and payments for industrial property rights;
- interest;
- rental and sub-rental income from movable and immovable property in Serbia;
- and, among services, only market research, accounting and audit services, and other services in the field of legal and business consultancy — regardless of where they are performed.
That last item is narrower than most foreign founders assume. A German management consultant, a foreign law firm or an external auditor falls inside it. A hosting provider, a translation agency or a marketing agency running your campaigns generally does not.
One important exception. If the supplier is resident in a jurisdiction on Serbia’s list of preferential tax jurisdictions, the rate rises to 25% and applies to all services, not only the listed ones. The list is set by a Ministry of Finance rulebook (Off. Gazette RS 122/2012, 104/2018 and 161/2020) and covers around fifty territories — the BVI, Cayman Islands, Panama, Seychelles, Belize, Marshall Islands, Gibraltar, Guernsey, Jersey, the Isle of Man, Monaco, Liechtenstein, Mauritius and Macao among them. Contrary to a persistent myth, the UAE, Cyprus and Malta are not on it.
The treaty relief that most companies lose on paperwork
Serbia has a wide treaty network, and under most treaties a service fee is business profit, taxable only in the supplier’s country of residence unless it has a permanent establishment in Serbia. In practice that means the withholding tax often drops to zero.
The catch is procedural. Relief requires that, at the moment the taxable event occurs, the payer already holds:
- a certificate of tax residence issued by the other state’s tax authority — either on the Serbian Ministry of Finance form or on that state’s own form with a certified translation; and
- evidence that the non-resident is the beneficial owner of the income.
Where the treaty applies and you hold that evidence at the time of payment, the PDPO/S return is not filed at all. Obtain the certificate afterwards and the tax was due in Serbia — and it is now your cost.
The three-day deadline
Where Serbian tax does apply, the payer files form PDPO/S electronically and pays the tax within three days of the payment. Not by the 15th of the month, not with the next VAT cycle.
The other half: reverse-charge VAT
Separately, under article 10 of the VAT Law, when a foreign person supplies a service whose place of supply is Serbia and that foreign person is not registered for Serbian VAT, the recipient becomes the person liable for VAT. Your company self-assesses VAT at 20% on the invoice value, converted at the National Bank of Serbia middle rate.
| Your company’s status | What happens |
|---|---|
| Registered for Serbian VAT | you charge yourself the VAT and, subject to the usual conditions, deduct it as input VAT — normally cash-neutral |
| Not registered for VAT | you charge and pay the VAT with no deduction — a real 20% cost |
The second row catches small foreign-owned companies below the RSD 8,000,000 registration threshold that spend on Google Ads, cloud subscriptions or foreign consultants. They are outside the VAT system, and still owe VAT on those invoices. Non-registered persons liable under article 10 file the PP PDV return and pay within 10 days of the end of the month in which the liability arose. When registration becomes mandatory is explained in our guide to VAT in Serbia for foreign companies.
New since April 2026: amendments to the Law on Electronic Invoicing (Off. Gazette RS 109/2025), applying to tax periods starting after 31 March 2026, require the self-assessment document to be generated inside the SEF e-invoicing system as an individual VAT record — internal invoice. If your company buys regularly from abroad, this is a new monthly step alongside electronic VAT recording. See our overview of e-invoicing in Serbia.
Worked example: a EUR-equivalent RSD 300,000 consulting invoice
A Serbian d.o.o., VAT registered, buys business consultancy from a German firm for the equivalent of RSD 300,000.
- VAT: place of supply is Serbia, the German firm is not Serbian-VAT registered → self-assessed VAT of RSD 60,000, deducted in the same return. Net cash effect: zero.
- Withholding tax, with a residence certificate in hand: business profits under the treaty → nil in Serbia, and no PDPO/S filed.
- Withholding tax, without the certificate: 20% of RSD 300,000 = RSD 60,000 withheld, RSD 240,000 remitted abroad.
- Without the certificate, on a “net” contract where the supplier must receive the full RSD 300,000: the base is grossed up to RSD 300,000 ÷ 0.8 = RSD 375,000, and the tax becomes RSD 75,000. One missing certificate, RSD 75,000.
Intra-group payments deserve extra care
Management fees, licence fees and interest paid to your own parent company attract two additional layers of scrutiny:
- Transfer pricing. Transactions with related parties must be at arm’s length and documented in an annual transfer pricing report filed with the corporate tax return — see corporate income tax in Serbia.
- Characterisation. A “management fee” that is really a royalty changes both the withholding position and the transfer pricing analysis. Get the contract wording right before the first payment, not during an audit.
Where profit extraction rather than services is the real goal, dividends may be cleaner — compare the two in dividend tax in Serbia: salary vs dividends.
FAQ
Does withholding tax apply to payments to foreign individuals? Article 40 covers non-resident legal entities. Payments to non-resident individuals fall under the Personal Income Tax Law, with different rates and forms.
Do we file PDPO/S if the treaty reduces the tax to zero? No — provided you held the residence certificate and beneficial-ownership evidence at the time of payment. Otherwise the return is filed and the tax is paid in Serbia.
Is the reverse-charge VAT counted towards the RSD 8,000,000 registration threshold? No. The threshold measures your own outgoing supplies; here you are the recipient.
How do we determine the supplier’s jurisdiction for the 25% rate? By its country of tax residence, not by the address on the invoice or the location of its bank.
How we help
We classify incoming foreign invoices before they are paid: place of supply, self-assessment and the SEF internal invoice, whether withholding tax arises, and whether a residence certificate must be requested first. If your Serbian company pays suppliers or a parent abroad, get in touch or see our accounting service and pricing.
This article is informational and is not tax advice. Confirm the characterisation of a specific service, the application of a double tax treaty and the current list of preferential jurisdictions with the Serbian Tax Administration or a tax adviser.