From 1 January 2005 the 0.3% transfer duty levied by the Serbian authorities on equity transactions – the absolute rights transfer tax – can be deducted automatically by the local CSD. Investors that make use of the service will pay an additional 0.06% fee on top of the regular CSD transaction charge of 0.12%.
“The procedure requires all non-residents to provide their certificate of registration, together with a power of attorney granted to a resident of Serbia in order to have the Tax Identification Number (TIN) determined,” explains the head of custody at HVB Bank in Serbia. “The determination of TIN is a pre-condition for sellers of equities as the selling order of an investor will not be accepted by the CSD system if the TIN is not provided. Once the transaction is settled, the tax amount will be withheld by the CSD and, based on TIN and municipality code of the authorised resident, forwarded to the tax authority.”
1 January will also see VAT introduced in Serbia at a rate of 18%. This will replace the current turnover tax of 20%, which HVB says is likely to lead to a reduction in CSD fees. Once VAT is in place, the Financial Transactions Tax of 0.22% will be abandoned. This tax is currently applied to all transactions within the country, while securities trading has hitherto enjoyed full relief from it.
“The additional CSD fee will slightly increase the cost of trading shares, but the whole procedure will ease the process of taxation in Serbia,” adds the head of custody at HVB in Serbia. “The introduction of a lower VAT in comparison to the existing turnover tax is expected to slightly decrease fees in the market.”