Withholding tax on capital income and a foreign account: how to pay tax on interest from Serbia correctly

Anyone who opens an account in Serbia, whether for a holiday apartment, to prepare a move or because a fixed-term deposit in euros earns interest there, sooner or later faces the question of tax. With a German account this is conveniently handled: the bank withholds the German withholding tax on capital income (Kapitalertragsteuer), and with an exemption order (Freistellungsauftrag) part of the interest remains tax-free. With a foreign account, none of this happens automatically. The interest arrives without deductions, or it is taxed under the law of the other country, and you have to make sure yourself that everything ends up correctly in your tax return.

Using Serbia as an example, this article explains how interest on a foreign account is taxed in Germany, what the double taxation agreement between Germany and Serbia provides for interest, how Serbia itself taxes interest and what changes after you move away from Germany. A worked example shows which amounts actually arise in the end. Exgentum is not a tax advisory firm. This article does not replace advice on your individual case. It is meant to help you ask your tax advisor the right questions.

Withholding tax on capital income and a foreign account: why nothing happens automatically

The German Kapitalertragsteuer is a form of collecting income tax. Domestic banks withhold it directly when the interest is credited and pay it over to the tax office. As a rule, this settles the tax, hence the term flat-rate withholding tax (Abgeltungsteuer). A bank in Belgrade, Novi Sad or Niš, by contrast, is not a German withholding agent. It does not withhold any German tax and does not know about your exemption order either.

The German Income Tax Act (EStG) draws a clear consequence from this. Under § 32d (3) EStG, taxpayers must declare capital income that was not subject to Kapitalertragsteuer in their income tax return. For interest on a Serbian account, this means: as long as you have unlimited tax liability in Germany, i.e. you have a residence or your habitual abode here, the interest belongs in the capital income annex (Anlage KAP) of your income tax return. Anyone who has so far not declared capital income because of the settling effect of the flat-rate tax must therefore familiarise themselves with this part of the return.

Tax on interest from a foreign account: how the tax office calculates

The same special rate applies to this interest as to interest from a German bank. Under § 32d (1) EStG, the tax is 25 percent. On top of this comes the solidarity surcharge (Solidaritätszuschlag) of 5.5 percent of the tax. Under § 3 (3) of the Solidarity Surcharge Act, it is levied on income tax under § 32d (3) EStG regardless of the general exemption threshold. Together this makes 26.375 percent. If you are liable to church tax, church tax is added.

The saver's lump-sum allowance (Sparer-Pauschbetrag) is deducted from your total capital income for the year. Under § 20 (9) EStG it amounts to 1,000 euros, or 2,000 euros for jointly assessed spouses. You cannot additionally deduct actual costs, such as account fees charged by the Serbian bank. It is important that the allowance applies only once, for all accounts and securities accounts together. If you have already used it up through exemption orders at German banks, the Serbian interest is taxable from the first euro.

For your return, you convert interest in dinars (RSD) or another foreign currency into euros. Keep the annual statement or the account statements from the Serbian bank for this purpose, showing the amount of interest, the date it was credited and any Serbian tax withheld. The tax office may request these documents.

How Serbia taxes interest

The Serbian Personal Income Tax Act (Zakon o porezu na dohodak građana) treats interest on savings and other deposits as income from capital (prihodi od kapitala, Art. 61). Under Art. 64, the tax rate is a uniform 15 percent. Under Art. 103, the bank must withhold and pay over the tax when the interest is paid out or credited.

Art. 65 of the Act sets out two exceptions. The following are tax-exempt: interest on dinar balances from savings and other deposits, whether fixed-term or on demand, and interest on bonds issued by the Republic, the autonomous province, the municipalities and the National Bank. Interest on euro balances at a Serbian bank, on the other hand, is in principle subject to Serbian withholding tax of 15 percent.

What the Germany–Serbia double taxation agreement provides for interest

Between Germany and Serbia, the double taxation agreement (Doppelbesteuerungsabkommen, DBA) that Germany concluded in 1987 with what was then Yugoslavia still applies. It continues to be applied in relations with the Republic of Serbia. For interest, it contains a rule that is favourable for savers and that many people do not know about.

Under Art. 12 (1) of the agreement, interest arising in one contracting state and paid to a resident of the other state may be taxed only in that other state if this person is the beneficial owner. For an account holder resident in Germany, this means: the right to tax the interest on her Serbian account lies with Germany alone. Serbia may not levy any withholding tax. The protocol to the agreement does provide for renegotiation as soon as one of the states introduces a withholding tax on interest paid to non-residents. As long as Art. 12 is applied in this version, however, taxation remains exclusively with the state of residence. According to the overview of the German Federal Ministry of Finance as of 1 January 2026, a revision protocol with Serbia has been initialled, and its content has not yet been published. Changes, including to interest, are therefore possible. Have your tax advisor confirm the current status before any larger investment.

In practice: submit a certificate of residence

The Serbian bank does not apply the agreement of its own accord. Under Art. 107a of the Serbian Personal Income Tax Act, it may apply the treaty rules only if the non-resident proves that he or she is resident in the other contracting state and is the beneficial owner of the interest. You provide this proof with a certificate of residence (Ansässigkeitsbescheinigung), which you apply for at your German tax office. If the bank does not have a certificate when the interest is credited, it must withhold 15 percent under Serbian law. If you later submit the certificate to the Serbian Tax Administration (Poreska uprava), the difference is treated as overpaid tax and can be refunded.

Why the Serbian tax is not credited in Germany

Many account holders assume that they can simply credit the 15 percent withheld in Serbia in their German return. For interest from Serbia, this is generally not the case. § 32d (5) EStG allows a credit only for the foreign tax that has been assessed, paid and reduced by any entitlement to a reduction that has arisen. Because Serbia may not tax at all under the agreement, the entitlement to a reduction equals the full Serbian tax. Nothing then remains to be credited. You therefore reclaim the Serbian tax in Serbia, not from the German tax office.

Worked example: euro fixed-term deposit at a Serbian bank

The following figures are a simplified example with an assumed interest rate, not a statement about the current terms of Serbian banks. A single investor resident in Germany, not liable to church tax, holds 40,000 euros in a fixed-term deposit at a bank in Belgrade. The assumed interest rate is 3 percent, so the interest is 1,200 euros a year.

The example shows two things. First, the German tax depends heavily on whether the saver's lump-sum allowance has already been used up by German accounts. Second, it pays to submit the certificate of residence to the Serbian bank in good time. Without it, 180 euros initially flow to Serbia, which you can only get back through a refund application, while the German tax remains unchanged.

If the investor chose a dinar fixed-term deposit instead of euros, the Serbian tax would not apply under Serbian law because of Art. 65. This does not change anything about the German tax liability, and she would additionally bear the exchange rate risk.

After moving away: what changes in taxation

If you move to Serbia completely and give up your residence and habitual abode in Germany, your unlimited tax liability ends. Limited tax liability covers only the domestic income exhaustively listed in § 49 EStG. Interest from a Serbian bank is not part of it. Interest from ordinary bank deposits at a German bank is generally not covered there either. Things can be different, for example, for claims secured by real estate in Germany.

In return, under Art. 7 of the Serbian Personal Income Tax Act you become tax resident in Serbia if you have your residence or the centre of your vital interests there, or if you stay there for at least 183 days within twelve months. As a resident, you are liable to tax in Serbia on your worldwide income. Interest from a Serbian bank on euro balances is then taxed at source at 15 percent. For interest you receive from an account abroad, there is no Serbian withholding. You must calculate and declare this income yourself by way of self-assessment (samooporezivanje). Your tax advisor in Serbia will clarify which form and which deadline apply. For foreign tax on such income, Art. 12 of the Serbian Act grants a credit up to the amount of the Serbian tax.

Whether you have really left German tax liability is not decided by deregistration, but by where your life is actually centred. Why a residence permit or setting up a company is not enough on its own is explained in our article on tax residence in Serbia (in German). How the agreement allocates other types of income is covered in the article on the DBA Serbia for the self-employed (in German).

If interest from abroad was not declared

Anyone who is liable to tax in Germany and does not declare the interest on a Serbian account causes a tax shortfall (Steuerverkürzung). This can constitute the offence of tax evasion under § 370 of the German Fiscal Code (Abgabenordnung, AO), regardless of the amount. The fact that Serbia does not automatically report account data to Germany does not change this. We have discussed this in detail in our article on Serbia's CRS status (in German).

For capital income from third countries, there is also a special rule on the statute of limitations that directly affects Serbia. Under § 170 (6) AO, the assessment period for the tax on capital income from states outside the EU and EFTA that is not automatically reported to Germany begins at the earliest at the end of the year in which the tax office learns of the income, and at the latest ten years after the end of the year in which the tax arose. Undeclared interest from Serbia therefore becomes time-barred considerably later than interest from an EU country. Anyone who wants to catch up on previous years should tackle this with a tax advisor before the tax office asks of its own accord, because an effective correction is subject to strict requirements.

How the lack of automatic exchange of information fits into asset planning, and why it is not a sound basis for it, is explained in Asset protection and CRS in Serbia (in German).

Checklist for holders of an account in Serbia

• Request the annual statement or account statements showing interest and tax withheld from the Serbian bank
• Apply for a certificate of residence at the German tax office and submit it to the bank before the next interest credit
• Reclaim Serbian tax already withheld from the Poreska uprava
• Keep track of the saver's lump-sum allowance across all accounts
• Convert interest into euros and declare it in the Anlage KAP
• If you move away, document the cut-off date and observe the Serbian filing obligations from then on

How Exgentum supports you

Exgentum is not a tax advisor and not a law firm. We do not calculate taxes and do not prepare tax returns. What we take care of organisationally in Serbia: we accompany you to bank appointments in Belgrade, help obtain annual statements and confirmations from the Serbian bank, and support you in submitting documents to the Poreska uprava. Your contact person speaks German or English. For the tax assessment, you work with a tax advisor in Germany and, as soon as you are resident in Serbia, also with a tax advisor in Serbia.

Frequently asked questions

Do I have to pay tax in Germany on interest from a Serbian account?

Yes, as long as you have unlimited tax liability in Germany. The Serbian bank does not withhold German Kapitalertragsteuer, so you must declare the interest in the Anlage KAP under § 32d (3) EStG.

Does the saver's lump-sum allowance also apply to interest from abroad?

Yes. The allowance of 1,000 euros, or 2,000 euros for joint assessment, applies to all capital income of a year together. If you have already used it up at German banks, nothing is left for the foreign interest.

Can I credit Serbian withholding tax in Germany?

For interest, generally not. Under the agreement, only Germany may tax interest paid to persons resident in Germany. You reclaim the tax withheld in Serbia from the Serbian Tax Administration with a certificate of residence.

Is interest on dinar accounts in Serbia tax-free?

Under Serbian law, yes: Art. 65 of the Personal Income Tax Act exempts interest on dinar deposits. In Germany, it is nevertheless taxable if you have unlimited tax liability here.

What changes if I move to Serbia?

After you have moved away completely, Germany no longer taxes interest from Serbian accounts. Instead, Serbian law applies, with 15 percent on foreign-currency interest, and for interest from foreign accounts you must file a return yourself in Serbia.

Does undeclared interest from Serbia become time-barred after four years?

No, not automatically. Under § 170 (6) AO, for capital income from states without automatic data exchange the period only begins when the tax office learns of it, but at the latest ten years after the year in which the tax arose.

Conclusion

From a tax point of view, an account in Serbia is not a special case; it simply requires more initiative than a German account. As long as you live in Germany, you declare the interest yourself in the Anlage KAP, pay 25 percent plus solidarity surcharge on the part above the saver's lump-sum allowance and use a certificate of residence to ensure that Serbia does not withhold any tax at source. After moving away completely, responsibility passes to Serbia. Our advice: obtain the certificate before the first interest is credited, collect the Serbian bank's documents every year and have a tax advisor accompany you through the year of your move. For appointments and paperwork on the ground in Serbia, you can count on us.