Financial Year – 1 January – 31 December Currency – Convertible mark (BAM). 1 EUR = 1.95583 BAM (fixed rate)
Taxation in Bosnia and Herzegovina
The complexity of the state organisation in Bosnia and Herzegovina also applies to the tax system. As part of the harmonisation process, indirect taxation at state level was introduced in 2006. However, direct taxes are still accounted and paid at entity level (Federation of Bosnia and Herzegovina (F BiH), Republic of Srpska (RS) and Brcko District of Bosnia and Herzegovina (BD)).
Corporate Tax Summary
Residence – A company is resident in Bosnia and Herzegovina if it is incorporated in any of the entities of Bosnia and Herzegovina (F BiH, RS or BD) or, if not incorporated in Bosnian and Herzegovina, it carries on business in Bosnia and Herzegovina.
Basis of Taxation – Resident companies are taxed on worldwide income. A non-resident company generally pays taxes only on income derived from Bosnia and Herzegovina sources. The tax rates and treatment are the same for companies and branches of foreign companies.
Type of Tax / Tax Jurisdiction
Corporate Income Tax paid on the basis of annual tax return
Withholding Tax on dividends paid abroad
Withholding Tax on interests paid abroad
Withholding Tax on royalties paid abroad
Branch Remittance Tax (profit after payment of Corporate Income Tax)
Tax losses carried forward
Individual Tax Summary
Residence – For tax purposes an individual is a resident if he/she ordinarily resides in Bosnia and Herzegovina or satisfies one of the following conditions:
Is domiciled in any of the entities of Bosnia and Herzegovina
Has spent more than half the year in Bosnia and Herzegovina
Has a centre of vital interests and permanent home in Bosnia and Herzegovina
Basis of Taxation – Resident taxpayers are generally taxed on worldwide income, with a tax offset for foreign tax paid on foreign income, up to the amount of Bosnia and Herzegovina tax payable on that income. Foreign residents are taxable only on Bosnia and Herzegovina source income.
Filing Status – The following taxpayers are obliged to file annual tax returns:
Taxpayers earning income from two or more sources in the tax period
Taxpayers earning income directly from abroad
Taxpayers earning income from self-employment
Joint returns are not permitted.
Personal Income Tax Rates
Income tax is paid at the rate of 10% in all tax jurisdictions in Bosnia and Herzegovina.
Goods and Services Tax (GST)
VAT is a transaction based, value added tax on the inputs and outputs of a taxpayer’s business activities. VAT is charged at each step in the supply chain, with VAT- registered entities including VAT in the price of taxable goods and services that they supply.
Generally, taxpayers that are registered for VAT purposes can claim a credit for the VAT paid on their inputs acquired for use in their enterprise, however in certain circumstances this is limited to the extent that they are making ‘taxable supplies’.
An entity that carries on an enterprise must register for VAT if its annual turnover is at or above the registration turnover threshold. The current threshold is BAM 50,000 per year for all other entities (residents and non-residents) and individuals (residents and non-residents). However, a taxpayer making taxable supplies of goods and services may choose to register, even if their turnover is below the registration turnover threshold.
Filing and Payment
Each VAT taxpayer must file its VAT obligations in the EPDV tax system at the end of each tax period (monthly) by the 10th of the following month. The VAT due is payable by 10th of the following month. There is no obligation for the filing of annual VAT returns.
Other Taxes Payable
Payroll tax is levied on employers by the entities (F BIH, RS and BD), with the amount based on salaries, wages and benefits paid to employees. The rates are between 33% and 41.5% on the gross salaries, wages and benefits paid to employees.
Property transfer tax
The F BIH entity imposes stamp duty at a rate of 5% on the transfer of real property through its cantonal tax laws. The RS and BD entities have exempted the transfer of property from taxation since 2012.
The RS and the BD entities have introduced property tax which real estate owners and users pay annually at rates between 0.05% -0.5% of the estimated market value. Rates vary depending on the location (municipality) and type of property.
Customs Duties in Bosnia and Herzegovina
Customs tariffs in Bosnia and Herzegovina have been harmonised with the Combined Nomenclature of the European Union.
Goods Originating in Other Countries
Customs duties in line with the current customs tariffs of Bosnia and Herzegovina are paid on imports of goods originating from other countries (non-EU and non-CEFTA countries).
Goods Originating in the EU
In line with the provisions of the Interim Agreement on Trade and Trade-related Matters signed with the European Union (in effect until the Stabilisation and Association Agreement enters into force), customs rates will gradually decrease, depending on product type, by 90%, 75% or 50% of the previous rate, while customs rates for some products will be eliminated entirely.
The lowering of import customs duties applies only to goods originating in the EU, and not all goods which are imported from the EU, i.e. via the EU.
Goods Originating in CEFTA Countries
CEFTA 2006 – Agreement on the Amendment of and Accession to the Central European Free Trade Agreement
The CEFTA agreement has been in effect in BiH since 1 January 2007, on the basis of the regional agreement on free trade CEFTA 2006. The agreement envisages no customs duties for goods from the signatories to this agreement: Albania, North Macedonia, Moldova, Serbia, Montenegro and UNMIK/Kosovo.