MAZARS IN BOSNIA AND HERZEGOVINA

MAZARS IN BOSNIA AND HERZEGOVINA

THE CROATIAN OFFICE IS RESPONSIBLE FOR EX YUGOSLAVIAN COUNTRIES
Mazars Cinotti Consulting d.o.o.
10000 – Zagreb, Strojarska cesta 20, Croatia

Phone:
(00385) 1 4864 420

Fax:
(00385) 1 4864 429

www.mazars.hr

Kristijan CINOTTI

Partner – Tax & FAS services

Phone:
(00385) 1 4864 420

Mobile:
(00385) 99 4877 112

E-mail:
kristijan.cinotti@mazars.hr

BOSNIA AND HERZEGOVINA

Corporate taxes and other direct taxes

Bosnia and Herzegovina (BiH) is divided into three tax jurisdictions: the Federation of BiH (FBiH), the Republika Srpska (RS) and Brčko District (BD). For the sake of simplicity we will focus on the RS and FBiH.

The CIT rate is flat and amounts to 10%. In all tax jurisdictions, losses can be carried forward for up to 5 years. Loss carry-back is not permitted. There are no special limitations in case of M&A. In FBiH, interest expenses taken from related parties are tax deductible in debt / equity ratio of 4: 1 (thin cap rule). In RS, interest expenses are not recognized for the amount of net interest expenses exceeding 30% of the tax base (without financial items). In the RS, R&D costs are recognized in line with IAS. In FBiH and BD, R&D costs are recognized.

Dividend profit is not included in the calculation of the tax base. In the FBiH, taxpayers investing own resources in production equipment worth more than 50% of the profit of the current tax period, reduces CIT liabilities for 30% of the amount in the year of investment.

If own resources are invested for five consecutive years in amount above 20 million BAM (10,2 million EU), with the first year investment of 4 million BAM (2,04 million EUR), reduces the obligation of the calculated tax by 50% of the investment in years.

Double dip is allowable in amount of gross wages paid to newly admitted employees (minimum contract duration of 12 months). Similar incentives apply for RS as well.

Withholdings rate is 10%, for dividends amounts to 5% in FBiH unless DTT applies (currently, around 30 active DTT’s). Interests, royalties and technical fees paid by a FBiH company to a foreign company are subject to WHT at the rate of 10%. In RS there is a flat rate WHT (10%) on all payments to foreign legal person in which there is an obligation to pay withholding tax. The group taxation concept is allowed in BiH for a group of resident companies with a minimum of 90% (FBiH). Moreover, mother company and its subsidiaries constitute a group of companies if among them there is direct or indirect control over 50% of the shares or stakes.

In case of acquiring real estate in the FBiH, the transfer is taxable at cantonal level. In the RS, there is no transfer tax, but the owner of the real estate has to pay property tax up to 0,20% of the market value. (decreased rules for production RE applies).

Transfer pricing in Bosnia Herzegovina
Arm’s length principle since 1998
Documentation liability Necessary
APA -
Penalty
Lack of documentation RS: up to 30.678,00 EUR
FBIH: up to 51.130,00 EUR
Tax shortage N/A
Related parties 25%
(25%)<
Direct or indirect control
(25% for FBIH, 25% for RS)
or common managing director or significant influence on decisions.
Safe harbours N/A

Level of attention paid by Tax Authority:

Increasing given the new provisions of the Act and Regulations relating to transactions with related parties.

2/10

VAT and other indirect taxes

The general rate is 17%. There are no reduced rates beside the 0% rate (mainly for the export of goods). VAT-exempt services are mainly banking services, insurance, healthcare, etc. Export exemption as well as exemption for deliveries to free zones apply. Certain thresholds are as follows.

Other indirect tax types in BiH are custom duties and excise duties on goods imported into BiH.

VAT Options in Bosnia Herzegovina
Distance selling
Call-off stock
VAT group registration
Cash accounting
Import VAT deferment
Local reverse charge construction work exceeding approx. EUR 12,755
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold* approx. EUR 25,510/year

Personal income tax / Social security system

Personal income tax is taxed at a flat rate of 10%, and it is applicable on the active (e.g. employment, assignment fee) and passive income (interest, real estate rental, etc.). Dividends are not taxable in BiH.

In the RS, the employee contributes 33% of the gross salary. In the FBiH, the employer contributes 10.5%, and employee contributes 31% of the gross salary.

In FBiH, the lowest hourly wage cannot be less than 1,75 BAM (0,895 EUR) net, or 2,96 BAM gross (1,51 EUR). In RS, the lowest salary is determined as a net amount in the amount of 395,00 BAM (201,96 EUR).

Wage- related taxes in FBiH and RS Average wage in FBiH Average wage in the RS
Exchange rate BAM/ EUR 1,96 in EUR in BAM in EUR in BAM
  649 1 272 668 1 309
TOTAL WAGE COST 717 110,50% 688 100,00%
Employer's SS and other contributions 68 10,50% - 0,00%
Gross salary 649 100,00% 668 100,00%
Employees' contributions 201 31,00% 220 33,00%
Personal income tax* 29 4,54% 35 5,17%
Net salary 418 64,46% 413 62,97%
Wage- related taxes in FBiH and RS Minimum wage in FBiH Minimum wage in the RS
Exchange rate BAM/ EUR 1,96 in EUR in BAM in EUR in BAM
  267 524 202 394,94
TOTAL WAGE COST 295 110,50% 318 100,00%
Employer's SS and other contributions 28 10,50% - 0,00%
Gross salary 267 100,00% 318 100,00%
Employees' contributions 83 31,00% 105 33,00%
Personal income tax* 3 1,17% 11 3,49%
Net salary 181 67,59% 202 66,07%

*Tax base differs from the gross salary, deductions apply.

 
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