Bosnia and Herzegovina flag Bosnia and Herzegovina: Business Environment

Tax rates in Bosnia and Herzegovina

Tax Rates

Consumption Taxes

Nature of the Tax
Value-Added Tax (VAT) or Porez na dodatu vrijednost (PDV).
Tax Rate
17%
Reduced Tax Rate
Certain transactions are exempt from VAT, including: public postal services, except telecommunications services; medical and healthcare services; social security services; services of education; services in the field of sport and sports education, which are supplied to individuals by the persons whose activity is not focused on the acquisition of profit; insurance and reinsurance services; the supply of immovable property, except for the first transfer of the ownership rights or the rights to dispose of newly-constructed immovable property; the leasing and sub-letting of residential premises for a period of longer than 60 days; financial services (the approval and management of credits; services relating to the management of deposits, savings and bank accounts, conducting payment transactions, trading in shares or other forms of participation in companies; investment fund management); current postage stamps, tax stamps, and administrative and court stamps, and games of chance; the supply of vessels with fuel and other goods used for sea rescue and assistance at sea and for navigation on the high seas which transport passengers for consideration or which are intended to perform commercial, industrial or fishing activities; the purchase, repair, and lease of aircraft used by airlines for flights on international routes, the supply of fuel and other goods to the mentioned aircrafts.

Exports are zero-rated (however, the exporting taxpayer is entitled to request a refund of VAT paid on his purchases).

Other Consumption Taxes
There are excise taxes on oil products (BAM 0.3 or 0.4 per litre), tobacco products, soft drinks (BAM 0.1 per litre), alcohol drinks (between BAM 8 and 15 per litre of absolute alcohol, special rate for beer and wine - between BAM 0.2 and 0.25 per litre) and coffee (between BAM 1.5 and 3.5 per kg).

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Corporate Taxes

Company Tax
10%
Tax Rate For Foreign Companies
Non-resident companies are taxed at the standard corporate income tax rate, but only on their locally-sourced income. The profit of a branch is determined as the profit that would be generated by the branch if it were an autonomous and independent legal entity.

Direct taxes are imposed at the entity/district level, whereas indirect taxes are levied at the state level.
Capital Gains Taxation
Capital gains are taxed as profit at the standard corporate income tax rate of 10% (those obtained by residents and non-residents alike). Capital gains or losses realised during the fiscal year can be offset.
Main Allowable Deductions and Tax Credits
Depreciation of property, plant and equipment and intangible assets is tax-deductible, albeit at variable rates in the Federation of Bosnia and Herzegovina (5% to 40%), the Republika Srpska (3% to 40%) and the District of Brcko. Goodwill cannot be amortised in any of the territories.
Start-up and interest expenses are generally deductible across the country (net interest expenses are not deductible in the Republika Srpska if they exceed 30% of the tax base). Bad debts are also deductible in the three entities, although under different conditions and at different rates. Donations to charities are deductible up to 3% of the total income of the current fiscal year.
Fines are not deductible while the taxes due are all deductible, with the exception of corporate income tax.
Entertainment expenses are deductible up to 30% in the three territories. Sponsorship expenses up to 2% of the fiscal year’s total revenue are tax-deductible (3% in FBiH).
Tax losses can be carried forward up to five years, on a FIFO basis. The carryback of losses is not permitted.
Other Corporate Taxes
Locally collected taxes vary from one community to another. There are no social security contributions payable by the employer in Republika Srpska while the employer contributes up to 6% of salary for retirement and disability insurance, 4% for health insurance and 0.5% for unemployment insurance in the Federation of Bosnia and Herzegovina. Employees in Brcko District may choose to be assigned to the social security scheme in one of these two entities. There is no other payroll tax in all communities.
The property tax varies from one municipality to another (between BAM 0.5 and 3 per square metre) in the Federation of Bosnia and Herzegovina. It amounts to 0.2% of the market value of the property in Republika Srpska. In Brcko District, the annual rate is between 0.05% and 1%.
Real estate transfers are taxed only in the Federation of Bosnia and Herzegovina, at rates varying from one municipality to another from 0.05% to a maximum of 5%.
The following taxes are levied in all of the territories: forest tax, fire prevention tax, stamp duty, membership fees to the Foreign Chamber of Commerce, communal tax (called special republic tax in the Serbian Republic of Bosnia-Herzegovina).
A tourist tax is also levied in the Federation of Bosnia and Herzegovina. A special republic tax is levied in Republika Srpska.
Other Domestic Resources
Consult the Doing Business website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Bosnia and Herzegovina Eastern Europe & Central Asia United States Germany
Number of Payments of Taxes per Year 33.0 13.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 411.0 226.2 175.0 218.0
Total Share of Taxes (% of Profit) 23.7 36.5 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Income tax 10%
Small entrepreneurs (Republika Srpska) 2% of annual revenue
Allowable Deductions and Tax Credits
In Republika Srpska: personal deduction (maximum BAM 6,000 per calendar year), deductions for dependant family members (BAM 900 per year), for interest paid on mortgage loan (fully deductible), contribution for voluntary pension scheme and for premium on life insurance (up to BAM 1,200 per year each)

In the Federation of Bosnia and Herzegovina: personal deduction (maximum BAM 3,600 per calendar year or BAM 300 per month), deductions for dependant family member (BAM 150 for spouse, BAM 150 per child, BAM 270 per second child and BAM 90 per third and every next child), for interest paid on mortgage loan, and for premium paid on life insurance (both fully deductible).

In Brcko District: personal deduction (maximum BAM 6,000 per calendar year), deduction per dependent (BAM 3,000), deduction for invalidity of taxpayer or dependent family member (10% of allowance for every 20% determined of invalidity), contributions for additional personal insurance (up to BAM 1,800 per year), permanent disability (BAM 3,000).

Special Expatriate Tax Regime
There is no special tax regime for expatriates, who are taxed on their locally-sourced income.
An individual whose residence or centre of business and/or vital interests is in the FBiH/RS, or who is present in the country for at least 183 days in the aggregate during a fiscal year, is deemed to be resident for personal income tax purposes.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of double taxation agreements signed by Bosnia and Herzegovina.
Withholding Taxes
Dividends: 5% (FBiH)/10% (RS) in case of a foreign corporation, otherwise it is 0; Interest: 10% in case of a foreign corporation, otherwise it is 0; Royalties: 10% in case of a foreign corporation, otherwise it is 0.

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Latest Update: July 2022