Bosnia and Herzegovina
Corporate taxes and other direct taxes
It is important to note that Bosnia and Herzegovina (BiH) is divided into three tax jurisdictions: the Federation of BiH (FBiH), the Republika Srpska (RS) and Brčko District (BD). For simplicity’s sake, we will focus on the RS and FBiH.
CIT is set at a flat rate of 10%. A company in the FBiH/RS is considered resident if it is registered as a legal entity in the relevant jurisdiction, or in case its activities in BiH, qualifies as PE. Losses can be carried forward for up to 5 years in all tax jurisdictions. Loss carryback is not permitted. There are no special limitations in the case of M&A transactions. In FBiH, interest expenses taken from related parties are tax deductible in a debt/equity ratio of 4:1 (thin cap rule). In the RS, interest expenses are not recognized for the amount of net interest expenses that exceed 30% of the tax base (without financial items). In the RS, R&D costs are recognized in line with IAS. In the FBiH and BD, R&D costs are recognized.
Profit on dividends is not included in the calculation of the tax base. In the FBiH, taxpayers who invest their own resources in production equipment to a value exceeding 50% of the profit for the current tax period see a reduction in corporate income tax liabilities for 30% of the amount for the year of the investment.
Any taxpayer who invests more than 20 million in BAM (EUR 10.2 million) over five consecutive years (minimum investment in the first year is equal to 4 million BAM (EUR 2.04 million) reduces its CIT liability by 50% of the investment in each of the 5 years.
The withholding tax rate for dividends amounts to 5% in the FBiH unless a DTT applies (currently, there are around 38 active DTT’s). Interests, royalties, and technical fees paid by a BiH company to a foreign company are subject to withholdings at a rate of 10%. In the RS, there is a flat-rate withholding tax (10%) on all payments to foreign legal persons in which there is an obligation to pay withholding tax. The group taxation concept is allowed in the BiH for a group of resident companies, with a minimum of 90% (FBiH). Moreover, the parent company and its subsidiaries constitute a group of companies if they have direct or indirect control over 50% or more of the shares or stakes.
In cases of real estate acquisition in the FBiH, the transfer is taxable at the canton level. In the RS, there is no transfer tax, but the owner of the real estate has to pay property tax of up to 0.20% of the market value. (Decreased rules for production RE apply).
| Transfer pricing in Bosnia and Herzegovina |
| Arm's length principle |
 |
Since 1998 |
| Documentation liability |
|
Necessary. Prescribed in the transfer pricing documentation. |
| APA |
 |
– |
| Country-by-Country liability |
|
Annual consolidated group revenue equal to or exceeding EUR 750 million in the previous year.
|
| Master file-local file (OECD BEPS 13) applicable |
|
Deadline 45FBiH/30RS days from the request made by the tax administration. |
| Penalty |
|
|
| - lack of documentation |
|
RS: EUR 10,226.00-EUR 30,678.00 for legal persons and EUR 2,556.00 – EUR 7,669.00 for responsible person.
FBiH: EUR 1,524.00-EUR 50,867 for legal persons and EUR 1,278.00 – EUR 5,113.00 for responsible person.
|
| - tax shortage |
|
- |
| Related parties |
> 25% (25%) |
Direct or indirect control (25% for FBiH, 25% for RS), or a common managing director, or significant influence on decisions – directly or indirectly in the management, control or capital of the other person, etc.
|
| Safe harbors |
|
In FBiH, the safe harbor rate for support services is 5%. Support services include: IT maintenance services, accounting and auditing, administration, legal services, HR management, training and education and tax advisory services for employees. |
Level of attention paid by Tax Authority:
Personal income tax / Social security system
In the FBiH, personal income is taxed at a flat rate of 10%, and is applicable for active income (e.g. employment, assignment fees) and passive income (interest, real estate rental, etc.). Dividends are not taxable in the BiH. In the FBiH, the lowest permitted monthly salary is BAM 619 (EUR 317) net (for the period 1.1. - 31.12.2024).
In the RS, personal income is taxed at a rate of 8%, assignment fees at a rate of 13%, and all other passive income at a rate of 10% (interest, real estate rental, etc.). The lowest salary permitted is determined as a net amount; for 2024, this amounts to BAM 900 (EUR 460).
In the RS, employees contribute 31% of the gross salary. In the FBiH, employer contributions are set at 10.5% and employee contributions at 31% of the gross salary.
Wage related taxes in
Bosnia and Herzegoniva |
Minimum wage in FBiH |
Minimum wage in the RS |
| Exchange rate BAM/ EUR |
in EUR |
in BAM |
in EUR |
in BAM |
| 1.95 |
485 |
949 |
688 |
1,345 |
| Total wage cost |
536 |
110.50% |
688 |
100.00% |
| Employer's SS and other contributions |
51 |
10.50% |
- |
0,00% |
| Gross salary |
485 |
100.00% |
688 |
100.00% |
| Employees' contributions |
150 |
31.00% |
213 |
31.00% |
| Personal income tax* |
18 |
3.74% |
14 |
2.05% |
| Net salary |
317 |
65.26% |
460 |
65.23% |
*Tax base differs from the gross salary, deductions apply.
Wage related taxes in
Bosnia and Herzegoniva |
Average wage in FBiH |
Average wage in the RS |
| Exchange rate BAM/ EUR |
in EUR |
in BAM |
in EUR |
in BAM |
| 1.95 |
1,042 |
2,037 |
1,009 |
1,974 |
| Total wage cost |
1,151 |
110.50% |
1,009 |
100.00% |
| Employer's SS and other contributions |
109 |
10.50% |
- |
0,00% |
| Gross salary |
1,042 |
100.00% |
1,009 |
100.00% |
| Employees' contributions |
323 |
31.00% |
313 |
31.00% |
| Personal income tax* |
57 |
5.46% |
40 |
3.95% |
| Net salary |
662 |
63.54% |
657 |
65.05% |