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a)TAXATION
Tax collection authority in BiH
Tax administrations (entity, cantonal and municipal levels) are in charge of tax collection in BiH.
The BiH Indirect Taxation Authority is in charge of collecting value added tax and coordinating fiscal policy issues in general. This body is also responsible for collecting customs and excises on the entire territory of BiH.
The basic taxation categories are: Corporate income tax (in the Federation BiH – 30%, in the Republic of Srpska – 10% and in the Brko District – 10%, Personal income tax, Value Added Tax, Wages tax, Property tax, Social security contributions paid by employers and employees, Excises, a special type of sales tax paid on some commodities like oil products, tobacco products, soft drinks, alcohol drinks, beer, wine and coffee.
Value added tax (VAT)
Value added tax (VAT) was introduced on January 1, 2006, replacing sales tax on goods and services. It was introduced at a flat rate of 17%. The Indirect Taxation Authority is in charge of calculation and collection of VAT.
Tax exemptions for foreign investors
Investment capital in not subject to taxation in BiH.
Profits transferred from abroad are not taxed if they were previously subject to taxation abroad.
Foreigners and taxes in BiH
All foreigners with permanent residence in Bosnia and Herzegovina pay personal income tax on revenues earned during a calendar year in BiH territory. Equally, all foreigners who do not reside permanently in BiH but who earn income in the Federation BiH and RS are considered as taxpayers.
b)IMPORT DUTIES IN BOSNIA AND HERZEGOVINA
Import customs rates payable in BiH according to the customs tariffs are: 0%, 5%, 10% and 15%.
Import restrictions on equipment that is part of foreign investment
Equipment imported as foreign investment must not be older than 10 years. A certificate issued by the authorized body needs to be provided confirming that the equipment meets necessary standards on environmental protection and protection at work.
c) SOCIAL SECURITY CONTRIBUTIONS PAID BY THE EMPLOYER AND THE EMPLOYEE
The average net wage in Bosnia and Herzegovina in 2006 was 300 EUR.
Social contributions are calculated according to the entity legislation.
d) INCENTIVES FOR FOREIGN INVESTORS
- The Law on the Policy of Foreign Direct Investments of Bosnia and Herzegovina (Official Gazette of BiH, 17/98, 13/03) ensures national treatment of foreign investors, i.e, foreign investors have the same rights and obligations as residents of BiH.
- Foreign investors are entitled to open accounts in any commercial bank in domestic and/or any freely convertible currency on the territory of BiH.
- Foreign investors are entitled to freely employ foreign nationals, subject to the labour and immigration laws in BiH.
- Foreign investors are protected against nationalisation, expropriation, requisition or measures having similar effects; such measures may take place only in the public interest in accordance with the applicable laws and regulations and against the payment of an appropriate compensation, i.e. compensation that is adequate, effective and prompt.
- Investment capital is exempt from paying import customs and customs duties (with the exception of passenger cars, slot and gambling machines).
- The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment (mentioned above) cannot be terminated or overruled by subsequent laws and regulations. Should a subsequent law or regulation be more favourable to foreign investors, the investor will have the right to choose the regime by which the investment will be regulated.
- Foreign investors may own real estate in BiH. Foreign investors enjoy the same property rights in respect to real estate as BiH citizens and legal entities.
- Foreign investors are entitled to transfer abroad, freely and without delay, in convertible currency, proceeds resulting from their investment in BiH.
- Free trade zones in BiH are part of the customs territory of BiH and have status of legal entity. According to the Law on Free Trade Zones, free trade zone founders may be one or more domestic and foreign legal entities registered in BiH. Free zone users do not pay taxes and contributions, with the exception of taxes and contributions related to salaries and wages. Investors are free to invest capital in the free zone, transfer their profit and retransfer capital. The free zone establishment is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50% of the total value of manufactured goods leaving the free zone within the period of 12 months.
- The Federation Law on Corporate Income Tax enables the reduction of the tax for a period of 5 years equal to the percentage of foreign capital invested in the assets of the company, provided that the foreign capital is greater than 20% of total capital. This incentive includes companies with 100% foreign capital investment
- In the Federation of BiH, companies, investing their taxable profits in their own production activities and apartment building are given a tax relief in the amount of 100% of the invested value, or in the amount of 75% if they invest in other activities of their company
e) FDI INSURANCE INSTRUMENTS IN BOSNIA AND HERZEGOVINA
Foreign investors concerned about risks of transfer restrictions, expropriation, war and civil disturbances and denial of justice, can be insured against these risks with the European Union Investment Guarantee Trust Fund for Bosnia and Herzegovina, administered by the Multilateral Investment Guarantee Agency (MIGA, member of the World Bank Group).
BiH is eligible for assistance from the US Overseas Private Investment Corporation (OPIC), which also provides political risk insurance for investors.
f)AGREEMENTS ON AVOIDANCE OF DOUBLE TAXATION
Bosnia and Herzegovina has signed Agreements on avoidance of double taxation with the following countries: Belgium, Croatia, Denmark, Germany, Turkey, Serbia, Montenegro, Poland, Slovenia, China, United Kingdom, Pakistan, Cyprus, Czech Republic, Iran, Malaysia, Norway, Italy, Slovak Republic, Moldova, Sweden, Hungary, Romania, United Arab Emirates, Finland, Egypt, France, Philippines
g)FREE TRADE AGREEMENTS
Bosnia and Herzegovina has signed Free Trade Agreements with the following countries: Albania, Croatia, Macedonia, Moldova, Serbia, Montenegro, Kosovo, Turkey.
Preferential Export Regimes
According to the preferential export regime with the European Union, all goods of BiH origin that fulfill EU technical-technological standards and conditions, can be imported to all 27 EU countries until the end of 2010 without any quantitative restriction and without paying customs and other similar duties.
BiH also has preferential regimes with USA, Australia, New Zealand, Switzerland, Norway, Russia, Japan and Canada.
h)AGREEMENTS ON PROMOTION AND PROTECTION OF INVESTMENTS
Bosnia and Herzegovina has ratified/signed 36 Agreements on Promotion and Protection of Investments with the following countries: Austria, Belgium, Luxembourg, Belarus, Croatia, Czech Republic, China, Denmark, Egypt, France, Finland, Greece, Germany, Hungary, Italy, Iran, India, Jordan, Kuwait, Macedonia, Malaysia, Moldova, Netherlands, United Kingdom, Pakistan, Portugal, Qatar, Romania, Serbia, Montenegro, Slovenia, Switzerland, Spain, Sweden, Turkey, USA (OPIC), Ukraine, OPEC FUND.
i) FDI POSITION AND PERFORMANCE
Central Bank (CBBH) introduced in 2004 regular quarterly and annual surveys of foreign investment in the country. |
