Bosnia and Herzegovina
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EY
Vrbanja 1
71 000 Sarajevo
Bosnia and Herzegovina
Executive and immigration contact Dragana Varagic Djokic +381 6349-1329
Fax: +381 (11) 209-5891
Email: dragana.varagic-djokic@rs.ey.com
A. Income tax
The structure of the tax system of Bosnia and Herzegovina (BiH) is rather complex. BiH consists of three separate entities (jurisdictions), which are the following:
• Republic of Srpska (RS)
• Federation of Bosnia and Herzegovina (FBH)
• Brcko District (BD)
These three jurisdictions have separate legal systems and, accordingly, separate tax systems.
Direct taxes are regulated at the level of the constitutional units mentioned above. Each of these jurisdictions has separate personal income tax (PIT) and social security contribution (SSC) regulations. Therefore, each of them has separate PIT and SSC requirements. Certain taxes (local taxes) in the FBH are regulated at the level of 10 cantons and at the level of municipalities.
The following text contains provisions from the perspective of the legislative framework of the FBH, which is the largest jurisdiction.
Who is liable. Residents are subject to tax in the FBH on their worldwide income. Nonresidents are subject to tax on FBHsource income only.
Individuals are considered to be resident for tax purposes if they have a domicile, residence or center of business and vital interests in the FBH or if they spend more than 183 days within a calendar year.
Income subject to tax. Tax is levied on the types of income described below. For each type of income described below, a 10% tax rate is applied.
Employment income. Salary tax is payable on income from permanent or temporary employment, benefits received in money and in kind, paid leave and other employment remuneration that exceeds a prescribed nontaxable threshold.
Income from independent activities. Income from independent activities includes income from self-employment, agriculture and forestry, freelance professions, and other independent activities.
• Contribution for natural disasters of 0.5%
• Water fee of 0.5%
The following contributions are payable by individual entrepreneurs on the base published by the competent Ministry of Finance:
• Contributions to the Pension and Disability Fund at a rate of 23%
• Contributions to the Health Care Fund at a rate of 16.5%
• Contributions to the Unemployment Fund at a rate of 2%
Contributions to the Pension and Disability Fund at a rate of 6% and contributions to the Health Care Fund at a rate of 4% are payable for income received under contracts relating to royalties, services and additional work, as well as under similar contracts involving the payment of remuneration for services performed (that is, other independent activities).
For expatriate employees, social security contributions may also be payable on salaries received outside the FBH. Under certain bilateral conventions, expatriates may pay social security contributions in their jurisdiction of residence only.
Coverage. An employee who pays social security contributions in the FBH is entitled to benefits, including health insurance for the employee and dependent family members, disability and professional illness insurance, unemployment allowances, retirement, and other benefits.
Totalization agreements. To prevent double taxation and to assure benefit coverage, the FBH currently applies social security totalization agreements with the following jurisdictions.
Austria Italy Slovak
Belgium Luxembourg Republic
Bulgaria Montenegro
Slovenia
Croatia Netherlands Sweden
Denmark North Macedonia Switzerland
France Norway Turkey
Germany Poland United
Hungary Serbia Kingdom
Some of the agreements listed above were concluded with the former Yugoslavia, but they are still applicable.
These agreements provide a 12-month or 24-month exemption, which may be extended.
D. Tax filing and payment procedures
The tax year is the calendar year. Annual tax returns must be filed by 31 March of the year following the tax year. They may be submitted directly or electronically in the case of having electronical approval. The same deadline applies for the payment of annual tax. Withholding tax is levied on most types of income, including salaries. Self-employed individuals who are liable for income tax must make advance payments of income tax monthly.
E. Double tax relief and tax treaties
Double tax treaties concluded by or applicable for BiH (in the case of former Yugoslavia double tax treaties that are still
applicable for BiH) equally apply to the tax residents of the FBH (that is, to all three entities [all three tax jurisdictions]).
Tax treaties with the following jurisdictions are being applied.
Albania Hungary Qatar
Algeria Iran Romania
Austria Iraq Serbia
Azerbaijan Italy Slovak Republic
Belgium Kuwait Slovenia
China Mainland Malaysia Spain
Cyprus Montenegro Sri Lanka
Croatia Netherlands Sweden
Czech Republic
North Macedonia Türkiye
Finland Norway United Arab
France
Pakistan Emirates
Greece Poland United Kingdom
F. Visa D
Foreign nationals from jurisdictions with which Bosnia and Herzegovina does not have a visa-free regime need to obtain a visa prior entering BiH. A visa D allows a foreigner to enter Bosnia and Herzegovina and stay for maximum of 180 days in a 12-month period.
Foreigners may apply for the visa only in the competent BiH embassy. There is no possibility to apply for the visa online. The visa D is issued abroad in the jurisdiction where the applicant resides.
The processing time for granting a visa is up to two months. Holders of a foreign passport, coming from jurisdictions for which a visa is required, with a valid Schengen or European Union (EU) Member State visa, or a United States visa, and holders of a foreign passport with a residence permit in the countries of the Schengen area or the EU, or the United States may, without a prior visa application, enter, travel through, or stay in BiH up to 90 days during a six-month period, starting from the day of the first entry and up to the validity of Schengen, EU, or the United States visa. Such individuals may enter BiH for non-work purposes.
H. Work and residence permits
This section will refer to the obtaining of the work and residence permit, as well as the other basis for regulating a foreigner’s immigration status.
Work permit. In general, to work in BiH, it is required to obtain a work permit. A work permit is obtained by the employer (local company registered in BiH) and issued by the competent employment authorities.
The request for the issuance of a work permit should be submitted in hard copy form to the competent employment authorities together with other required documentation. This procedure may also be conducted on the basis of a power of attorney. A work permit is issued for a maximum period of one year. The work permit may also be extended in one-year increments. After five years of continuous residence with this permit, the permit holder may apply for permanent residence in BiH.