Worldwide VAT, GST and Sales Tax Guide
carried out, as well as a person who trades goods, i.e., services or imports goods in its own name, and for the account of another person.
Any taxable person making taxable supplies of goods and services that exceeds or is likely to exceed a threshold of BAM100,000 in calendar year is required to register for VAT. A taxable person who became or may become liable for VAT for the first time is obliged to submit a registration form for VAT to the ITA no later than the 20th of the calendar month following the end of the month in which the taxable person realized or is likely to realize the turnover of goods or services in the amount that is higher than the amount of the prescribed threshold.
Exemption from registration. The VAT law in Bosnia and Herzegovina does not contain any provision for exemption from registration. This means that anyone who performs taxable turnover in the amount that exceeds the prescribed threshold is obliged to register for VAT. Note that the state, government departments and similar bodies established for the purpose of performing activities within the scope of administrative bodies, as well as entities operating in the public sector, are not obliged to register for VAT in the case that they perform only trade in goods and services within the activities in which they enter as administrative bodies or as entities in the public sector.
Voluntary registration and small businesses. Upon its incorporation, a legal entity has the option to seek voluntary registration in the VAT system – immediately upon incorporation or later once the entity estimates that it will exceed taxable turnover (BAM100,000) by performing taxable activities within the calendar year whereby exact time deadline for voluntary registration is not prescribed. All rights (i.e., deduction of input tax) and obligations (i.e., calculation of output tax) from the VAT law would be applicable as of the day when VAT number is acquired (practically once appeared in tax authority’s data base).
An option is available for small businesses (annual turnover below BAM100,000) to register for VAT by submitting a registration VAT form to the ITA, thereby acquiring the rights and obligations to compute and deduct VAT. The minimum obligation to be VAT registered from voluntarily registering of a small business, to account and pay VAT is for five years.
Group registration. When several taxable persons jointly perform activities that are taxable under VAT law, the ITA may, at the request of those taxable persons, grant group VAT registration. The condition for joint registration is that one taxable person, legal entity or parent company, directly or indirectly, through the possession of all shares, fully owns a subsidiary company or companies of another taxable person that are included in the group VAT registration.
After the registration procedure has been completed, the ITA assigns an identification number (VAT number) and issues a decision on VAT registration to the “parent” company.
All members of a VAT group in Bosnia and Herzegovina should be jointly and severally liable for VAT debts and penalties. Note that the VAT legislation does not prescribe any further detail other than the above, and it is our understanding (as this is not common in practice) the ITA should consider all participants involved in a group registration to be jointly and severally liable.
There is no minimum time period required for the duration of a VAT group. However, note that group VAT registration is not common in practice.
Fixed establishment. In Bosnia and Herzegovina there is no legal definition of a fixed establishment for VAT purposes.
Non-established businesses. Note that the VAT law does not define a non-established business (i.e., a business that does not have a registered establishment in Bosnia and Herzegovina) as a taxable person. Therefore, a non-established business cannot be registered for VAT in Bosnia and Herzegovina. However, if taxable supplies goods or services are performed locally by the nonestablished business and as such subject to Bosnian VAT, a foreign entity/head office would be
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Leasing and subletting of residential houses, apartments and residential premises for a period of longer than 60 days
• Supply of immovable property, except for the first transfer of the ownership rights or the rights to dispose of a newly built construction object or an economically divisible unit within the object
• Financial services
• Insurance and reinsurance services
• Educational services provided by private or public educational institutions
• Delivery of gold to the Central Bank of Bosnia and Herzegovina
• Postal services
• Lottery games
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Bosnia and Herzegovina.
E. Time of supply
The time of supply for a supply of goods takes place on the earlier of the following:
• When the supply of goods is performed
• When the invoice is issued
• When the payment or partial payment is made before the invoice is issued
• When the invoice is issued, and VAT amount corrected due to subsequent change of tax base
• In the case of use of goods for nonbusiness purposes, the tax liability arises at the end of the tax period in which the use was made.
A supply of goods is also considered to be “performed” on the date when the dispatch or transport of the goods starts, or on the date when ownership of the goods is transferred to the purchaser (if transport is not included). The time of supply of imported goods is the date on which the goods arrive in the Bosnian customs territory.
The time of supply for a supply of services takes place on the earlier of the following:
• When the supply of services is performed
• When the invoice is issued
• When the payment or partial payment is made before the invoice is issued
• When the invoice is issued, and VAT amount corrected due to subsequent change of tax base
• In the case of use of services for nonbusiness purposes, the tax liability arises at the end of the tax period in which the service was made
Services are “performed” on the date when the provision of the individual service is finished. Apart from this, if periodical invoices are issued for the service, the supply of that service is considered finished on the last day of the tax period for which that invoice relates. A partial service is “performed” at the moment when the provision of that part of the service is finished.
Deposits and prepayments. If a prepayment is made before the invoice is issued, or before the supply of goods and services are performed, the time of supply is considered on the date when the prepayment is made (as outlined above).
Continuous supplies of services. There are no special time of supply rules in Bosnia and Herzegovina for supplies of continuous supplies of services. As such, the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. There are no special time of supply rules in Bosnia and Herzegovina for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. The time of supply of reverse-charge services is the date when the invoice is received. As such, after receiving the invoice, the taxable person is obliged to calculate VAT, and based on such invoice to record in the book of output invoices only the amount of calculated VAT, with reference to the invoice number in the tax period when it was received. If the taxable person meets the conditions prescribed by VAT law, the taxable person has the right to deduct input tax in the tax period when the invoice was received.
Leased assets. There are separate guidelines that set out the conditions that must be fulfilled for a lease to be regarded as a sale of goods or sale of services. If a lease is regarded as a supply of goods, the time of supply is when the goods are handed over. If a lease is regarded as a supply of a service, the time of supply is when the leasing provider issues an invoice for each individual lease installment (as outlined above).
Imported goods. The time of supply of imported goods is the date on which the goods arrive in the Bosnian customs territory.
F. Recovery of VAT by taxable persons
Input tax includes VAT charged on goods and services supplied in Bosnia and Herzegovina, VAT paid on imports of goods and VAT accounted for to reverse-charge services.
The main condition that needs to be fulfilled for the deduction of input tax to be allowed is that the acquisition of goods or services that are used or should be used for the purpose of performing a taxable activity, for business purposes. Additional conditions are as follows:
• The invoices for the goods received or services performed indicate the VAT amount and are in line with the form prescribed by the VAT law
• The supply of goods or services was received from another taxable person (B2B)
• The VAT law does not exclude the right to deduct input tax for received goods or services.
The time limit for a taxable person to reclaim input tax in Bosnia and Herzegovina is five years.
Nondeductible input tax. Effectively, any expenditure that is not business related is nondeductible from an input tax perspective. Such VAT will be treated as an expense or capitalized.
Examples of items for which input tax is nondeductible
• Expenditures related to acquisition and import of cars, boats, yachts, motorcycles, aircraft, fuel and spare parts, as well as goods and services related to their maintenance and storage
• Expenditure related to business entertainment and accommodation
• Expenditures related to the acquisition of immovable property used by the taxable person or its staff as a facility for housing, children’s stay or as a facility for recreation and leisure activities
• Expenditures of taxable persons and employees for “representation,” e.g., entertainment expenses
• Expenditures to employees in goods
Examples of items for which input tax is deductible (if related to taxable business use)
• Employee expenses for business purposes
• Cargo vehicles for business use (the deduction of VAT on passenger vehicles is usually not allowed, except in the case when it is necessary for business, i.e., specialized transport of goods)
• Business maintenance costs
Partial exemption. If acquired goods or services are used partly for purposes of taxable supplies and partly for exempt supplies, the taxable person may not deduct input tax totally. The taxable person should divide the part of the input tax relating to taxable supplies and that which does not relate to taxable supplies.
The proportional input tax deduction calculation is determined by applying the calculated percentage to the amount of input tax reduced by the amount that the taxable person is not entitled to deduct.
If acquired goods or services will be used in an insignificant part (up to 5%) for taxable purposes, such delivery is considered to have been made entirely for nontaxable purposes. From the other side, a taxable person is not obliged to perform division of the input tax, if the established percentage of proportional input tax deduction is at least 95%, i.e., such delivery is considered to have been made entirely for taxable purposes.
Approval from the tax authorities is not required to use the partial exemption standard method in Bosnia and Herzegovina. Special methods are not allowed in Bosnia and Herzegovina.
Capital goods. Capital goods are defined as facilities and equipment that are used in a business. Input tax is generally deducted in the year in which the capital goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of acquisition.
However, the amount of input tax recovered for capital goods must be adjusted if the taxable person ceases to meet the conditions for deduction of input tax in the period of 5 years from the first usage of the equipment, 10 years from the first usage of the facilities and the investment in the facilities. A capital goods adjustment applies for a period represented in the difference between the aforementioned periods (5 or 10 years) and the period in which the taxable person had the right to deduct input tax.
Exceptionally, the taxable person does not have an obligation to adjust input tax on the capital goods in the case that equipment or facilities become unusable before the expiry of the input tax adjustment period.
Refunds. If the input tax incurred is higher than the output tax paid, the taxable person has a right to obtain a refund or to use this amount as a tax credit. To claim the input tax refund, the taxable person must tick the box in its VAT return for the input tax refund.
However, if credit is not used within six months it will be automatically refunded. The standard refund period is 60 days, whereby for taxable persons predominantly engaged in export related activities, the refund period is reduced to 30 days. If the ITA does not refund the input tax difference within the prescribed deadlines, the taxable person is entitled to the prescribed interest that begins on the first day after the deadline for refund until the day of transfer of funds to the taxable person’s account.
Pre-registration costs. In Bosnian legislation it is prescribed that input tax can also be deducted from the beginning of the commencement of taxable activity, i.e., during the preparations for the beginning of the activity.
Note that this right cannot be used on received deliveries such as privately motivated investments, preparatory investments, etc., that do not lead to entrepreneurial status and entrepreneurial business. By way of further information, note that this is not commonly used or approved by ITA in practice.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) can be recovered in Bosnia and Herzegovina. This is only allowed if prescribed conditions
Record retention period. VAT records and all supporting documents based on which the VAT records are maintained (e.g., invoices) should be kept until the expiry of statute of limitation period for determination and collection of VAT (statute of limitation period is 5 years; absolute limitation is 10 years).
Electronic archiving. Electronic archiving is allowed in Bosnia and Herzegovina. The laws on accounting (in different tax jurisdictions in Bosnia and Herzegovina) prescribes that accounting documents may be stored in original material and electronic form, in the form of an electronic record or on microfilm, a taxable person can provide authentic electronic invoices upon the request of ITA. It is recommended that the documentation should be kept in paper form, because the tax authority usually requires insight into such a form of documentation during tax audits.
Note that Bosnia and Herzegovina consists of three jurisdictions whereby each has its own tax legislation concerning direct taxes and accounting regulations. Indirect taxes like VAT and customs and excises are regulated on the state level.
I. Returns and payment
Periodic returns. The tax period in Bosnia and Herzegovina is a calendar month. VAT obligations must be reported within 10 days after the end of the tax period (i.e., the 10th of the following month for previous month). For example, the January 2025 VAT return is due by 10 February 2025.
Periodic payments. The deadline for VAT payment is the same as the deadline for the filing of VAT returns, i.e., within 10 days after the expiration of the tax period. Upon submitting the VAT return electronically via the portal e-Taxes (e-porezi), the taxable person pays the VAT liability by transferring funds to the prescribed public revenue account. The VAT payable by a taxable person for a tax period equals the VAT on the total taxable value of supplies made during the tax period minus any input tax allowed as a deduction.
Electronic filing. Electronic filing is mandatory in Bosnia and Herzegovina for all taxable persons. The submission of a VAT return, D PDV form and e-KUF/e-KIF files, is completed electronically. Taxpayers must submit VAT returns authenticated with a qualified digital signature, which must be obtained and approved by the ITA. Taxable persons must use the “e-Taxes portal” (https://e-porezi.uino.gov.ba:4443/Account/LogOn?ReturnUrl=%2f ) and “Digital signature” application for verification of signature. The “e-Taxes portal” collects electronic services for the Bosnian ITA, enables all taxable persons to submit online tax forms (except D PDV form which is submitted vie email), provides follow up on the status of submitted applications with insight into the taxable person’s tax card, and provides faster and simpler fulfillment of obligations toward tax administration. This system meets high security standards that enable safe and uncompromised electronic data transfer.
Payments on account. Payments on account are not required in Bosnia and Herzegovina.
Special schemes. Construction works. Bosnian VAT law stipulates a special regime for construction works performed at the territory of Bosnia and Herzegovina whose total amount exceed EUR12,500. In this respect, it should be clarified who is deemed to be investor (an entity that finances construction works on its immovable property), main contractor (an entity that has directly concluded construction works agreement with the investor) and subcontractor (an entity that delivers goods needed for construction works and provides services related to delivered goods and therefore has impact on construction works). It is important to bear in mind that the special regime only applies to the relation between the main contractor and subcontractor. In this respect, the subcontractor invoices the main contractor with the VAT calculated on its invoice. However, the main contractor pays only net amount to the subcontractor while the amount of calculated VAT is paid directly to the ITA. On the other side, the subcontractor pays VAT regularly to the ITA while it can utilize the VAT paid by main contractor as input tax once it receives confirmation/proof that VAT was paid by the main contractor to the ITA.
Tour operator’s scheme. Tourist services provided by a tourist agency are considered as a single service. The tax base of the single tourist service provided by a tourist agency is the amount representing the difference between total price paid by a passenger and actual expenses paid by the tourist agency for preliminary tourist services, after deducting the VAT that is included in that difference. The tourist agency is obliged to issue a VAT invoice to the service user, or any other document that serves as a tax invoice, for the performed tourist service.
Works of art, secondhand goods, antique goods. Taxable persons engaged in the trade of used goods, including secondhand goods, works of art, collector’s goods and antiques determine the tax base as the difference between the sale price and the purchase price of the goods by deducting the VAT that is included in that difference. If the purchase price is higher than the sale price, the taxable amount is zero. To use this scheme, the special conditions specified in the regulations must be met.
Small businesses. Small businesses (defined as businesses whose total turnover in the previous calendar year does not exceed BAM100,000) do not charge VAT for performed trade of goods and services, do not have the right to indicate the VAT in invoices and are not entitled to deduct input tax. Also, they are not required to keep records prescribed by VAT law.
Farmers. Generally, farmers who are not taxable persons are entitled to a flat-rate input tax fee when purchasing agricultural and forestry goods and services resulting from activities subject to cadastral income tax on agriculture and forestry, provided they have previously received approval from the ITA.
Annual returns. Annual returns are not required in Bosnia and Herzegovina.
Supplementary filings. D PDV. Taxable persons are also obliged to file a D PDV form along with the VAT return. Dodatak uz PDV prijavu (D PDV) is the official name of the form and in English would be “Addition to the VAT return.” Its purpose is a more detailed explanation of the selected items of the output and input fields in the VAT return and the corresponding input and output tax. Only data related to the tax period for which the VAT return is submitted are entered in D PDV.
E-KIF and e-KUF. Taxable persons must submit e-KIF (book of outgoing invoices) and e-KUF (book of incoming invoices) by the 20th of the month after the end of the tax period to which these records refer. Submission of data on procurement and deliveries electronically is done within the e-Taxes portal.
Correcting errors in previous returns. If a taxable person finds that the VAT return submitted to the ITA contains an error that results in an incorrectly determined amount of tax liability, or an omission of another type, it is obliged to immediately, and no later than the expiration of the statute of limitations (i.e., five years), file a corrective VAT return in which the error or omission has been rectified. The amended VAT return must be submitted electronically via the e-Taxes portal. Note, there is no obligation to include an explanatory letter to accompany the corrective VAT return. However, every corrected VAT return usually triggers VAT audit.
An administrative fee of BAM10,000 must be paid for the purposes of correcting the VAT return (the amount does not change on an annual basis). Proof of payment of the administrative fee on the changed VAT return must be sent electronically (to the official e-mail address).
Digital tax administration. There are no transactional reporting requirements in Bosnia and Herzegovina.
J. Penalties
Penalties for late registration. If a taxable person fails to notify the ITA about the commencement of it performing taxable activity (i.e., its obligation to register for VAT), the taxable person will
be fined in the amount of 100% of the obligation that was not notified due to the taxable person’s omission, and at least BAM1,000.
Penalties for late payment and filings. For the late payment of VAT due, a taxable person will be fined in the amount corresponding to the amount of 50%–200% of the unpaid calculated amount, and at least in the amount of BAM100. The percentage determined on unpaid obligations (50%–200%) depends on initially unpaid amount of VAT, i.e., the significance of the omission.
For late filing of a VAT return due, a taxable person will be fined a penalty in the range of BAM300 to BAM1,000. With respect to late payment interest, note that it is currently set at the rate of 0.04% per day.
Penalties for errors. If a taxable person establishes that a VAT return, which it submitted to the ITA, contains an error that results in a wrongly determined amount of tax liability, or omission of another kind, it is obliged to immediately file a tax return in which the error or omission is remedied (see the subsection Correcting errors in previous returns above).
Incorrect VAT reporting may lead to penalty of 50%–200% of the difference between the correct VAT amount that should have been reported and unreported/incorrectly reported VAT amount if the error does cause economic damage to the ITA or impose economic risk on public revenues. If the error does not cause economic damage to the ITA or does not impose economic risk on public revenues, a fine in the fixed amount of BAM1,000 is prescribed. The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details may result in a penalty of BAM500. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. The criminal law of Bosnia and Herzegovina prescribes key tax criminal offenses (among others) for tax evasion and filing forged/false tax returns, etc. Regarding the tax fraud/ evasion, the threshold for this criminal act is very low (the amount of tax whose payment is avoided exceeds the amount of BAM10,000) and the penalty in this regard is imprisonment from six months to five years. Moreover, if the mentioned tax liability exceeds BAM100,000, the offender shall be punished by imprisonment of 1-10 years, and if tax liability exceeds BAM200,000, the offender shall be punished by imprisonment of minimum three years.
Personal liability for company officers. The general rule is that the responsible person in the legal entity is the person who on the basis of the law, regulation or authorization conducts certain managerial, supervisory or other functions in the company, as well as the person who factually conducts certain work – substance over form. This is presumably a director, although it can be proved that some other person/company official has been liable for certain activities of the company. In Bosnian legislation, a responsible person working for a legal entity (i.e., director) is subject to the same fine as the legal entity as stated above.
Statute of limitations. The statute of limitations in Bosnia and Herzegovina is 5 or 10 years. The statute of limitation period in Bosnia and Herzegovina in which the tax authority may go back and assess additional tax liabilities is generally set at 5 years, whereby the absolute statute of limitation for indirect taxes is set at 10 years.
The prescribed five years period for VAT liability assessment and VAT payment start counting from the day after the deadline for submitting VAT return, i.e., after the payment deadline.