| Bosnia & Herzegovina Income Tax Rate Bosnia & Herzegovina personal income tax rate for 2009 is a flat 10%.
A personal allowance exempts the first BAM 3,600 a year from income tax. Additional fractional allowances are permitted for a dependent spouse, dependent children, other dependent immediate family members, and for disability of immediate family members. Income tax will not be paid on dividends, prizes, pensions, and child allowances are also exempt from tax.
The overall rate of contributions on salaries in Bosnia & Herzegovina is reduced from 32% to 31% in 2009. The FBIH Entity Prime Minister Nedzad Brankovic announced that the government would look into possibilities of further decreasing the rate by 3% next year.
Tax collection authority in Bosnia & Herzegovina: Tax administrations (entity, cantonal and municipal levels) are in charge of tax collection in Bosnia and Herzegovina. The Bosnia & Herzegovina 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 Bosnia & Herzegovina.
Taxation categories in Bosnia and Herzegovina: The basic taxation categories are:
- Value Added Tax
- Corporate income tax
- Personal income tax
- Property tax
- Social security contributions paid by employers and employees
- Excise taxes, a special type of sales tax paid on some commodities like oil products, tobacco products, soft drinks, alcohol drinks, beer, wine and coffee.
Tax on Foreigners in Bosnia & Herzegovina: All foreigners with permanent residence in The Federation of Bosnia & Herzegovina and RS pay personal income tax on revenues earned during a calendar year in Bosnia & Herzegovina territory. Equally, all foreigners who do not reside permanently in Bosnia & Herzegovina but who earn income in the Federation Bosnia & Herzegovina and RS are considered as taxpayers.
In Brcko District, foreigners are treated as taxpayers if they stay in the District territory during an uninterrupted period of 183 days at least.
Bosnia & Herzegovina Corporate Tax RateBosnia & Herzegovina corporate income tax rate in 2009 is a flat 10%, which is one of the lowest tax rates in European Union.
Corporate Tax Base
Profits are calculated in accordance with applicable laws, by deducting (real) expenses from revenues. The corporate income tax base includes profit gained through revenues and capital gains, according to the accounting regulations. The expenditures must conform to the accounting standards.
Tax Exemptions
The Federation of Bosnia & Herzegovina Law on the Corporate Income Tax enables the taxpayer, who in the year for which the corporate income tax is being determined, has achieved 30% of their total revenue by export to be exempted from the tax payment for that year.
Taxpayer who in the period of 5 consequent years invests into production in the value of minimum BAM 20 million, on the territory of the Federation of Bosnia & Herzegovina, is being exempted from the payment of corporate income tax for the period of five years beginning from the first investment year, in which minimum BAM 4 million must be invested.
If taxpayer from the above paragraph, in the time period of 5 years, does not achieve the prescribed census for investment, they lose the right of tax exemption, and the unpaid corporate income tax is being determined in accordance with the provisions of the Law on the Corporate Income Tax augmented for penalty interest payable for untimely paid public revenues.
In the Federation of Bosnia & Herzegovina, taxpayer who employs more than 50% of disabled persons and persons with special needs longer than one year is being exempted from the payment of corporate income tax for the year in which more than 50% disabled persons and persons with special needs were employed.
Profits transferred from abroad are not taxed in Bosnia & Herzegovina
Profits transferred from abroad are not taxed in Bosnia & Herzegovina, if they were previously subject to taxation abroad.
Bosnia & Herzegovina Value Added Tax (VAT) RateThe unique VAT rate in Bosnia & Herzegovina is 17%. The Indirect Taxation Authority is in charge of calculation and collection of VAT.
Value added tax is a comprehensive tax on consumption, assessed based on the value added to goods and services. This is a general tax applied to all commercial activities, including manufacturing and distribution of goods and providing services. It is a consumer tax because it is not paid by the company, but by the end user. It is assessed as a percentage of the cost of goods or services. The tax amount is visible in all stages, from manufacturing to distribution chain. When paying tax liability, the taxpayer will reduce the value added tax by the tax amount he/she has already paid to other taxpayers at purchase. This ensures neutrality of taxation, regardless of the number of transactions involved.
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