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Taxation in Bosnia Herzegovina
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Taxation in Bosnia Herzegovina

Corporate Tax

Main rate: 30%

Bosnia and Hercegovina (BiH) is divided into three jurisdictions for tax purposes: the Federation of BiH, the Republika Srpska and Brcko district. The corporate tax rate in the Federation of BiH is 30%, but a 10% rate applies in the Republika Srpska and Brcko District. In the Federation of BiH, some tax holidays are available for certain activities, but these tax breaks are not available in the Republika Srpska or in Brcko District. A new corporate tax on the state level is to be introduced in 2006. According to the draft law, the main changes will be a decrease in the corporate income-tax rate and reduction or elimination of tax holidays, deductions and incentives.

Individual Tax

Main rate: 10% (Brcko District)

Brcko District was the first of the three jurisdictions to pass a comprehensive modern individual income-tax law, effective from 2004. Under this law, individuals resident in Brcko District are subject to tax on their worldwide income; non-residents are taxed on income sourced in Brcko District only. Income tax applies at a flat rate of 10%. The other two jurisdictions, the Federation of BiH and Republika Srpska, are expected to introduce similar personal tax laws in the near future.

Capital Gains

Taxed as income

Capital gains are generally taxed as income.

Indirect Tax

VAT standard rate: 17%

Up to January 1st 2006, the Federation of BiH, Republika Srpska and Brcko District all impose separate sales taxes that are administered separately. From January 1st 2006, a federal value-added tax (VAT) applies with a centralised indirect tax authority. The VAT applies to most transactions at a standard rate of 17%.

Tax Administration and Compliance

Tax year: Companies: accounting year; Individuals: calendar year

Each of the three entities - the Federation of BiH, Republika Srpska and Brcko District - has its own tax administration responsible for collecting taxes within the entity. There is no central tax administration except for the indirect tax authority, which is responsible for the value-added tax (VAT) from January 1st 2006. Brcko District has introduced a system of self-assessment, under which taxpayers make a payment of tax with the return, except for those receiving only employment income, who are taxed by withholding. The Federation of BiH and Republika Srpska are moving towards a similar system.

Additional Tax Information

Withholding Taxes

Dividends, Interest and Royalties 15% (only in the Federation of BiH).

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