International Correspondence Lawyers & Financial Experts
ICL DIRECTORY
Company Formation & Tax Rates
Bosnia and Herzegovina
Kindly supported by:
IKRP Rokas & Partners (Sarajevo)
IKRP Rokas & Partners d.o.o. Sarajevo
Čobanija 19
71000, Sarajevo
Bosnia and Herzegovina
Tel: (+387) 33 268780
Fax: (+387) 33 268781
Internet: www.rokas.com
Contact Person: Petros Doukas
E-Mail: BiH@rokas.com
| Representative Office | Limited Liability Company (d.o.o) | Foundations | Joint - Stock Company (d.d.) | |
| Governing legislation | Decision on establishing Foreign Representative Offices (Official Gazette BiH, no 15/03) |
Law on Enterprises of FBiH (Official Journal 45/00, 68/05) |
Law on Associations and Foundations FBiH (Official Gazette, no 45/02) |
Law on Enterprises of FBiH (Official Journal 45/00, 68/05) |
| Law on Enterprises of RS (Official Gazette 62/03) |
Law on Associations and Foundations RS (Official Gazette 42/05) |
Law on Enterprises of RS (Official Gazette 62/03) |
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| Company purpose | Trade research, representing of the founder, propaganda and informative activities | Unrestricted | Restricted (note 5) |
Unrestricted |
| Founder members | One foreign person (legal or physical) | Minimum one shareholder | Minimum one person | Minimum one shareholder |
| Capital requirements | No minimum capital | € 1.000 minimum of initial capital | No requirements | FBiH:€ 25.000 RS: € 5.000 for companies incorporated by known shareholders and € 10.000 for companies incorporated through public offer |
| Liability | Unlimited | Limited to the amount unpaid on shares issued | Limited to the assets of the Foundation | Limited to the amount unpaid on shares issued |
| Costs of incorporation | € 70 | € 800 - 1.000 | € 100 approx. | € 1.000 approx. |
| Incorporation document | Application request to the Ministry of Foreign trade and economical relations | Act of establishment, Statute | Act of establishment, Statute | Act of establishment, Statute |
| Company name | The already existing name of the company, which is establishing the representative office, with the | Prior approval required | Prior approval required | Prior approval required |
| Formalities | Low | Moderate | Low | Moderate |
| Credits / funds | No | Possible | Possible | Possible |
| Accounting and audit obligations | Yes | Yes | No | Yes |
| Management | Person responsible for the Office’s activities | At least 1 director | Board of directors | At least 1 director |
| Nationality | Only foreign persons (companies) | Unrestricted | Unrestricted | Unrestricted |
| Image | Very good | Very Good - very popular |
Good | Very good |
| Taxation | Corporate tax, personal income tax, VAT | Corporate tax, personal income tax, VAT | No taxation | Corporate tax, personal income tax, VAT |
- - - - - - - - - - - - -
| Personal Income tax | Company profit tax | Municipal tax | VAT | |
| Tax rate | FBIH 5% - 30% | FBiH 30% | none | 17% |
|---|---|---|---|---|
| RS max. 10% | RS 10% |
Notes:
1. Bosnia and Herzegovina consists from two entities – Federation of BiH (FBiH) and Republic of Srpska (RS) and one district (Brcko District), which takes only 1% of the territory of BiH. FBiH consists of ten cantons. Commercial and financial law is regulated by legislation of the entities, and as well in FBiH financial law is regulated on cantonal level.
2. Corporate profit tax in Federation of BiH the corporate tax rate is 30%,
Reduction from corporate tax for domestic founders:
- 100% reduction for the first business year,
- 70 %for the second business year,
- 30% for third business year,
- and for Foreign investment – for the period of first five years, tax payment would be reduced by an amount equivalent to the participation of the foreign capital in the total capital of the company. If the participation of the foreign capital in total amounts 100%, then reduction will be in 100%
A company that employed disabled persons and they number more than 50% of the total number of employees in that company shall be exempted from the corporate income tax payment.
Since 1 of January 2009 in FBiH the corporate tax rate will amount 10% Reductions from the corporate taxation will be: Taxpayer who in the period of five consequent years invests into production in value of minimum EUR 10.000.000 is being exempted from the corporate income tax beginning from the first investment year.
In Republic of Srpska the corporate profit tax rate is 10%
The tax payment will be reduced in the case of investment in machines or assets for performing the own registered business activity for an amount that is equivalent to the amount of the investment.
3. Personal income tax:
In the FBiH and RS, personal income tax is payable for the following types of income:
- Salaries and wages;
- Earnings from farming;
- Income from property and property rights;
- Income from copyrights, patents and technical inventions;
- Capital gains and
- Income from other activities.
In FBiH, personal income tax is regulated at cantonal level
Wages are taxed 5% while tax rates for other types of income are from 5% to 30% (depending on cantonal regulations and the tax-base type, e.g. income from property, copyrights, capital gains, etc.)
The new Law on the Personal Income Tax of FBiH, Official Gazette of FBiH, no 02/08 was passed on January 1, 2008 will come into force at January 1, 2009. The new law introduces a lower tax rate, which will be maximum10%. For the personal income of physical persons the only reductions from salaries and will be for alimentation members of the family from 0,03% to 0,09%, which will depend on cantonal regulations.
In RS the personal income tax rate is 10%.
Wage tax:
- 0% for the annual personal incomes up to the amount equivalent to the 12 minimum salaries determined by the General Collective Agreement.
- 10% for the amount that exceed the amounts of 12 minimum salaries, and up to the amount equivalent to the 4 average salaries according to information of the Statistic Institute of RS.
- 15 % for the amounts that exceed the amounts of 4 averages annual net salaries the income tax rate is from
Property tax is payable per square meter of a real estate in amount of 0,05 KM/m² - 3 KM/ m² (depending on the type and location of the real estate). Only for the case of gas stations, property tax is payable per gas station in amount of 3.000 KM/gas-station.
Tax rates for all other types of income (earnings from farming, income from property and property rights, Income from copyrights, patents and technical inventions, capital gains) are the same 10%.
4. Value Added Tax (“VAT”) is imposed by the Law on VAT in 2005. It is common for the whole territory of BiH and amounts 17%. The VAT system came into force in January 2006 and replaced the sales tax on goods and services (which was 20%).
Legal entities that expect to have goods and services turnover in amount of over 50.000 KM during one fiscal year are obliged to apply for registration at the Indirect Taxation Administration of BiH (ITA) and to obtain a VAT number. The law provides that certain business activities are exempted from payment of the VAT and the legal entities registered for these activities should not be registered for VAT payment.
5. Foundations are type of associations, where physical or legal persons are associated for the same or similar economical aim. Foundations may acquire profit only from other activities but not from their main activity.
