Entrepreneurs looking to establish a company often seek a country whose business environment aligns best with their strategic objectives. In this article, we will explore Bosnia and Herzegovina, highlighting the business incentive programs it offers. Bosnia and Herzegovina is dedicated to supporting enterprises and fostering an atmosphere conducive to growth and innovation, making it a promising market for both domestic and foreign ventures.

The Benefits of doing business in Bosnia and Herzegovina

1. A Stable financial sector – Due to its robust financial health, the banking sector in Bosnia and Herzegovina has effectively mitigated risks arising from both domestic and international factors such as the Russian-Ukrainian war. Bosnia and Herzegovina successfully navigated the risks of a financial crisis, which was apparent due to the EU’s sanctions on Russia, by leveraging a streamlined regulatory system. The banking sector remained well-capitalized and liquid, saw improvements in the quality of its assets, and observed a significant increase in profitability measures.
2. Incentives for Foreign Investors – Foreign investors are eligible for several tax benefits and incentives. One such incentive allows a tax deduction of twice the gross wage paid to new employees under specific conditions. Additionally, there are specific incentives for direct investments in new technologies, emphasizing the introduction of advanced technologies and modern equipment. These funds are distributed based on the investment project and are accessible following a public tender process. Click here to read about the numerous incentives of the Bosnian government related to foreign investors.
3. Favorable Legislation for Foreign Investors.
4. Bosnia and Herzegovina’s Law on Foreign Direct Investments creates a favorable environment for foreign investors. It ensures national treatment, granting them equal rights as residents, including the ability to open accounts in any commercial bank, employ foreign nationals, and transfer investment proceeds abroad. The law permits foreign ownership of real estate with property rights equivalent to those of local entities and offers strong safeguards against nationalization or expropriation. These rights take precedence over later laws, providing foreign investors with the flexibility to select their regulatory framework.
5. Free Trade Zones – Bosnia and Herzegovina currently hosts four (4) free trade zones strategically located near key economic hubsa.

• Trebinje.
• Vogošća, Sarajevo.c.
• Hercegovina, Mostar.
• Visoko.

In these free trade zones, individuals are not obligated to pay Value Added Tax (VAT) and contributions, except for those specifically tied to salaries and wages.

Types of Business Companies in Bosnia and Herzegovina

Bosnia and Herzegovina Federation

• Unlimited Joint Liability Company (d.n.o. / o.d/ UnLtd) – This entity is established through a contract involving two or more partners, who can be domestic or foreign natural persons. The founders are responsible for the company’s liabilities with all their assets, including personal property. There is no stipulation for minimum or maximum contributions for the establishment of this entity.
• Limited Liability Company (d.o.o./Ltd) – Established by either an establishment act or contract, this entity can be formed by one or more domestic or international natural or legal entities, with its initial capital divided into parts. In a limited liability company, each member’s liability is confined to the amount of their investment in the company. The required minimum initial capital for this type of company is 1,000 BAM (approximately 500 EUR).
• Limited Partnership (k.d./LP) – A company established through a contract involving two or more domestic or international natural and/or legal entities, where there is at least one partner with full liability, including personal property, and at least one partner whose liability is limited to their share value in the company. This type of company does not have specified minimum or maximum requirements for initial capital.
• Joint-Stock Company (d.d. /a.d./JSC) – Legal entities founded by the establishment contract of one or more domestic/foreign natural or legal shareholders with initial capital divided into shares. Joint stock companies may be open or closed. Open joint stock companies are companies whose shares have been issued using public offering and which meet one of the following criteria: a) they are banks or insurance companies, or b) they have a share capital of at least in the amount of 4 million KM (approx.. 2 mil eur) and at least  40 shareholders. A closed joint-stock company is a legal entity whose shares are distributed among a limited number of shareholders. The min. initial capital is 50,000 BAM (approx. 25,000 EUR).

Republic of Srpska

• Unlimited Joint Liability Company (d.n.o./o.d./ UnLtd) – Established by an act involving two or more domestic or foreign natural and/or legal partners, this company is formed to engage in specific activities under a unified company name. The partners are jointly and fully liable for the company’s obligations, with no set minimum or maximum contribution requirements.
• Limited Liability Company (d.o.o./Ltd) – Established through an act by one to a hundred domestic or foreign natural and/or legal entities, a shareholder in this limited company bears no personal liability for the company’s debts beyond the value of their investment in the company. The minimum required initial capital for establishment is set at 1 BAM (approximately 0.5 EUR).
• Limited Partnership (k.d./LP) – Formed through an establishment act by two or more domestic or foreign natural and/or legal entities, this company structure requires at least one person to have unlimited liability and at least one person whose liability is restricted to their investment in the company. There is no stipulation for minimum or maximum initial capital for its formation.
• Joint-Stock Company (d.d. /a.d./ JSC) – A legal entity in the form of a joint-stock company can be established by one or more domestic or foreign natural or legal entities, with its capital divided into a set number of shares. An Open Joint-Stock Company allows its shares to be publicly traded, requiring a minimum initial capital of 50,000 BAM (25,000 EUR). Conversely, a Closed Joint-Stock Company restricts its shares to a limited number of shareholders, with a minimum initial capital of 20,000 BAM (10,000 EUR).

Business Registration in Bosnia and Herzegovina

Establishing a company in Bosnia involves a series of steps. These include choosing the suitable company type, selecting a business name, preparing the required documentation, and completing the registration with both the Bosnian Business Registration Agency and the Bosnian Court as well.

The steps are:

1. Establishment contract/decision. This document specifies the company’s name, address, business type, ownership composition, and other critical information. (must be made by a notary).
2. Payment of the required capital at a bank (bank by choice of founder).
3. Registration of the company at the Registry of Business Entities.
4. Manufacturing the stamp with the name and the address of the company on it. Bear in mind to choose a unique name.
5. Opening a bank account.
6. Registration of the company and employees at the tax administration.
7. Obtaining the service permission certificate for completion of the activities issued by the Municipality Bureau of Economic and other permits/licenses.
8. Hire employees if needed.

The expenses associated with setting up a business include administrative costs of around 500 EUR and lawyer and notary costs ranging between 500-1000 EUR. The legal process for business establishment, as mandated by the law, typically spans 5 days, though the comprehensive procedure in practice may extend to 30-45 days.

If you are considering the establishment of a company in Bosnia and Herzegovina, consulting with experts is crucial. Nimrod Yaron & Co. specializes in offering professional guidance and support in the area of taxation. For an initial consultation, we invite you to contact us through the provided link.