Bosnia and Herzegovina is becoming a prime location for investors and businesses, thanks to a range of tax benefits and incentives aiming to support economic growth and development. This article highlights the main tax advantages in Bosnia, which include measures to support business activities, attract investments, and provide personal tax benefits.
Customs Benefits
Equipment imported as part of share capital, except for certain items like passenger vehicles, are exempt from customs duties on the basis of equipment. Meanwhile Production equipment that is not produced domestically and imported for new or expanded product facilities, as well as facility relocations, including farms, is exempt from import for an unlimited time and date.
Free Trade Zones
Free trade zones in Bosnia and Herzegovina are within the country’s customs territory and are recognized as legal entities. According to the Law on Free Trade Zones of B&H, these zones can be established by one or more domestic or foreign legal entities or individuals. Users of these zones are exempt from paying VAT and import duties on equipment used for production. Investments, profit transfers, and investment transfers within these zones are unrestricted.
Entity Level Incentives
Federation of Bosnia and Herzegovina
Companies will get a 30% tax cut on investments in production equipment worth over 50% of their total profit. There is an additional 50% tax cut for total investments worth at least 10 million KM (Convertible Marka) over a five-year period, with a minimum investment of 2 million KM (Convertible Marka) in the first year alone.
Republic of Srpska
The tax incentives include a reduction in the tax base for investments in manufacturing activities, set at 40%. Additionally, there are incentives for adopting new technologies and increasing salaries, with the possibility of receiving refunds on 30% or 70% of contributions paid based on the increase in salaries (subject to incentive increase limits).
Brčko District
Businesses enjoy several incentives, including no charge for company establishment except for notary services. They receive full compensation for utility connections and administrative fees, along with significant incentives for employment. These employment incentives include payments of 5,000.00 KM or 7,000.00 KM (Convertible Marka) for employees with a university or secondary degree, respectively. Furthermore, there are incentives for investments in fixed assets, with reimbursements equivalent to the determined and paid profit or income tax for the year of purchase.
These incentives are part of Bosnia and Herzegovina’s strategic approach to attract and retain foreign direct investment by providing financial benefits, operational flexibilities, and safeguards against changes in regulations that might disadvantage the investment climate.
Bosnia and Herzegovina provide highly competitive tax benefits to attract investment, support local businesses, and stimulate economic growth. With low corporate taxes, free trade agreements and double tax treaties, personal income tax advantages plus a highly competitive tax incentives for investors and businesses, the country has broader attraction more than ever.
Whether you are considering setting up a business in the country, or interested in capitalizing on Bosnia’s tax incentives for corporate or personal benefits, our experts in international taxation at Nimrod Yaron Albania are ready to assist. For an initial discussion, please reach out to us through the link provided.
