We offer a very liberal trade regime, and our simplified tax structure is one of the lowest in the region (17 percent VAT and 10 percent flat income tax).
There are state-level incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees, and various investment incentives available to investors at the canton, municipal, or city level.
For example, in Canton Sarajevo, the corporate income tax allows offsetting of losses against profits over five years.
The corporate tax rate is 10 percent across the country. Foreign investors can open bank accounts in all jurisdictions and transfer their profits abroad without any restrictions. The rights and benefits of foreign investors granted, and obligations, are regulated by the Law on the Policy of Foreign Direct.
Investment cannot be terminated or overruled by subsequent laws and regulations. Should a subsequent law or regulation be more favorable to foreign investors, the investor has the right to choose the most beneficial regulations.
A taxpayer who invests KM 20 million over a period of five years is exempted from paying corporate income tax for the period of five years beginning from the first investment year. Qualifying investments include fixed assets such as real estate, plants, and equipment for carrying out production activity. Also, tax on dividends is zero!
STATE LEVEL
Law on the Policy of Foreign Direct Investments of Bosnia and Herzegovina (Official Gazette of B&H, 17/98, 13/03, 48/10 and 22/15) ensures:
– National treatment of foreign investors, i.e, foreign investors have the same rights and obligations as residents of B&H.
– Foreign investors are entitled to open accounts in any commercial bank in domestic and/or any freely convertible currency on the territory of B&H.
– Foreign investors are entitled to freely employ foreign nationals, subject to the labor and immigration laws in B&H.
– Foreign investors are entitled to transfer abroad, freely and without delay, in convertible currency, proceeds resulting from their investment in B&H
– Foreign investors may own real estate in B&H. Foreign investors enjoy the same property rights in respect to real estate as B&H legal entities.
– Foreign investors are protected against nationalization, expropriation, requisition or measures having similar effects; such measures may take place only in the public interest in accordance with the applicable laws and regulations and against the payment of an appropriate compensation, i.e. compensation that is adequate, effective and prompt.
– The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment (mentioned above) cannot be terminated or overruled by subsequent laws and regulations. Should a subsequent law or regulation be more favorable to foreign investors, the investor will have the right to choose the regime by which the investment will be regulated.
Customs benefits
Equipment of the foreign investor being imported as part of share capital is exempt from paying customs duties (with the exception of passenger vehicles, slot and gambling machines).
From the payment of import duties are exempted: production equipment that are not produced in Bosnia and Herzegovina, imported for the new or expansion of existing production, modernization of production, the introduction of new or modernization of the existing production technology, and carrying out the direct manufacturing activity
From the payment of import duties are exempted, on the production assets and other equipment belonging to the company which definitively ceases activity in another country and transfers to the customs territory of Bosnia and Herzegovina in order to carry out similar activities.
If the company that is moving is the farm, the animals on it are also exempted from import duties on importation.
In order to enjoy the benefit for foreign investor, he should submit a written request for exemption from paying import duties to the competent customs authority (according to the place of seat of the company) along with the following documents:
– contract or other relevant document about the investment on the basis of which the equipment is being imported,
– proof of registration of the investment at the competent authority,
– specification of equipment with tariff number, tariff mark (with quantity indication), single and total value, certified by the investor,
– statement of the investor that the equipment is not older than 10 years age limit,
– Certificate of the competent institution confirming that the imported equipment complies with the environmental and employment protection standards.
The Customs Office issues a decision within 15 days upon submission of the request
Free trade zones
Free trade zones in B&H are part of the customs territory of B&H and have status of legal entity. According to the Law on Free Trade Zones of B&H, free trade zone founders may be one or more domestic and foreign legal entities or natural persons.
Users of the free zone do not pay VAT and import duties on the equipment that will be used for production. Investments in free zones, profit transfer and investment transfer are free.
The free zone establishment is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50% of the total value of manufactured goods leaving the free zone within the period of 12 months.