Welcome to Canton Sarajevo, flagship of EU reforms and the Future Capital of Foreign Direct Investments!
The Canton Sarajevo is on the road to becoming the most investment-friendly region in the country and the wider Balkan region. It is the most economically developed region of Bosnia and Herzegovina.
Its population of 418,542 (2021) has been steadily increasing in the past decade. The Canton has nine municipalities, four of which form the City of Sarajevo – the Capital of Bosnia and Herzegovina. After a decade of slow growth, high unemployment rates, and poor infrastructure investment rates (2008-2018), post-pandemic economic, and investment trends are favorable.
By Adnan Jašarević, general director of Cantonal Agency for Attracting Investment and Privatization
Sarajevo Canton government has recognized investment and entrepreneurship as the key development goal. As such, the Sarajevo Canton Development Strategy 2021 – 2027 is integrated into several priorities:
- Improvement of business environment, through systemic development of entrepreneurial infrastructure,
- Improved quality of education, the implementation of curricular reform is envisaged to include entrepreneurship as an essential skill,
- Activation of the unemployed, through support for social entrepreneurship, and
- Improved digital transformation, through support programs for entrepreneurship in the ICT field.
Strong recovery
The strong post-COVID recovery is visible from the trends in the number of companies. We are now registering the growth in infrastructure, tourism, and trade. In 2021, the total number of companies in Sarajevo Canton (SC) reached 33,828, out of which 37.9% are sole proprietorship businesses. This represents a 5,7% increase compared with 2020. Between 1994. and 2021, $8.95 billion of foreign direct investment flowed into Bosnia and Herzegovina, and much of it in Canton Sarajevo. The top five historic investors in Bosnia and Herzegovina are Austria, Croatia, Serbia, Slovenia, and Germany.
The main sectors for FDI are manufacturing, banking, trade, and telecommunications, and the investors are now more focused on renewable energy, tourism, real estate, and the metal-processing industry with an emphasis on the automotive sector. Our country, and Canton Sarajevo, is richly endowed with natural resources, providing potential opportunities in energy (hydro, wind, solar, along with traditional thermal), agriculture, timber, and tourism.
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!
The New Free Trade Zone
The BiH Law on Free Trade Zones allows the establishment of free trade zones (FTZs) as part of the customs territory of BiH. One or more domestic or foreign legal entities registered in BiH may create an FTZ. Canton Sarajevo is currently in the process of establishing our first FTZs. This will be a breakthrough and an incentive to invest in Sarajevo Canton.
FTZ users do not pay taxes and contributions, except for those related to salaries and wages. Investors are free to invest capital in the FTZ, transfer their profits, and retransfer capital.
Customs and tariffs are not paid on imports into FTZs. Foreign-owned firms have the same investment opportunities as local entities in FTZs.
The banking and financial system in Bosnia and Herzegovina and Canton Sarajevo is adequately capitalized, stable, and liquid. The new and vibrant cantonal government is committed to investment-friendly policies. Largescale infrastructure investments are triggering faster private sector growth and a very positive economic and also stable political atmosphere. Canton Sarajevo has been growing to become a flagship of a wider prosperity wave driven by a European integration process.
Opening the negotiation with the EU for the final integration of Bosnia and Herzegovina into the European Union is a major step that will give more power to the investment and economic growth in Canton Sarajevo. Every day we open and see a new chance for investors. We are keen to overcome all the challenges and to establish partnerships with every investor. We know that investor success is our success. Welcome to Canton Sarajevo, the future capital of FDI, and champion of investor incentives in Western Balkans!