VAT on services supplied abroad: the place of supply under Article 15

Author: Azur Prnjavorac, attorney at law · Last updated: 13 September 2026 · Legislation, time limits and case law verified on 13 September 2026.

Why does the ITA wrongly assess VAT on services supplied abroad?

The ITA most often assesses VAT wrongly by applying the basic rule on the supplier's seat in Article 15(1) of the VAT Law to a service supplied to a foreign recipient or performed outside BiH, while passing over the exceptions in Article 15(2), which tie the place of supply to the recipient's seat or to the place where the service is actually performed. The pattern in inspections is almost always the same: a domestic company issues an invoice to a foreign partner without VAT, the inspector sees an output invoice with no tax charged and assesses 17% with default interest, without weighing the evidence of where the service was actually performed and who received it.

The VAT Law does not use the term "export of services", but Article 15 states clearly when a service is not treated as supplied in BiH and is therefore outside the scope of BiH VAT. What follows sets out those rules, the situations that arise most often in practice, how the ITA and the Court of BiH read them, and how a wrong decision is challenged by objections, an appeal and an action.

What is the place of supply of a service under Article 15 of the VAT Law?

The place of supply is the place where a service is treated as supplied under Article 15 of the VAT Law, and it decides whether a taxable person from BiH charges VAT at the rate of 17% or issues the invoice without VAT. Under Article 3 of the Law, VAT is charged on supplies of goods and services made for consideration in the territory of BiH and on imports of goods, and for services that territory is determined precisely by the place of supply. The basic rule ties it to the supplier's seat, while the five exceptions in Article 15(2) tie it to immovable property, the route of carriage, the place of actual performance and the recipient's seat. The table sets them out.

An example from practice. A company from Sarajevo invoices a company in Germany, which has no business unit in BiH, for consultancy services of KM 10,000 without VAT, relying on Article 15(2)(4) and (5). If the ITA applies the basic rule in an inspection and treats the invoiced amount as the taxable base, the assessment comes to KM 1,700 of VAT (17%) plus default interest for every day from the due date, and as a rule the company can no longer recover that amount from the foreign client. If the company holds the contract, a certificate that the recipient is registered as a taxable person in Germany and proof of payment from the recipient's account, there is no liability under Article 15 and the assessment falls in the appeal or before the Court of BiH.

The basic rule: the supplier's seat

Under paragraph (1), a service is supplied in BiH where the taxable person has a permanent seat in BiH from which the services are supplied, or, failing that, a permanent address or habitual residence in BiH. The rule applies only where none of the exceptions in paragraph (2) covers the service.

Services connected with immovable property

Services directly connected with immovable property (design, construction works and supervision, agency, valuation, letting) are taxed where the property is situated. If the property is abroad, the place of supply is outside BiH and no BiH VAT is charged. The ITA has confirmed this for a taxable person from BiH letting property abroad: there is no obligation to charge VAT in BiH, and the ground should be stated on the invoice, for example "VAT not charged under Article 15(2)(1) of the VAT Law".

Carriage

The place of supply of carriage is where the carriage is performed. Where it is performed both in BiH and abroad, the Law applies only to the leg performed in BiH. See the section on VAT on international transport from BiH.

Services taxed where they are actually performed

For ancillary transport services (loading, unloading, transhipment), services in culture, art, education, science, sport and entertainment, including the organisation of events, and for the valuation of and work on movable property, the place of supply is where the service is actually performed. A seminar held abroad, the servicing of a machine at the customer's plant in Germany or the transhipment of goods in a port outside BiH are not supplies in BiH. In an official opinion the ITA confirmed that training of workers of a BiH company held in Hungary is not subject to tax in BiH.

Services taxed at the recipient's seat (points 4 and 5)

This is the most important group for what is known in practice as the export of services. Point 4 lists the services for which the place of supply is where the recipient carries on business or has a business unit, seat or residence:

• the transfer and assignment of copyright, patents, licences, trade marks and other intellectual property rights;
• advertising;
• the services of consultants, engineers, lawyers, auditors, accountants and translators, and data processing and the supply of information;
• the obligation to refrain, in whole or in part, from pursuing an activity or exercising a right;
• banking, financial, insurance and reinsurance services, other than the hire of safes;
• the supply of staff;
• telecommunications services;
• the hire of movable property, other than means of transport;
• agency services connected with any of the above.

Point 5 applies that principle expressly where a taxable person seated in BiH supplies those services to a person with no seat in BiH: the place of supply is the recipient's seat or residence abroad, so no BiH VAT is charged. Where both the supplier and the recipient are in BiH, the supply is domestic and taxable. The reverse also holds: where services under point 4 are supplied to a domestic recipient by a person from abroad, the VAT in BiH is accounted for and paid by the domestic recipient as the person liable (Article 13 of the VAT Law), unless the foreign supplier has appointed a tax representative in BiH.

Article 16 of the VAT Law and Article 21 of the Rulebook supplement these rules: in order to avoid double taxation or non-taxation, for services under point 4 regard is also had to the place where the service is actually used. Where a service invoiced to a foreign recipient is in fact used in BiH, for example advertising aimed at the BiH market for a foreign client, the ITA may fix the place of supply in BiH even though the recipient is abroad. That, together with a business unit of the recipient in BiH and a different real content of the service, is the third circumstance that defeats an invoice without VAT in an inspection.

How is VAT charged on international transport from BiH?

On the international carriage of passengers and goods, BiH VAT is charged only on the part of the carriage performed in the territory of BiH (Article 15(2)(2) of the VAT Law), while carriage of goods directly connected with the export or import of goods is exempt in full, including the domestic leg, under Article 27 of the Law. The two rules should not be confused.

A carrier from BiH taking passengers by coach from Sarajevo to Munich charges VAT only on the leg up to the BiH border; the rest of the route does not enter the taxable base and is shown on the ticket or invoice without VAT. The same applies to the carriage of goods that is connected with neither export nor import.

For the export of goods the rule is different. Transport and other ancillary services directly connected with the export or import of goods, including goods under the customs transit procedure referred to in Article 11(3) of the Law, are exempt under Article 27(1)(2), subject to evidence of export (the export customs document, the CMR, the invoice). A lorry carrying goods for export from Sarajevo to Munich therefore does not split the route into a domestic and a foreign leg: the whole transport service is exempt.

Since 1 January 2023 the ITA has applied the same leg principle to foreign carriers of passengers driving through BiH: they pay VAT on the leg through BiH, in proportion to the kilometres covered, through a tax representative (Rulebook amending the Rulebook on the application of the VAT Law, Official Gazette of BiH 47/22).

The error of the ITA in these cases is usually an assessment on the whole value of the international carriage, or a refusal of the exemption for transport connected with export. The answer is documentation of the route and of the customs procedure: CMR consignment notes, tachograph records, export customs declarations, travel orders and a calculation of kilometres by country.

When is no VAT payable on services to foreign clients (the export of services)?

No BiH VAT is payable on services under Article 15(2)(4) (consultancy, legal, engineering, accounting, marketing, IT and related services) where a taxable person from BiH supplies them to a recipient that has no seat, business unit or residence in BiH, because the place of supply is then the recipient's seat abroad. The most common examples are consultancy, legal advice, marketing campaigns and market research, software development and maintenance, data processing, accounting for a foreign company, translation, and engineering or design for a project in another country.

The invoice is issued without VAT, with a note of the ground, for example "VAT not charged under Article 15(2)(4) and (5) of the VAT Law". The ITA has confirmed this treatment in several official opinions. For advertising and market research supplied by an agency from BiH to a company in Serbia the place of supply is Serbia, so the domestic supplier charges no VAT, even where the foreign client is also the founder of the domestic company. The same applies to the services of lawyers, consultants and engineers supplied to a recipient outside BiH and to data processing for a foreign customer.

Three circumstances displace that treatment. First, the foreign client has a business unit in BiH and the service was supplied to it. Second, the service is actually used in BiH within the meaning of Article 16 of the Law. Third, and most common in inspections, the real content of the service is not what the invoice says. In judgment no. U 1670/2009 of 21 December 2011 the Court of BiH upheld an assessment against a taxable person who had invoiced a foreign recipient for "advertising services" and "data processing", where the input invoices and the way the work was carried out showed that what was in fact supplied was the production of promotional material and searches of already processed data in another party's software, that is, services which are not on the list in point 4 and are taxed at the supplier's seat. The Court held that in determining the place of supply the real content of the supply is what counts, not the description on the invoice.

Documentation on the foreign recipient

For an invoice without VAT to withstand an inspection, the supplier from BiH must prove that the recipient is a foreign person with no presence in BiH. Under Article 21(9) of the Rulebook on the application of the VAT Law the supplier must obtain from the recipient: for a legal person, a certificate of registration as a taxable person abroad (in practice also an extract from the register or a VAT number), and for a natural person, the name, address and passport number. The note on the invoice is not itself a condition of the right. In judgment no. S1 3 U 030813 20 Uvp of 25 March 2021, in a case concerning the import of equipment relieved of duties, the Court of BiH (Appellate Division) held as a matter of principle that a formal omission by a taxable person who did not state on the invoice the provision of the VAT Law under which the supply was exempt cannot extinguish a right that is established beyond dispute by other evidence, because the tax authorities are bound by the principle of material truth to establish the true state of affairs. The same principle applies by analogy to an invoice without VAT for services whose place of supply is outside BiH: the note is added for good order, and the right is defended with documents.

Is BiH VAT payable on work, installation and training performed abroad?

No. Construction works on property abroad, the installation and servicing of equipment outside BiH and training or seminars held in another country are not supplies in BiH, because under Article 15(2)(1) and (3) of the VAT Law the place of supply is where the property is situated, or where the service is actually performed, regardless of whether the customer is domestic or foreign.

• Construction works abroad. Where a company from BiH builds or assembles a structure in another country, the service is connected with property outside BiH and is not subject to BiH VAT. Material bought in BiH remains a domestic taxable purchase with a right to deduct input VAT, while the construction service may be subject to the VAT of the country where the work is done, which is a matter for that country's law.
• Installation, fitting and servicing of equipment abroad. Work on movable property is taxed where it is carried out. If a machine is serviced at the customer's plant in Austria, the supply is not in BiH, even where the customer is a domestic company with a project abroad. The same applies where workers are sent to a site abroad to provide such services.
• Training, seminars and conferences abroad. Training held outside BiH, whether given by a foreign lecturer to participants from BiH or organised by a domestic company for its clients in Croatia, is not a supply in BiH.

The common denominator is that the service is not consumed in the territory of BiH. Where an inspector sees an invoice without VAT and suspects an irregularity, the burden of proving the place of performance in practice lies mainly with the taxable person; the list of evidence is in the section on proving the place of supply.

What do the ITA and the Court of BiH say about the place of supply?

In its official opinions the ITA consistently confirms that services under point 4 supplied to a recipient outside BiH, and services actually performed abroad, are not subject to BiH VAT, while in administrative disputes the Court of BiH requires two things: that the ITA apply the exceptions in Article 15(2), and that the taxable person prove by documents the place of performance and the real content of the service.

The opinions of the ITA, published in the questions and answers section of its website, are not a source of law and do not bind as a statute does, but they show how the authority reads the provisions in an inspection, which is useful both to the taxable person and to the court, and in particular as an argument on appeal where the ITA departs from its own reading.

The lawfulness of final decisions of the ITA is reviewed by the Court of BiH in an administrative dispute, at first instance by the Administrative Division sitting in a panel of three judges, and on a request for review of a judicial decision by the Appellate Division. The Court does not protect a taxable person who cannot prove the facts on which the invoice without VAT rests: in judgment no. U 1670/2009 the taxable person lost the case not because Article 15 was read against him, but because the real content of the service did not match what had been invoiced. The lesson runs both ways: the ITA may not pass over the exceptions in paragraph (2), and the taxable person must hold documents from which the place of supply and the content of the service are apparent without guesswork.

Challenging a VAT decision of the ITA: objections, appeal and administrative dispute

A VAT decision of the ITA is challenged by an appeal within 15 days of service, and the second-instance (final) decision by an action before the Court of BiH within 60 days; the process, however, begins earlier, with objections to the inspection record, for which the time limit is five working days. All the time limits are preclusive: once a limit expires, the right to object, appeal or bring an action is lost.

1. Objections to the inspection record. The record is served on the taxable person as a proposed assessment, and objections are lodged within five working days of service (Article 101 of the Law on the Indirect Taxation Procedure of BiH). If no objections are lodged, the proposed assessment becomes final and the ITA issues the assessment decision. The documentation on the place of performance and on the foreign recipient is therefore attached to the objections at once. The Supreme Court of the Federation of BiH confirms the same principle in proceedings before the Tax Administration of the Federation of BiH, in judgment no. 09 0 U 042368 25 Uvp of 5 March 2026: without objections to the record and without credible documentation on appeal, the authority may base the assessment on the facts found in the record.
2. Appeal against the assessment decision. The appeal is lodged within 15 days of service of the decision, under the Law on Administrative Procedure of BiH, which applies in a subsidiary manner by virtue of Article 2 of the Law on the Indirect Taxation Procedure. The appeal challenges the application of the basic rule in paragraph (1) and shows that the service falls within an exception in paragraph (2). The appeal is decided by the ITA at second instance; the second-instance decision is the final administrative act, by which the appeal is dismissed or the first-instance decision is quashed or varied. The appeal does not suspend collection: under Article 48(2) of the Law on the Indirect Taxation Procedure, collection measures are carried out irrespective of an appeal, so the assessed amount falls due within the time stated in the decision, and enforced collection follows under the Law on the Procedure of Enforced Collection of Indirect Taxes. Deferral of payment or payment by instalments against a guarantee may be sought (Articles 35 and 47 of the Law on the Indirect Taxation Procedure).
3. Action before the Court of BiH. An administrative dispute against the second-instance decision is brought by an action before the Court of BiH within 60 days of service (Article 19 of the Law on Administrative Disputes of BiH). The action does not suspend enforcement either, but on the applicant's request the Court may suspend it where enforcement would cause damage that is difficult to repair and suspension is not contrary to the public interest (Article 12 of the same Law). The Court reviews the lawfulness of the decision, and where necessary a financial expert may be proposed, for example to calculate the leg of carriage through BiH.
4. Request for review of the judicial decision. Against a judgment of the Administrative Division a party may, within 30 days, lodge a request for review on the ground of a breach of the law of BiH or of the rules of procedure (Articles 49 and 50 of the Law on Administrative Disputes of BiH), which is decided by the Appellate Division of the Court of BiH sitting in a panel of three judges.

At every stage the taxable person has the right to inspect the file and obtain copies of documents (Article 55 of the Law on the Indirect Taxation Procedure), the right to be heard on all the facts before the decision is taken, the right to submit evidence and the right to be represented, including by an attorney at law.

How is the place of supply proved?

The place of supply is proved by documents that answer the two questions put by both the ITA and the Court of BiH: where the service was performed and what was actually supplied. These cases are not won by reading the statute but by evidence, so the file for each disputed invoice, at the latest together with the objections to the record, should contain:

• the contract or order showing the subject of the service, the place of performance and the recipient;
• proof of the foreign recipient's status: a certificate of registration as a taxable person, an extract from the register or a VAT number, and for a natural person the data from the travel document;
• the invoice with the note on the ground for not charging VAT and a reference to the point of Article 15;
• proof of payment from the recipient's foreign account;
• for carriage: CMR consignment notes, tachograph records, customs documents and a calculation of kilometres by country;
• for work and training abroad: travel orders, work records, evidence of the stay, handover protocols and confirmations from the foreign partner;
• for intellectual services: reports, analyses, correspondence and the delivered results, from which the real content of the service and the place where it is used are apparent.

The burden of proof in practice lies mainly with the taxable person, but not exclusively. In a case against the Tax Administration of the Federation of BiH, in judgment no. 09 0 U 040253 25 Uvp of 28 January 2026, the Supreme Court of the Federation of BiH held that additional tax liabilities cannot be established without reliable evidence of the income earned; by the same logic, an assessment of VAT cannot rest on an assumption that the service was performed in BiH. A taxable person who holds the documents relies on the law in the inspection; one who does not is defending an omission of his own.

What does a lawyer do in a VAT dispute?

In a VAT dispute the lawyer sorts the disputed services by the points of Article 15, gathers the evidence on the place of performance and on the foreign recipient, drafts the objections to the record and the appeal to the ITA, and conducts the administrative dispute before the Court of BiH. The Prnjavorac Law Office represents taxable persons from all over Bosnia and Herzegovina in such cases and advises on how future invoices to foreign clients should be issued so that they withstand an inspection; for companies just beginning to export services we set the documentation right from the first contract, which is far cheaper than a dispute. Related subjects are covered on our pages on tax and financial law, tax protection for BiH citizens working abroad and the VAT refund on the purchase of a first home.

Sources and case law on this subject

The legislation and the decisions relied on in this text are available on our own site, in full text or as edited statements of case law. The legislation and the case law pages are in Bosnian.

• Law on Value Added Tax of Bosnia and Herzegovina, Official Gazette of BiH 9/05, 35/05, 100/08, 33/17, 46/23, 80/23 and 20/25 (Article 3 scope of tax, Article 13 person liable, Article 15 place of supply of services, Article 16 place of actual use, Article 27 exemptions on export).
• Rulebook on the application of the Law on Value Added Tax, Article 21 on the place of supply of services and the documentation on the foreign recipient.
• Law on Administrative Procedure of Bosnia and Herzegovina, applied in a subsidiary manner to an appeal against a decision of the ITA.
• Law on the Procedure of Enforced Collection of Indirect Taxes, collection after the time for voluntary payment under the assessment decision has expired.
• Law on the Indirect Taxation System of Bosnia and Herzegovina, the establishment of the ITA and the system of indirect taxes.
• Court of Bosnia and Herzegovina, judgment no. U 1670/2009 of 21 December 2011, the place of supply of services under Article 15(2)(4) and the assessment of the real content of a service.
• Court of Bosnia and Herzegovina, judgment no. S1 3 U 030813 20 Uvp of 25 March 2021, a formal omission on the invoice does not extinguish the right to the exemption.
• Supreme Court of the Federation of BiH, judgment no. 09 0 U 042368 25 Uvp of 5 March 2026, the inspection record as the basis of an assessment where the taxable person lodges no objections.
• Supreme Court of the Federation of BiH, judgment no. 09 0 U 040253 25 Uvp of 28 January 2026, additional tax liabilities cannot be established without reliable evidence.
• Tax law in the case law of BiH, 26 statements on VAT, input tax deduction, the taxable base and fictitious supplies, and taxes and contributions in the case law of BiH, 11 statements.
• Case law on the Law on Administrative Disputes, case law on the Law on Administrative Procedure and administrative law of BiH in case law.

Frequently asked questions: VAT on services supplied abroad