Attorney for tax and financial law in Bosnia and Herzegovina: VAT, profit tax, tax inspections, appeals and finance
In brief: The office provides legal support in tax and financial law in Bosnia and Herzegovina: tax advice and optimisation, representation during tax inspections and audits, objections and appeals against tax decisions, international taxation and VAT, and financial and banking services, including instruments of security and the collection of claims.
- Tax rates: a single VAT rate of 17% and profit tax of 10%, one of the lowest tax burdens in the region.
- Zero rate: 0% is provided exclusively for the export of goods and for certain services.
- Services outside BiH: services supplied to a foreign client and actually performed outside BiH are not subject to VAT; disputes with the Indirect Taxation Authority of BiH are conducted with reference to Article 15 of the Law on VAT and to the case law.
- Investment incentive: a 50 per cent reduction of the assessed profit tax for five years for taxpayers that invest at least BAM 20 million in production over five consecutive years (Article 36, paragraph 4 of the Law on Profit Tax of the FBiH).
- Double taxation: application of the treaties BiH has concluded with a number of states, together with the questions of tax residence and transfer pricing.
- Challenging a decision: objection and appeal in the tax procedure, and then an administrative dispute.
- Financial law: instruments of security and the collection of claims, with advice in banking law.
Law Office Prnjavorac specialises in providing legal support in the field of tax and financial law. Our team of attorneys helps companies and natural persons throughout Bosnia and Herzegovina to move safely through a complex tax system, to use the benefits the law provides and to protect their rights before the tax and financial institutions. The tax system of BiH is characterised by a single VAT rate of 17% and a profit tax of 10%, which currently makes it one of the least burdensome in the region. Nevertheless, keeping a business in line with the numerous regulations at the state and the entity level requires careful planning and professional legal advice. Below we set out how the office, as an attorney for tax law and an attorney for financial law, can help your business throughout BiH.
The tax system of Bosnia and Herzegovina at a glance
Taxes in Bosnia and Herzegovina are levied at several levels. Indirect taxes (VAT, customs and excise duties) are state taxes, administered by the Indirect Taxation Authority of BiH, and their revenue is distributed to the state, the entities and the Brčko District. Direct taxes (profit tax, personal income tax, contributions) are levied by the entities and the District under their own laws, and the taxes on real estate belong to the cantons and municipalities in the Federation of BiH and to Republika Srpska. For a company that operates in more than one entity, or for a foreign investor, this means several tax authorities, several sets of rules and several inspections, which is where careful planning pays off.
| Tax | Rate | Level | Authority |
|---|---|---|---|
| Value added tax (VAT) | 17%, single rate; 0% for exports and certain services | State | Indirect Taxation Authority of BiH (UIO BiH) |
| Customs duties and excise duties | Under the customs tariff and the Law on Excise Duties | State | Indirect Taxation Authority of BiH |
| Profit tax (corporate income tax) | 10% in the Federation of BiH, Republika Srpska and the Brčko District | Entities and the District | Tax Administration of the FBiH, Tax Administration of RS, Tax Administration of the Brčko District |
| Personal income tax and contributions | Under the entity laws on personal income tax and on contributions | Entities and the District | The entity tax administrations |
| Real estate transfer tax and property tax | Cantonal in the Federation of BiH; real estate tax in Republika Srpska | Cantons, entities, municipalities | The cantonal and entity tax authorities |
Attorney for tax law: tax advice and optimisation
As experienced lawyers for tax law, we provide comprehensive support that covers tax advice and planning, representation during tax audits, international taxation, the drafting of objections and appeals, and the optimisation of tax liabilities. Proactive tax planning is essential for the successful operation of every company. Our experts advise clients on how to comply fully with the tax regulations and at the same time use all available reliefs and exemptions. We give guidance on the optimal business structure, on the manner of recording income and expenses, and on the correct application of the tax regulations, so that the tax burden is lawfully minimised. The tax optimisation we offer means finding lawful solutions for reducing the tax base, from the use of investment incentives to tax credits, so that your company saves money and avoids the risk of overpaying tax. For example, the Law on Profit Tax of the Federation of BiH allows a 50 per cent reduction of the assessed profit tax for a period of five years for taxpayers that invest at least BAM 20 million in production over five consecutive years (Article 36, paragraph 4). Our team of attorneys will make sure that clients obtain the benefits the law provides and use to the full all the tax reliefs available to them.
International taxation and VAT on cross-border services
Whether you do business with foreign partners or are part of an international group, we also provide professional assistance in the field of international taxation. We help companies to apply the treaties for the avoidance of double taxation that Bosnia and Herzegovina has concluded with many states, so that the same income is not taxed twice; among them are the treaty with Germany, concluded with the former Yugoslavia and still applied, and the treaty with Austria in force since 2012. We also advise on tax residence, on transfer pricing between related persons and on meeting the obligations towards foreign tax systems. A particular aspect of international taxation is the correct application of the VAT rules to cross-border services and supplies. The standard VAT rate in BiH is 17%, while the 0% rate is provided exclusively for the export of goods and for certain services. This means that services that a Bosnian company supplies to a foreign client, and which are actually performed outside BiH, are not subject to VAT. Our office protects clients precisely in the situations in which the Indirect Taxation Authority of BiH wrongly establishes an obligation to pay VAT on such transactions. We react quickly, relying on the relevant statutory provisions (for example Article 15 of the Law on VAT, which determines the place of supply of services) and on the case law, in order to prove that the supply is not taxable in BiH and to secure the client’s right to the VAT exemption in those cases. The subject is dealt with in detail on the page on VAT on services supplied abroad, and the taxation of citizens of BiH who work abroad on the page on tax protection for citizens of BiH working abroad.
Protection during tax inspections
Facing a tax inspection can be stressful for any company. Our attorney for tax law provides complete legal support during tax audits, from the preparation of the documentation and advice to the management, to attendance at the inspection and reaction on the spot. Experience shows that during most inspections the tax inspectors find certain irregularities, but many of them can be clarified at once with adequate explanations and documentation. That is why it is important to have a professional attorney at your side who knows the procedure and the regulations well. We make sure that the competent authorities respect the rights of your company and prevent unjustified additional tax liabilities or penalties from arising during the inspection. In practice this means that we communicate actively with the tax inspectors, submit the evidence requested and point to the relevant regulations as soon as we notice a misunderstanding, protecting your interests in that way. If the inspectors nevertheless establish certain liabilities, we advise at once on the best next steps, so as to minimise the consequences for your business. Before an announced inspection it is useful to prepare the accounting records and the tax returns for the period under review, the contracts and invoices with related persons and foreign partners, the documents proving the export of goods or the performance of services abroad, and the records of earlier inspections and of the decisions issued in them.
Objections and appeals against tax decisions
In situations in which the Tax Administration or the Indirect Taxation Authority of BiH issues a decision by which a tax liability is retroactively established for the client or a penalty is imposed with which you do not agree, we take over the conduct of the whole procedure of legal protection. We prepare detailed and reasoned objections against decisions issued in the summary procedure, then appeals in the regular administrative procedure, and claims before the competent courts (an administrative dispute) where necessary. Through a thorough analysis of the facts and the application of the relevant regulations we seek the annulment or the amendment of the contested decision in favour of the client. Our team of attorneys has experience in the successful challenging of tax claims, relying also on the extensive case law in BiH in the field of taxes. We take every step in the procedure in good time, carefully observing the time limits the law prescribes, so that the rights of our clients are protected to the full. With our assistance, clients often succeed in significantly reducing the amount of the additionally established liabilities or in having unlawful decisions of the tax authorities annulled altogether.
| Authority that issued the decision | Appeal | Administrative dispute |
|---|---|---|
| Indirect Taxation Authority of BiH (VAT, customs, excise) | Appeal within the tax procedure, as a rule within 15 days of service; an objection against a decision issued in the summary procedure where the law provides for it | Claim before the Court of Bosnia and Herzegovina within 30 days of service of the final decision |
| Tax Administration of the Federation of BiH | Appeal to the Federal Ministry of Finance, as a rule within 15 days | Claim before the competent cantonal court within 30 days |
| Tax Administration of Republika Srpska | Appeal to the Ministry of Finance of Republika Srpska, as a rule within 15 days | Claim before the competent district court within 30 days |
| Tax Administration of the Brčko District | Appeal to the competent second-instance body of the District | Claim before the Basic Court of the Brčko District |
Attorney for financial law
In addition to tax law, Law Office Prnjavorac has exceptional experience in the field of financial (banking) law. Our attorneys provide legal services to leading domestic and foreign financial institutions, as well as to companies, in various financial transactions and disputes. We represent clients before banks and regulatory agencies and advise on complex financial contracts and regulations; the practice is described in detail on the page on banking law and finance. The key services in the field of financial law include:
- Instruments of security. We advise on the choice of the best means of security (mortgage, pledge, bank guarantee, bill of exchange and the like) for the protection of the client’s interests in financial contracts. We explain the advantages and the risks of each instrument of security and draft the necessary documentation (for example mortgage or pledge agreements) in accordance with the regulations in force.
- Collection of claims. On behalf of large international banks and funds, we conduct proceedings for the collection of unpaid loans and other claims from debtors in the territory of BiH. We combine a detailed knowledge of domestic law with foreign regulations where necessary: for example, where the loan agreement was concluded under foreign law, we can apply the relevant provisions of that law in the proceedings before the domestic courts. Through the efficient conduct of enforcement proceedings we help clients to realise their financial claims in the shortest time; see also the page on debt collection in Bosnia and Herzegovina.
- Disputes and regulatory compliance. We represent clients in disputes against banks or other financial institutions, in particular in cases of violation of the banking and financial regulations. We also advise on bringing a business into line with the financial regulations in BiH, including the laws on banks, the Law on Financial Operations of the Federation of BiH, the regulations on the prevention of money laundering and the financing of terrorism, and other relevant regulations. Our task is for the client to operate in accordance with the law, with the legal risks in the financial sector minimised.
With a professional team of attorneys and extensive experience in both fields, tax and financial, Law Office Prnjavorac is ready to provide complete legal support to your business or to you as a natural person. Whether you need advice on tax planning and optimisation or legal assistance in a complex financial transaction, we are at your disposal. As an attorney for tax law and an attorney for financial law in BiH, our aim is to protect the interests of clients, to ensure compliance with the law at every step and to contribute to the long-term security and success of your company.
Contact us. If you have received a decision or a record of a tax inspection, are planning an investment or a cross-border transaction, or need a financial contract or its security reviewed, contact us by email and send the documents, so that we can check the time limits and propose the next step. We work with the accountant or the auditor of the company, in Bosnian, English and German.
Regulations
The main regulations of tax and financial law in Bosnia and Herzegovina are the Law on Value Added Tax of BiH (Official Gazette of BiH, nos. 9/05, 35/05, 100/08 and 33/17), the Law on the Procedure of Indirect Taxation of BiH, the Law on Excise Duties of BiH and the customs regulations, the Law on Profit Tax of the Federation of BiH (Official Gazette of the FBiH, nos. 15/16 and 15/20) and the Law on Profit Tax of Republika Srpska (Official Gazette of RS, no. 94/15, with subsequent amendments), the laws on the tax administrations and on personal income tax of the entities, the Law on Financial Operations of the Federation of BiH (Official Gazette of the FBiH, no. 48/16), the laws on banks of the entities and the Law on the Prevention of Money Laundering and Financing of Terrorist Activities of BiH. The regulations, in Bosnian, are available on the office’s portal: the pages on VAT and tax law and on tax law in case law.
Frequently asked questions
The questions clients ask us most often about tax and financial law in Bosnia and Herzegovina.
Which tax law services does Law Office Prnjavorac provide?
Law Office Prnjavorac provides comprehensive services in the field of tax law, which include tax advice and planning, the optimisation of tax liabilities, representation during tax audits and inspections, the drafting of objections and appeals against tax decisions, and advice in the field of international taxation. The aim is to help companies and natural persons to minimise their tax burden lawfully and to protect their rights before the tax authorities throughout Bosnia and Herzegovina.
How can a tax decision of the Tax Administration or of the Indirect Taxation Authority of BiH be challenged?
When the Tax Administration or the Indirect Taxation Authority of BiH (UIO BiH) issues a decision establishing a tax liability or imposing a penalty with which you do not agree, you are entitled to legal protection in several steps. First an objection is lodged against a decision issued in the summary procedure, then an appeal in the regular administrative procedure, and where necessary a claim before the competent court in an administrative dispute. Law Office Prnjavorac takes over the conduct of the whole procedure, with a thorough analysis of the facts and of the relevant regulations, with the aim of having the contested decision annulled or amended in favour of the client.
How does VAT work in BiH and when does the zero rate apply?
The standard VAT rate in Bosnia and Herzegovina is 17% and applies to most goods and services. The zero rate of 0% is provided exclusively for the export of goods and for certain services. This means that services that a Bosnian company supplies to a foreign client, and which are actually performed outside BiH, are not subject to VAT. Law Office Prnjavorac protects clients in situations in which the Indirect Taxation Authority of BiH wrongly establishes an obligation to pay VAT, relying on the relevant statutory provisions, including Article 15 of the Law on VAT, and proving that the supply is not taxable in BiH.
What does representation during a tax audit and inspection involve?
Representation during a tax audit includes complete legal support from the beginning to the end of the inspection procedure. The attorney attends the inspections, advises the management, prepares and submits the documentation requested, communicates actively with the tax inspectors and points to the relevant regulations as soon as a misunderstanding or an irregularity in the procedure is noticed. The aim is to ensure that the competent authorities respect the rights of the company and to prevent unjustified additional tax liabilities or penalties. If the inspectors nevertheless establish certain liabilities, the attorney advises at once on the best next steps in order to minimise the consequences.
Which financial and banking law services does Law Office Prnjavorac offer?
In the field of financial and banking law Law Office Prnjavorac provides advice on instruments of security (mortgages, pledges, bank guarantees, bills of exchange), conducts proceedings for the collection of claims for domestic and international banks and funds, and represents clients in disputes against financial institutions. The office also advises on bringing a business into line with the financial regulations in BiH, including the laws on banks, the regulations on the prevention of money laundering and the financing of terrorism, and other relevant regulations of the financial sector.
Which court decides an administrative dispute against a tax decision?
It depends on which authority issued the decision. Against the final decisions of the Indirect Taxation Authority of BiH the claim is filed with the Court of Bosnia and Herzegovina; against the decisions of the Tax Administration of the Federation of BiH, after the appeal to the Federal Ministry of Finance, with the competent cantonal court; against the decisions of the Tax Administration of Republika Srpska, after the appeal to the Ministry of Finance of RS, with the competent district court; and in the Brčko District with the Basic Court of the District. The claim is filed within 30 days of service of the final decision.
Does Bosnia and Herzegovina have double taxation treaties with Germany and Austria?
Yes. With Germany the treaty for the avoidance of double taxation concluded with the former Yugoslavia continues to apply, and with Austria a new treaty has been in force since 2012. The treaties determine which state may tax income from employment, business profits, dividends, interest, royalties and pensions, and how the tax paid in the other state is credited. Their application requires proof of tax residence, which the office obtains together with the client.
Which documents should be prepared before a tax inspection?
The accounting records and the tax returns for the period under review, the contracts and invoices with related persons and foreign partners, the documents proving the export of goods or the performance of services abroad (contracts, proof of payment from abroad, customs declarations), the calculations of salaries and contributions, and the records and decisions of earlier inspections. A review of these documents with an attorney before the inspection often prevents findings that would later have to be challenged.
Clients have trusted us since 1993.
The law office Prnjavorac has been active since 1993. Today, in its fourth decade of work, it has 1,056 Google reviews with a rating of 5.0 / 5 across two independent Google business profiles.
All client reviews are publicly available on both Google business profiles, without filtering, mediation or moderation by the law office.
Other areas of the firm's work
We provide legal assistance and representation across a wide range of areas in Bosnia and Herzegovina:
