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.

 

 

ENTITY LEVEL

In Federation of B&H

Tax Incentives

 

Law on Corporate Income Tax enables foreign investors to enjoy the following benefits

- The taxpayer who invests, from its own funds, in production equipment more than 50% of the total profit in the current tax period, shall be reduced of the obligation of the calculated tax for 30% of the amount in the year of investment.

- The taxpayer who in a period of 5 consecutive years makes investments from its own funds, in the total amount of 10 million €, starting with the first year when taxpayer has to invest at least 2 million €, shall be reduced of  the obligations of the calculated income tax for 50% of the amount in the year of investment.

- The taxpayer is entitled to a tax-deductible expense in the double amount of the gross wage paid to newly employees if  meets the following conditions:

- duration of the employment contract must be at least for a period of 12 months with full-time working hour

- new employee was not employed with the taxpayer or a related person in the previous five years.

 

Other incentives

Federal Ministry of Development, Entrepreneurship and Crafts

www.fmrpo.gov.ba

The public call is announced annually and supports micro and small businesses (up to 49 employees). Some of the funding topics are:

- incentives for newly established small business entities

- youth entrepreneurship

- women's entrepreneurship

- introduction of ISO; CE, HACCAP

- support for strengthening the competitiveness of exporters

 

Federal Ministry of Energy, Mining and Industry

www.fmeri.gov.ba

A public call is published annually, which defines the lines of support, eligible applicants and projects. Funds are placed through:

- Credit guarantee fund

 

Federal Ministry of Agriculture, Water Management and Forestry

https://fmpvs.gov.ba/

A public call is published annually, which defines the lines of support, eligible applicants and projects. Funds are placed through:

- Support for the development of agriculture

Federal Ministry of Environment and Tourism

https://www.fmoit.gov.ba

A public call is published annually, which defines the lines of support, eligible applicants and projects. Funds are placed through:

- Development of tourism

- Support to the hospitality sector

 

Development Bank of the Federation of Bosnia and Herzegovina

https://rbfbih.ba/

The bank has formed loan products for companies, and the funds are placed through:

- Long-term loans

- Short-term loans

- Guarantee fund

- Projects with foreign donors for the competitiveness of domestic companies

The loan is realized throughout the year

 

Environmental Protection Fund

https://fzofbih.org.ba

 

A public call is published annually, which defines the lines of support, eligible applicants and projects. Fund funds that can be used by companies for:

- Environmental protection projects

- Waste management projects

- Energy use improvement projects

 

Federal Employment Agency

www.fzzz.ba

 

Annually, it publishes employment support programs and can offer funding opportunities for larger employers in retraining programs.

The Institute's annual public calls include the following employment co-financing programs:

- "First work experience" program – employment of unemployed persons up to 30 years of age;

- Program "Opportunity for all" – employment of all categories of unemployed, regardless of age, education, gender;

- Program "Periodic/seasonal employment" – seasonal employment of all categories of unemployed;

- "Job Voucher" program – help with (self)employment of long-term unemployed persons.

- Fund for professional rehabilitation and employment of persons with disabilities

- https://fond.ba/

- Annually publishes a call for co-financing of employment and self-employment of persons with disabilities

Support System for Improving Entrepreneurial Infrastructure

The support system for improving entrepreneurial infrastructure focuses on enhancing business activities in entrepreneurial zones, support institutions, and technology-entrepreneurial centers, according to the following priorities:

a) Improving conditions for entrepreneurial infrastructure to attract domestic and foreign investments;

b) Creating a favorable business environment for smart industry (Industry 4.0);

c) Promoting entrepreneurship in new technologies and green entrepreneurship;

d) Strengthening the competitiveness of entities within the entrepreneurial infrastructure;

e) Increasing the number of employees and business entities;

f) Encouraging the internationalization of business operations.

Based on the Development Strategy of the Federation, the policies of the Federation Government, and in accordance with the analysis of the state of entrepreneurial infrastructure, an Incentive Program for the Development of Entrepreneurial Infrastructure in the Federation is proposed for each calendar year.

The Program must include an overview of the state and trends in entrepreneurial infrastructure, as well as goals and measures to be implemented through development projects.

Development projects must include the project name, the amount of funds required for project implementation, project goals, criteria for fund allocation, category of fund recipients, projection of the desired state at the end of the project period, implementation deadlines, and indicators for monitoring and evaluation. 

Incentives at the cantonal level

Depending on the purpose, i.e. activities, some of the usual incentives at the cantonal level in the Federation of Bosnia and Herzegovina, for which companies can apply, are:

- Incentives for economic development

- Incentives for newly founded companies

- Incentives for the development of entrepreneurship and the launch of new start-up companies

- Incentives for co-financing of unemployed persons

- Incentives for retraining and additional training of unemployed persons and education

- Support for co-financing interest on investment loans, loans for working capital, loans for closing/reprogramming investment loans, financial leasing

- Incentives for the development of entrepreneurial infrastructure

- Subsidies to private companies and entrepreneurs for participation in fairs and exhibitions:

- support to companies in completing the implementation of internationally recognized standards and quality

- Support for export development

- Incentives for the development of tourism

 

In Republic of Srpska

Tax Incentives

 

A taxpayer who invests in property, plant and equipment in the territory of the Republic of Srpska for performance of a registered manufacturing activity, shall be entitled to a tax base reduction by the value of the investment

- Workers in the textile, clothing, leather and leather products sector who earned a salary lower than the average gross salary in the Republic for the previous year, have a smaller basis for calculating contributions, which is 25% of the average gross salary paid in the Republic in the previous year.

- In the Republika Srpska, the dividend tax was abolished, and significant novelties were introduced for the taxation of income from foreign sources in a positive sense. The conditions for obtaining the status of a qualified investor are defined, on the basis of which the investor acquires tax benefits for annual income.

 

Other incentives

Incentives from the Ministry of Economy and Entrepreneurship of the RS

https://vladars.rs

The Law on Incentives in the Economy of the Republic of Srpska envisages incentives for the development of the economy:

- Incentives for increasing the salary of workers employed in the economy in the amount of funds that correspond to the value of 70% or 30% of the paid contributions to the salary increase,

- Incentives for direct investments for new technologies are focused on the introduction of new technologies and modern equipment.

- Incentives for direct investments of special importance imply the implementation of projects that achieve the following:

  1) Employment of at least 100 workers or investment of at least 10,000,000 KM in tangible and intangible assets in the territory of developed and medium-developed local self-government units.

2) Employment of at least 50 workers or investment of at least 5,000,000 KM in tangible and intangible assets in the territory of an underdeveloped and extremely underdeveloped local self-government unit.

 

Public invitations are announced once a year.

 

- Incentives for small and medium-sized enterprises are also awarded once a year for digital transformation, technical innovation, preservation of old and artistic crafts and domestic handicrafts, organizing a joint performance of SMEs at a fair or exhibition - organizing a fair or conference.

 

RS Ministry of Agriculture, Forestry and Water Management

https://vladars.rs

 

The Ministry adopts the Rulebook on the requirements and methods of obtaining financial incentives for agricultural and rural development every year. These funds are allocated through a public call.

 

RS Ministry of Energy and Mining

https://vladars.rs

 

The funds of this ministry are allocated for:

- investment in tangible assets (land, buildings, production or sales facilities, machines or equipment or other similar tangible assets) and

- investment in intangible assets (business software packages, patents, licenses, certification, accreditation, quality management standards or information security management standards, controlling systems or marking of products with the "CE" mark of conformity or production of industrial design, i.e. redesign of products or packaging or other similar intangible assets).

 

 

RS Guarantee Fund

https://garantnifondrs.org

 

- There are several types of guarantee lines, such as for initial business activities, for companies, for entrepreneurs, for export support, for agriculture, etc., and the Guarantee Program for supporting the economy was established to mitigate the consequences of the COVID-19 pandemic caused by the SARS virus. -CoV-2”.

 

Environmental Protection Fund

https://www.ekofondrs.org

 

On the website, a permanent public call for environmental protection is published, and funds are allocated for

- co-financing of programs and projects in the field of environmental protection,

- energy efficiency and

- renewable energy sources.

 

Investment Development Bank RS

https://www.irbrs.org

 

The bank has established the following credit lines:

- Loans for initial business activities

- Loans for micro-business in agriculture

- Loans for agriculture

- Loans for entrepreneurs and companies

- Loans for the support and recovery of micro, small and medium enterprises.

 

Employment Office of the RS

http://www.zzzrs.net

 

- The Employment Office of the Republic of Srpska implements and publishes a public call for the Program of Support for Employment in the Economy through the payment of incentives in the amount of taxes paid and contributions for new employment of workers.

 

The Register of Incentives in Republic of Srpska

The Register of Incentives in the Republic of Srpska is an electronic database of funds for incentives of the economy of the Republic of Srpska that are allocated at national and local level, including data such as: providers and implementers of incentives, legal basis for their allocation, sources of funds, types and purposes of incentives, all the way of information about who and which amount the funds were allocated. The register is available on two portals: - Public portal of the Register of Incentives, which is available for everyone, and which contains information about the Register of Incentives, and current public calls available for interested users; - Administrative portal of the Register of Incentives, which are available to institutions and authorized persons at the level of institutions, ie for registered users. Both portals are available at :https://regpodsticaja.vladars.rs/home/o-registru.

Brcko District

Law on Incentives to Economic Development of Brcko District ensures:

- Exemption from utility fees for displaying the company

- Compensation of expenses of connection to power, water and sewage network

- Compensation of paid fees necessary for obtaining the location conditions, building permits and approvals for the use of the facility

- Compensation of expenses in amount of the difference in price of electricity and water paid by the company and the price paid by households

- The costs of connection to the power grid are borne by the employer, and the Brčko District of BiH refunds the paid dedicated fees (taxes) and connection services for the right to connect to the power grid based on the Law in the maximum amount of up to 10,000 KM during one calendar year.

- Compensation for salary for maternity leave in amount of 100%

- The legal measure to encourage the employment of new workers foresees the substituting employers in the amount of 5,000.00 KM for the new employment of persons with secondary school and a lower level of vocational education and in the amount of 7,000.00 KM for the employment of persons with a higher education.

 

Tax incentives:

- Compensation for amount of new investments invested in purchase of fixed assets and up to the amount of determined and paid profit tax or income tax in period for the year in which purchases of fixed assets was made, provided that the difference between the amount of profit tax or income tax, and made supply cannot be transferred to next year

- For taxpayers who hire new employees for an indefinite period during the tax year, the tax base is reduced by the amount of the gross salary paid to the newly hired employees.

- Compensation for amount of new investments invested in purchase of fixed assets and up to the amount of determined and paid profit tax or income tax in period for the year in which purchases of fixed assets was made, in accordance with the Income Tax Law of the Brcko District of Bosnia and Herzegovina, provided that the difference between the amount of profit tax or income tax, and made supply cannot be transferred to next year

When a taxpayer, in the year for which the profit tax is assessed, generates from export certain percentage of total profit, then the taxpayer is exempted from paying certain amount profit tax.

-For machines subject to depreciation, the taxpayer is allowed to use the accelerated depreciation calculation.

 

Development-Guarantee Fund of the Brcko District of BiH (DGFBD of BiH)

Guarantees are granted to small and medium sized enterprises (MSEs) and individual farmers. Loans have maximum guarantee set at BAM 50.000 (50%), repayment period is 60 months . Subsidizing Interest Rates Through the DGFBD of BiH the program of subsidizing a part of the interest rate on loans to companies and entrepreneurs in the Brcko District. In the Budget of the Brcko District of BiH BAM 1.800.000 are allocated annually for these purposes.