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

The Law on Economic Incentives of the Republic of Srpska (“Official Gazette of the Republic of Srpska”, No. 107/24) provides for incentive funds aimed at economic development.

 

1.      Incentives for Investments of Special Importance

According to the currently valid Regulation on the Procedure for Awarding Incentives for Investments of Special Importance (“Official Gazette of the Republic of Srpska”, Nos. 87/22, 56/23), such investments refer to projects that achieve the following:

1.      Employment of at least 100 workers or investments of at least 10,000,000 BAM in tangible and intangible assets in developed and moderately developed local self-government units.

2.      Employment of at least 50 workers or investments of at least 5,000,000 BAM in tangible and intangible assets in underdeveloped and severely underdeveloped local self-government units.

3.       

Applications for incentives can be submitted year-round to the Ministry of Economy and Entrepreneurship. Besides the investment amount and/or number of employees, the applicant must meet additional criteria: the average wage at the economic entity during the entire project must be equal to or higher than the average wage in the Republic of Srpska for the previous year; the equipment being procured must be mostly new or no older than 3 years; the investor must have an appropriate credit rating; and the project must positively impact local community development and the Republic of Srpska’s economy (e.g., cooperation with the education system, employing as many local suppliers as possible, etc.).

Incentives granted under this category include reimbursement of taxes and contributions on newly employed workers (up to 24 months) and up to 30% of eligible investments in tangible assets.

 

2.      Incentives for Increasing Employees’ Salaries

 

In accordance with the Regulation on Awarding Incentives for Increasing Employees’ Salaries (“Official Gazette of the Republic of Srpska”, No. 4/25), incentives for salary increases apply to part of the funds based on higher paid contributions resulting from increased employee salaries during the accounting period. (Certain activity categories are excluded from eligibility.)
If an economic entity meets the general and specific conditions outlined in the Regulation, it is entitled to an incentive calculated individually per employee, equal to 70% of the higher paid contributions on the salary increase during the accounting period compared to the contributions paid on the initial salary amount. The incentive per employee cannot exceed 1,000 BAM in the accounting period.

 

3.      Incentives for Investments (for technological advancement and transition to green and circular economy)

 

This type of incentive is regulated by the Regulation on Awarding Investment Incentives (“Official Gazette of the Republic of Srpska”, 16/25). The minimum value of investments by an economic entity is 50,000 BAM excluding VAT, and the total amount that one economic entity can receive over three years is limited by the allowed “de minimis” aid threshold.

 

Tax Incentives

The Corporate Income Tax Law of the Republic of Srpska (“Official Gazette of the Republic of Srpska”, Nos. 94/15, 1/17, 58/19, 48/24) stipulates that taxpayers investing in equipment and facilities for performing registered manufacturing activities in the Republic of Srpska have the right to reduce their tax base by the value of the investment.
The Personal Income Tax Law (“Official Gazette of the Republic of Srpska”, Nos. 60/15, 5/16, 66/18, 105/19, 49/21, 56/22, 112/23, and 110/24) contains favorable provisions for investors, including the abolition of dividend tax.

 

Exemption from Import Duties

Article 207 of the Customs Policy Law in Bosnia and Herzegovina (“Official Gazette of BiH”, No. 58/15) regulates exemptions from import and export duties.

Import duty exemptions apply to:

·         Equipment imported for investment purposes by foreign entities, except passenger vehicles, amusement machines, and gambling devices;

·         Production equipment imported for new or expanded production, modernization of production, introduction of new or modernization of existing production technology, used directly in manufacturing activities;

·         Production means and other equipment belonging to companies ceasing their activity in another country and relocating to Bosnia and Herzegovina to conduct similar activities.

 

Employment Incentives by the Employment Service

The Employment Service of the Republic of Srpska implements various employment programs in accordance with the Employment Strategy of the Republic of Srpska 2021-2027. The Government annually adopts employment action plans based on the strategy. The 2025 action plan has yet to be adopted but is expected to focus on employment in the economy and private sector and on difficult-to-employ and vulnerable categories.
The 2025 Republic of Srpska budget allocates 10 million BAM to the Employment Service for employment programs in the economy (5 million BAM) and employment and self-employment of vulnerable groups and labor market improvement (5 million BAM).

More information: https://zzzrs.net/

 

Ministry of Economy and Entrepreneurship Incentives

More information: https://vladars.rs/sr-SP-Cyrl/Vlada/Ministarstva/mpp/Pages/default.aspx

 

 

 

 

 

 

Ministry of Agriculture, Forestry and Water Management Incentives

Each year, the Ministry issues a Rulebook on Conditions and Procedures for Granting Cash Incentives for Capital Investments in Agricultural Production, which regulates eligibility, application procedures, types, amounts, and methods of payment, obligations of recipients, deadlines, and required documentation. Funds are allocated through public calls managed by the Agricultural Payments Agency of the Republic of Srpska.
The Agency also distributes annual incentives for agricultural development and rural areas based on specific regulations.

More information: https://vladars.rs/sr-SP-Cyrl/Vlada/Ministarstva/mps/Pages/default.aspx
                                         https://vladars.rs/sr-SP-Cyrl/Vlada/agencije/aap/Pages/default.aspx

 

Ministry of Energy and Mining Incentives

More information: https://vladars.rs/sr-SP-Cyrl/Vlada/Ministarstva/mper/Pages/default.aspx

 

Guarantee Fund of the Republic of Srpska

Established to facilitate access to financial resources by issuing guarantees to economic entities for project realization. Applications can be submitted directly or via commercial banks.

More information: https://garantnifondrs.org/

 

Environmental Protection and Energy Efficiency Fund of the Republic of Srpska

Annually publishes open calls for environmental protection projects, co-financing programs in environmental protection, energy efficiency, and renewable energy sources.
More information: https://ekofondrs.org/

 

Investment-Development Bank of the Republic of Srpska

Offers credit lines including start-up business loans, micro-enterprise loans in agriculture, loans for entrepreneurs and companies, agricultural loans, and support and recovery loans for micro, small, and medium enterprises.

More information: https://irbrs.org/

 

Register of Incentives of the Republic of Srpska

An electronic database of economic incentives awarded at both the republic and local levels. The register aims to improve coordination and information exchange between institutions, provide public access to available incentives, and serve as a reliable statistical base for government bodies. Institutions responsible for granting incentives input their data, while the Ministry of Economy and Entrepreneurship administers the register in accordance with the Law on Economic Incentives of the Republic of Srpska and the Regulation on the Register of Incentives.

More information: https://regpodsticaja.vladars.rs/home/o-registru

 

Besides republic-level incentives, numerous local incentives exist, varying by municipality or city (e.g., favorable land prices in industrial zones, exemption from land development fees in zones, reduced land development costs, advisory services, etc.).

 

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.