Bosnia and Herzegovina - Overview and introduction

Bosnia and Herzegovina - Overview

Taxation of international executives

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In order to understand the origin/basis of the tax systems in Bosnia and Herzegovina (BiH), reference must be made to the Dayton Agreement (Dayton) of 1995.

Dayton established a Constitution for BiH, a Constitution for the Entities – the Federation of BiH (FBiH) and the Republic of Srpska (RS); subsequently the Brcko District was created as a third Entity (as this Entity is quite small it is not further discussed). Consequently, taxation systems, rates, and so on, vary between the three entities in BiH and BiH itself.

The capital of BiH is Sarajevo, which is in the FBiH.

The FBiH itself consists ten cantons: of Unsko-sanski Canton, Posavski Canton, Tuzlanski Canton, Zenicko-dobojski Canton, Bosansko-podrinjski Canton, Srednjobosanski Canton, Hercegovacko-neretvanski Canton, Zapadnohercegovacki Canton, Canton 10, and Sarajevo Canton (SC).

Personal income tax (PIT) is regulated at the entities' level.

Generally, both entities (the FBiH and the RS) exercise the source rule to their residents and non-residents (each entity exercises the right to tax all individuals, whether resident in that entity or not, on income arising in that entity), while residents are also taxed under the residence rule (residents are taxed on income that arises outside that specific entity). 

In order to work in BiH, a foreign citizen must have a work permit. Work permits are based on employment in BiH and therefore upon issuance of a work permit a foreign citizen must enter into a labor agreement with a local (that is BiH) company. This applies to both entities.

Issuance of work permits in both entities is subject to quotas (i.e. Governments of respective entities prescribe on annual level a specific number of available new work permits that may be issued per specific sector of industry). Please note that there are some exemptions from the quota system: most importantly, the issuance of work permits for directors and key personnel of companies in BiH does not fall under the quota system. However, directors and key personnel still need to enter into a labour agreement with a local (BiH) company.

The official currency of Bosnia and Herzegovina is the Convertible Mark (BAM).

Herein, the host country refers to the country where the expatriate is going on assignment. The home country refers to the country where the expatriate lives when he/she is not on assignment.

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