Legal and tax toolbox

Protected investments

The state-level Law on the Policy of Foreign Direct Investment accords national treatment of foreign investors, i.e., foreign investors have the same rights as domestic investors.

The granted rights and benefits of foreign investors, imposed by the respective law, cannot be terminated or overruled by subsequently passed laws and regulations. If any subsequently passed laws and regulations are more favourable for the foreign investors, the investors have the right to choose under which regime the respective foreign investment to be governed.

With the exception of the defence industry and certain elements of the media sector, where foreign control is limited to 49 percent of a single company, there are no restrictions on foreign investment. Furthermore the Bosnia and Herzegovina government does not screen or review foreign direct investments, except in the cases of privatization in order to ensure the privatization contract has been meet. If the privatization contract commitments are not fulfilled, the government retains the right to cancel the privatization contract.

Incentives for investors

There are several incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees. In general the Federation and the Republic of Srpska the corporate income tax allows offsetting of losses against profits over a five-year period. Foreign investors can open bank accounts in all jurisdictions and transfer their profits abroad, without any restrictions. 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). In addition, both entities stipulate additional incentives.

In the Federation of BiH the 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.

In the Republic of Srpska a taxpayer who in the territory of the Republic of Srpska invests in equipment, facilities and real estate for carrying out production activities in the amount of more than 50% of realized profit (the tax base) for current tax period, the income tax liability shall be reduced by of 30%.

Investment guarantees

• Foreign investors are entitled to open accounts in any commercial bank in domestic or any freely convertible currency on the territory of Bosnia and Herzegovina. Foreign investors are entitled to freely employ foreign nationals, subject to the labour and immigration laws in Bosnia and Herzegovina;
• 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. Foreign investors may own real estate in Bosnia and Herzegovina and have the same property rights with respect to real estate as any legal entity of Bosnia and Herzegovina;
• Foreign investors are entitled to transfer abroad, freely and without delay, in freely convertible currency, any proceeds resulting from their investment in Bosnia and Herzegovina;
• There are no restrictions on management of companies with foreign capital. The founder selects the management him/herself. Equipment being imported as a part of share capital is exempt from paying customs duties (this exemption does not refer to passenger vehicles, slot and gambling machines).