The country´s legislation is open to Foreign Direct Investments with very few restrictions and foreign investors that enter the country intend to stay and reinvest. The main investment partners’ countries have strong historical and economic ties to Bosnia and Herzegovina, and have learned to navigate the administrative hurdles.
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:
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%.