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Insights Value Added Tax (VAT) Guidelines: Bosnia and Herzegovina

Value Added Tax (VAT) Guidelines: Bosnia and Herzegovina

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published on 14 April 2022

 

 

This country summary is part of the comprehensive Focus on VAT Fellows: International Value Added Tax (VAT) Guidelines »



1. VAT Scope, VAT Rates and VAT Exemptions

Generally, the following supplies would be taxable in Bosnia and Herzegovina:
 
All forms of supplies of goods and services which will be provided by an entrepreneur within its business for a consideration made in Bosnia and Herzegovina, the import of goods in Bosnia and Herzegovina from a third country with customs clearance in Bosnia and Herzegovina. As Bosnia and Herzegovina is not a Member State of EU intra-Community rules do not apply.
 
Certain actions carried out for no consideration are deemed to be supplies: for example, the giving of business gifts and the private use of business assets.
 
Certain transactions are not subject to Bosnian VAT, for example, cash payments, the assumption of a debt as a form of payment and genuine compensation payments (damages), transfer of a business as a going concern, supplies within a VAT group or between the head office and a branch (exception: Only if head office and the branch are on the territory of Bosnia and Herzegovina).
 
The standard VAT rate is 17 percent, which apply to most supplies of goods and services.
 
There are some rules for VAT exemptions as well. It will be distinguished between VAT exemptions with input VAT recovery (so-called zero rated supplies) and VAT exemption without an input VAT deduction (exempt supplies):
  • Zero rated supplies, for example, are: exports from Bosnia and Herzegovina, supply, import, repair and main­tenance of ships and aircraft under certain conditions or supply, import of gold to central banks.
  • VAT exempt supplies without input VAT deduction, for example, are:    acquisition of real estate except for the first time, activities in the public interest (for example: Healthcare and education services) or insurance and financial services.
 
Entrepreneurs selling VAT exempt goods or providing VAT exempt services neither can charge VAT nor can de­duct the VAT paid on their purchases. In such cases input VAT is considered as costs of an entrepreneur.
 
As Bosnia and Herzegovina is not a member of EU, intra-Community rules are not in place so if a local business exports goods to a customer (business or private) does not need to charge VAT.
 
As a rule, supplies of services provided to a business for business purposes (so-called B2B services) are made where the recipient of the service is established. As an exception, if such services are provided to a fixed esta­blishment of the recipient, the place of such fixed establishment is the place of supply. 
 
As a further rule, the place of supply of services to customers/supplier who do not receive such services for their business (so-called B2C services) is where the business providing the services is established. As an excep­tion, if such services are provided from a fixed establishment of the business providing the service, the place of such fixed establishment is the place of supply.
 
Apart from these principal rules, there are special rules for certain types of services. In particular, these are the following:
  • Place of supply of services connected with land/immovable property is where the land is located
  • Place of short-term hiring of a means of transportation (short-term means an uninterrupted period of no more than 30 days, for example, for cars) is generally where the means of transportation is in fact made available to the customer
  • Place of supply of the following services is where the business providing the service physically carries out the service as cultural, artistic, scientific, educational, sporting, entertainment or similar services (including ticket sale) as well as services in the connection with fairs and exhibitions (including ticket sale), generally restaurant and catering services, valuations of and work on movable tangible property in the case of B2C services
 
The place of supply of services by an intermediary in the case of B2C services is the place where the underlying transaction is supplied.

 

2. VAT registration and simplifications

Registration is compulsory if the business entity performs or intends to perform taxable activities in Bosnia and Herzegovina. The threshold for VAT registration is BAM 50,000 (approx. EUR 25,000). A company may register voluntarily if the threshold is not met. Once entering into the VAT system, a taxpayer cannot opt out for 5 years.
 
The registration rules which apply to Bosnian entities also apply to non-Bosnian entities providing taxable supplies in Bosnia. Fiscal representation is possible for foreign taxable persons who want to recover Bosnian input VAT.
 
There are no some simplification rules.
 
An oversee company does not need to appoint a fiscal representative but they can.
 
Rödl & Partner with their partner in Bosnia and Herzegovina also provides VAT compliance/declaration services for foreign companies which are obliged to register for VAT in Bosnia and Herzegovina. 

 

3. Declaration requirements and penalty regime

The VAT calculation period is a calendar month. VAT taxpayers are obliged to submit the return and pay VAT within the period from the 1st to the 10th of the month following the expiry of tax period. The difference be­tween total amount of output and input VAT calculated in tax period represents the amount of VAT liability for payment or the amount of VAT refund.
 
Non-compliance with the obligation to properly file VAT return may result in a penalty of up to BAM 300 (approx. EUR 150). Furthermore late-filing penalties are possible.
 
There are no penalties for failing to register for VAT in time. However, a business may incur late-payment or penalties (50 percent of unpaid amount of VAT), late-filing penalties (up to the BAM 10,000) and interest on any outstanding VAT.
 
The Bosnian tax law does not involve any reasonable excuses, but penalties could be avoided as an exception and via application if the individual circumstances lead to that.
 

4. VAT recovery

If a business is registered for VAT purposes in Bosnia and Herzegovina it is possible to declare and deduct Bosnian input VAT within the VAT return on the regular tax procedure under further preconditions.
 
It is also possible to recover Bosnian input VAT if the entrepreneur is not registered for VAT purposes in Bosnia and Herzegovina or have its domicile, registered office, place of management or permanent (fixed) establishment outside of Bosnia and Herzegovina.
 
There are certain items that a business cannot recover input VAT on. For example:
  • Exempt supplies (without credit): VAT relating to both taxable and exempt supplies must be apportioned
  • Non-business (including private) activities: Where VAT relates to both business and non-business activities, VAT is not recoverable
  • Business entertainment: VAT on gifts in excess of BAM 20 (approx. EUR 10) per recipient to non-employees, per year is not recoverable
  • Expenses: VAT can be recovered only if charged to a taxable person in relation to its business. Where invoi­ces and bills are addressed to an employee, the VAT is not deductible.
 
Input VAT on certain employee expenses:
  • Domestic air travel: Yes, if the trip is undertaken in connection with the employer’s business.
  • International air travel: Not applicable. Expenses incurred on international flights do not incur Bosnian VAT.
  • Rail travel: Yes, if the trip is undertaken in connection with the employer’s business.
  • Taxi fares: No – due to the obvious reason – most of taxi drivers are out of VAT system.
  • Car rental: Yes, if the rented car is used for business purposes.
  • Fuel: In general no, except in cases for example where the business of VAT payer is transportation.
  • Car parking: No. The parking expenses are not recoverable.
  • Hotel: Yes, if accommodation relates to the taxable business carried on by an employer.

 

5. Invoicing

There are formal invoicing requirements according to the Bosnian VAT Act for the right to deduct Bosnian input VAT.  
 
For certain exempt services (such as, services in the banking or insurance sector) there is no obligation to issue invoices from a VAT point of view.
 
If invoices do not content all of the necessary requirements or if some indications are not correct it is possible to amend these invoices via different ways, for example via cancellation and new issuing or amendment with an additional document and respective references to the original invoices.
 
An electronic submission of invoices (e.g. via email, computer fax) is generally possible, but hard copy is still preferred. The submission of invoices from a standard fax to a standard fax or from a computer fax/fax server to a standard fax is considered as a paper-based invoice.
 
Credit notes are acceptable in some cases (return of the goods, discounts). To operate via self-billing is not possible.
 

6. Others

VAT grouping is obligatory if there are specific financial, economic and organizational links between companies. In that case there is only one taxable person according to VAT law.

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Comprehensive VAT Guidelines for key international markets »

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