In the last twelve months, Bosnia and Herzegovina amended the rules on combat against money laundering and published new rulebooks on transfer pricing and indirect tax control, writes Dajana Topic of Eurofast Global. The Republic of Srpska (RS) amended its profit tax law, while the Federation of Bosnia and Herzegovina introduced a law on financial operations.
The Council of Ministers of Bosnia and Herzegovina adopted the rulebook on application of the Law on Preventing Money Laundering and Terrorist Financing (the Law), which entered into force on May 29 2015.
A year later, on 29 June 2016, certain amendments to this Law entered into force. The amendments relate to the Indirect Taxation Authority (ITA), which controls the carrying of cash, securities, travellers cheques and other cash equivalents when entering or exiting the country and executes their temporary seizure in cases when money laundering or terrorist financing is suspected.
The Law sets out criteria for the collection of data necessary for identifying clients and transactions that must be reported to the State Investigation and Protection Agency (SIPA).
The effective dates for introduction of the initial transfer pricing rules were, for FBiH, January 1 2008 and, for RS, January 1 2007, although TP rules were not fully developed. The nearest step towards approaching the OECD rules was made in early 2016, with the adoption of new laws in the field of taxation for legal entities in BiH.
A new Rulebook was introduced on August 26 2016, published in the Official Gazette of FBiH no, 67/16. Provisions of the Rulebook can be divided in two parts:
The governing board of the ITA adopted amendments to the Rulebook on the Limited Control of Indirect Taxes at the 12th session, held on September 2 2016.
This Regulation entered into force on September 21 2016, eight days after its publication in the "Official Gazette" of BiH No. 68/16.
The main changes relate to the modification of tax control procedures, a new organisational structure and competences of the tax ivision of the ITA. In addition, the Rulebook provides for detailed clarification of limited tax control procedures.
The National Assembly of the Republic of Srpska adopted amendments to the profit tax law on December 28 2016. The main changes have become effective as of January 1 2017. With the amendments, the law clarifies the definition of a "taxable person" and harmonises the concept of residence with the profit tax law of the FBiH and Brcko District in order to avoid double taxation. Namely, a company is considered resident in BiH if it is registered as a legal entity there. An entity has a taxable presence in BiH if it carries out business activities in the jurisdiction that meet the criteria for a permanent establishment.
The Law on financial business activities in FBiH was published in the Official Gazette of FBiH No. 48/16 in June 2016, and it became effective as of December 30 2016.
The Law is the result of harmonisation of FBiH's legislation with the EU directives on combating late payments. The main purpose of the Law, however, is to attempt to protect and upgrade the position of small and medium-sized companies acting as creditors in financial transactions, by reducing the lack of liquidity of debtors. Deadlines for fulfilling financial obligations between taxpayers and public entities are also regulated by this Law, as are the consequences of missing those deadlines and the obligations of entrepreneurs in the event of lack of liquidity.
The Law applies to contracts concluded after the Law entered into force and to business transactions carried out after December 30 2016.
|Corporate Income Tax||10%|
|Capital Gains Tax||10%||A|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||10%||C|
|Branch Remittance Tax||0%||N/A|
A) Capital gains are generally taxed as a part of profits.
B) Dividend tax rate paid from Federation B&H to non-residents unless the rate is reduced or exempted under a double tax treaty (DTT). As of January 1 2016 dividends are subject to taxation in Republic of Srpska at a 5% rate, unless otherwise prescribed by DTT. Dividends are not subject of taxation in the District of Brcko.
C) Tax rate for interest and royalties paid to nonresidents unless the rate is reduced or exempted under DTT.
D) Capital losses can be carried forward for five years against capital gains.
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