VAT and Income Tax in Bosnia and Herzegovina
Bosnia and Herzegovina has a unified VAT system at the state level, administered by the Indirect Taxation Authority (ITA/UIO). VAT was introduced in 2006 at a single rate. Income and profit taxes are regulated by entity-level bodies – the FBiH and RS have separate tax laws.
VAT in Bosnia and Herzegovina – single rate
Unlike EU countries, BiH applies a single VAT rate of 17% to all goods and services, with no reduced rates. The threshold for mandatory VAT registration is an annual turnover of 50,000 BAM. VAT is also levied on imports. The ITA registers all VAT payers and carries out audits. VAT revenues are distributed between the entities and the Brčko District according to a predetermined allocation key.
Income tax in the FBiH and RS
Personal income tax in the FBiH is 10% of total annual income (with certain deductions). In the Republika Srpska, personal income tax is 10% with special tax reliefs. Corporate income tax in both the FBiH and RS is 10%. Incentives exist for reinvesting profits and investing in specific sectors.
Tax administration and filing
VAT is filed with the ITA, while income and profit taxes are filed with the entity tax administrations (FBiH Tax Administration and RS Tax Administration). Companies must file annual tax returns and financial statements. Individuals with income not subject to automatic withholding (payroll tax and contributions) must file an annual return.
Frequently Asked Questions
Why does BiH have a single VAT rate of 17%?
When BiH introduced VAT in 2006, it chose a simpler single-rate model for easier administration and harmonisation between entities. EU directives permit reduced rates, but BiH as a non-EU country is not bound by those rules and maintains a unified system that facilitates control and reduces the risk of VAT fraud.
Is the income tax rate the same in the FBiH and RS?
Both entities have a rate of 10%, but they differ in deductions, reliefs and filing procedures. The RS has a simpler lump-sum system for certain categories, while the FBiH has more detailed regulations. Consultation with a local tax advisor is recommended.
Who supervises VAT in BiH and where is it filed?
VAT is supervised and collected by the Indirect Taxation Authority (ITA/UIO), headquartered in Banja Luka. VAT returns are submitted via the ITA portal. The entity tax administrations (FBiH and RS) separately manage income and profit taxes.