FIPA - BiH FAQ

FREQUENTLY
ASKED
QUESTIONS
3
FAQ Contents
1. BOSNIA AND HERZEGOVINA AT A GLANCE...................................................10
2. FIPA SUPPORT....................................................................................................11
o What is FIPA?.................................................................................................11
o What can FIPA do for you?.............................................................................11
o What are FIPA activities?................................................................................11
3. INVESTING IN B&H .............................................................................................13

o Why would a company choose B&H as a location for investing?....................13
Legal Framework.....................................................................................................13
o What are the basic laws and regulations encouraging
foreign investors to invest in B&H?.................................................................13
Status of Foreign Investors....................................................................................14
o What is the status of foreign investors?..........................................................14
o What is the status of foreign citizens?.............................................................14
Incentives.................................................................................................................14
o What general incentives does B&H offer to foreign investors? ......................14
o Are there any customs incentives?.................................................................15
o Has B&H signed Agreements on Protection of Investments
and with which countries?...............................................................................16
o Who will insure my investment in B&H?..........................................................16
4. B&H ECONOMY (INDICATORS) ........................................................................17

Banking....................................................................................................................17
o What is the current situation in the banking sector of B&H?...........................17
o How many international banks are currently present in
the B&H market?.............................................................................................17
o What are interest rates of commercial banks?................................................18
o What is the international credit rating of B&H?................................................18
o Which accounting and auditing standards must be met
by business operators in B&H?.......................................................................19
o What is the exchange rate policy in B&H?......................................................19
Statistics..................................................................................................................19
o What is the recent GDP trend?.......................................................................19
o What is the annual inflation rate in B&H?........................................................20
o What is the industrial production growth rate?................................................20
Stock Exchange.......................................................................................................20
o How many stock exchanges operate on the capital market?..........................20
FDI statisctics..........................................................................................................21
o What is the amount of the FDI recorded in the past few yeras?.....................21
o FDI by sectors?...............................................................................................21
Top investors...........................................................................................................22
o Who are the top foreign investors in B&H?.....................................................22
4
5. SETTING UP BUSINESS.....................................................................................23
Types of Companies...............................................................................................23
o What types of companies are permitted by the B&H law?..............................23
Steps for Establishing Company...........................................................................23
o How long does it take to register a business?.................................................24
o What are the costs of registering a business?................................................24
o Can a foreign investor have a branch office in B&H?......................................25
6. TAX REGIME........................................................................................................25
Corporate Income Tax............................................................................................25
o What is the corporate income tax rate?...........................................................25
o Which items are included in the corporate income tax base?.........................25
Personal Income Tax..............................................................................................26
o What are the personal income tax rates?........................................................26
Real Estate Transfer Tax........................................................................................26
o What are Real Estate Tax Rates and Property Transefr Tax Rate? ..............26
Value Added Tax.....................................................................................................27
o What is the Value Added Tax rate?.................................................................27
Double Taxation Treaties........................................................................................27
o With which countries has B&H signed Double Taxation Treaties?.................27
Depreciation, Accelerated Depreciation...............................................................27
o Do taxpayers have the right to apply accelerated depreciation?.....................27
o Which methods are used to calculate the depreciation
rates of fixed assets? .....................................................................................28
Excises.....................................................................................................................29
o What are excises?...........................................................................................29
Tax Incentives..........................................................................................................29
o What are tax incentives in B&H?.....................................................................29
o Are profits transferred abroad taxed in B&H?.................................................29
Other Taxes..............................................................................................................30
o What is the withholding tax regulation? ..........................................................30
Social Security Contributions................................................................................31
7. OPPORTUNITIES FOR INVESTMENT................................................................32

Privatization ............................................................................................................32
o How is the privatization process regulated in B&H?........................................32
o How is the privatization process managed in B&H?........................................32
o Who can be a buyer in the privatization process?...........................................32
o Which methods of privatization are used?......................................................32
o What payment instruments are used in the privatization procedure?................33
o What is the process of restructuring?..............................................................33
o What results have been achieved in privatization so far?...............................33
Bankruptcy...............................................................................................................33
Concessions............................................................................................................33
o What are concessions?...................................................................................33
o What is the procedure of obtaining approval for a concession? .....................34
o What is the duration of a concession contract?...............................................34
o Which rights do concessionaires enjoy?.........................................................34
o What are the concessionaires’ obligations?....................................................34
5
8. LAND/REAL ESTATE...........................................................................................35
o Can foreign investors acquire property in B&H?.............................................35
o What is the procedure of buying land by a foreign investor?..........................35
o Where can I insure my property?....................................................................35
o Can I rent out my property in B&H?................................................................35
o What is the price of buying or leasing office space?.......................................36
o What is the price of land?................................................................................36
o What is the price of leasing or buying workshop
(production building)?......................................................................................36
9. FOREIGN TRADE.................................................................................................37
Customs Rates........................................................................................................37
o How are imports customs regulated?..............................................................37
o Which products can be imported duty free?....................................................37
o Are there any special import restrictions on equipment
that is part of foreign investment?...................................................................38
Trade Structure........................................................................................................38
o Which goods dominate B&H exports and imports?.........................................38
o Which countries are B&H’s major foreign trade partners?..............................38
Free Zones...............................................................................................................39
o What are Free Zones?....................................................................................39
o Are there any benefits of doing business in Free Zones?...............................39
o What is the time period of land and facilities rentals
to Free Zone users?........................................................................................39
Free Trade Agreements..........................................................................................39

o Which countries have signed the Free Trade Agreement with B&H?.............39
o Does B&H have preferences to export to other countries?.............................40
10. EMPLOYMENT...............................................................................................41
Employment Relations............................................................................................41
o Labor force......................................................................................................41
o How is the local labor force structured by activities?.......................................41
o What is the unemployment rate in B&H?........................................................42
o Which employment types are stipulated by the law?......................................42
o How can we employ a worker?.......................................................................42
o How can we terminate employment?..............................................................42
o Is it possible to conclude a part time work contract?.......................................43
o Can the employer hire trainees or volunteers?...............................................43
Work and Residence Permits for Foreigners.......................................................43
o How can foreigners obtain residence permits?...............................................43
o How can foreigners obtain work permits?.......................................................44
Collective Contracts................................................................................................44
o What are the collective contracts and what do they cover?............................44
o Is the employer obliged to conclude a collective contract?.............................44
Working Hours and Overtime Work.......................................................................45
o What are full time working hours? ..................................................................45
o Are overtime working hours limited?...............................................................45
6
Annual Leave, Public Holidays..............................................................................45
o What is the minimum annual leave?...............................................................45
o How long can a maternity leave last in B&H?.................................................45
Minimum Wages......................................................................................................45
o Is there a minimum wage?..............................................................................45
o In which cases are employees entitled to increased salaries?........................46
11. WORKFORCE AND EDUCATION.................................................................46

Educational System................................................................................................46
o How is the educational system organized in B&H?.........................................46
o What is the educational structure of unemployed population?........................46
o What is the annual number of graduated students over the years?................47
Number of Universities and Students...................................................................47
o How many educational institutions are there in B&H? ...................................47
o How many students are there in B&H? ..........................................................47
o Is B&H participating in the Bologna Process?.................................................47
o Are there any foreign schools?........................................................................47
12. INFRASTRUCTURE.......................................................................................49
Road and Railway Network....................................................................................49
o What is the total road network in B&H?...........................................................49
o What is the railway transportation potential?...................................................49
Airports.....................................................................................................................49
o How many airports exist in B&H and what is
the connectivity of Sarajevo Airport?...............................................................49
River Transport........................................................................................................50
o What are the possibilities for river transportation in B&H?..............................50
Fixed and Mobile Telephony..................................................................................50
o What is the fixed telephony infrastructure?.....................................................50
o What is the number and coverage of mobile telephony operators?................50
o Is the fixed telecommunication network digitalized and how many operators are
there?...................................................................................................................51
o What is the penetration of the mobile telecommunication network?...............51
Internet.....................................................................................................................51
o What is the Internet availability and infrastructure?.........................................51
o How many internet users are there in B&H?...................................................52
o What are the possibilities of internet access?.................................................52
13. OPERATIONAL COSTS ..................................................................... 54

o What is the price of electricity in B&H?...........................................................54
o What is the price of gas in B&H?.....................................................................55
o What are the costs of telephone?....................................................................55
o What are the prices of water in B&H?.............................................................56
o What is the quality of water in B&H?...............................................................56
7
8
9
Frequently Asked Questions
1. BOSNIA AND HERZEGOVINA AT A GLANCE

Bosnia and Herzegovina (locally Bosna i Hercegovina, most
Official name:
commonly abbreviated as B&H)
Capital city: Sarajevo (population 500.000)
Other major cities: Banja Luka, B&Hać, Mostar, Tuzla, Zenica
Geographic South Eastern Europe, borders with Croatia (932km), Serbia
location: (312km) and Montenegro (215km).
Area: 51.209 km2
Population: 3.50 million
Muslim (44%), Orthodox Christian (32%), Roman Catholic
Religions:
(17%), others (7%)
Ethnic groups: Bosniaks, Serbs, Croats and others
Languages: Bosnian, Serbian, Croatian (all official)
Administrative Two entities (Federation of B&H and Republic of Srpska) and
organization: Brcko district of B&H
B&H is a parliamentary democracy with a bicameral parliament
Government (House of Representatives and House of Peoples), a three-
Structure: member rotating presidency, a Council of Ministers, and
Constitutional Court.
GDP: 18.0 billion EUR (2019)
GDP per capita: 5,168 EUR (2019)
Currency: Konvertibilna Marka (BAM-official; KM-common use)
Exchange rate: 1 EUR = KM 1.95 (fixed exchange rate)
A very hilly country with the Dinaric Alps dominating
the landscape. The highest point, Mt. Maglić, rises to 2,387 m.
Thick forests cover almost 50% of the land. In the north, along
Landforms:
the Sava River valley, a hilly, fertile plain stretches east to west.
The country has 23 km of coastline in the southwest of the
country, providing access to the Adriatic Sea.
Winters can be very cold with a lot of snow, especially in the hills
Climate: and mountains. Summers are generally warm and comfortable,
occasionally hot. Cooler temperatures in higher elevations.
Latitude/longitude: 44˚ N, 18˚ E
Time zone: CET (GMT + 1 hour)
Internet domain: .ba
Int. telephone ode: +387
10
Foreign Investment Promotion Agency of Bosnia and Herzegovina
2. FIPA SUPPORT
o What is FIPA?
Foreign Investment Promotion Agency in B&H is a state agency with the main
objective of promoting B&H, creating a more conducive business environment,
retaining the existing foreign investment, as well as FDI policy advocacy.
o What can FIPA do for you?
FIPA helps you seize business opportunities in B&H by:

• Servicing potential and existing investors, especially in administrative
matters
• Legal advice for foreign investors
• Providing all information related to B&H business environment
• Investor after-care
• Policy advocacy
• Analysis and presentation of attractive sectors for foreign investments
o What are FIPA activities?
• Generating new investments by promoting B&H as an attractive location

for foreign investment
• Servicing potential and existing investors
• Providing of all information related to B&H business environment
to potential and existing investors, especially those about available
investment project and companies in privatization process
• Offering legal advice for foreign investors (FDI regulations, land
ownership, taxation, employment, etc.)
• Corporate development support to foreign investors – investor’s after-
care (general services in post-investment phase, e.g. support in project
implementation, co-operation with domestic private sector, etc.)
• Improving the business environment by identifying the main legal barriers
to FDI, creating recommendations for their removal and taking part in
their implementation. To carry out this activity FIPA cooperates with the
Council of Ministers, Entity governments, Brcko district, Cantons and
Municipalities, as well as with all other relevant organizations in B&H
(Foreign Investors Council, international organizations and institutions,
foreign trade associations, privatization agencies, chambers of commerce,
private business associations and private and public companies)
• Analysis and presentation of attractive sectors for foreign investments
such as: Agriculture, food processing, tourism, wood processing and
furniture production, energy (production of electricity), metal processing,
11
organic food and pure water, construction, textile, auto-components,

ICT sector, etc.
• Cooperation with B&H Ministry of Foreign Affairs, diplomatic-consular
networks and diaspora on FDI promotion abroad
• Work on creating presentations and producing materials essential for
FIPA activities abroad. FIPA website contains all relevant information
about foreign direct investment in B&H
• Publishing a monthly “FIPA Newsletter” (business and investment news)
• Creating and maintaining of investment projects and available locations
data bases, etc.
12
3. INVESTING IN B&H
o Why would a company choose B&H as a location for
investing?
There are many reasons for investing in B&H, such as:

• Stable financial sector
• Excellent geographical location
• Favorable Trade and other Agreements
• Favorable Tax and Customs System
• Availability of skilled, educated, competitively priced and multilingual
labor force that is familiar with international business
• Abundance of premises and sites, industrial zones, free trade zones
• B&H can be a successful platform to export to a market of app. 600
million people without customs duties.
Legal Framework
o What are the basic laws and regulations encouraging foreign

investors to invest in B&H?
The main laws and regulations include three basic laws encouraging foreign
investors:
• Law on the Policy of Foreign Direct Investment of B&H
• Law on Foreign Investment of FB&H
• Law on Foreign Investment of RS
Other Laws and Regulations which encourage foreign investors to invest in B&H:
• Law on Value Added Tax of B&H
• Law on Corporate Income Tax of FB&H
• Law on Corporate Income Tax of RS
• Framework Law on Registration of Business Entities in B&H
• Law on Registration of Business Entities of FB&H
• Law on Registration of Business Entities of RS
• Customs Tariff of B&H
• Customs Policy Law of B&H
• Decision on Implemental Regulations of the Customs Policy Law of
B&H
• Decision on Harmonizing and Establishing Customs Tariffs of B&H
13
Status of Foreign Investors
o What is the status of foreign investors?
Regarding his investment the foreign investor enjoys equal status, rights and
duties, as any domestic legal person. A foreign investor enjoys full legal security
and legal protection in respect of rights acquired by virtue of the investment.
Rights of foreign investor acquired in the moment of the business registration cannot
be deteriorated by subsequent alteration of laws and other regulations.
Company with foreign investment enjoys equal legal status and carries on its business
under equal conditions and in an equal manner as do domestic companies.
o What is the status of foreign citizens?
Foreign citizens in B&H shall exercise the same rights and freedoms as citizens
of B&H exercise in the country of the foreign citizen.
Incentives
o What incentives does B&H offer to foreign investors?
According to the Law on the Policy of Foreign Direct Investments of B&H, many
incentives are offered to foreign investors, such as:
• National treatment of foreign investors, i.e., foreign investors have the

same rights and obligations as residents of B&H;
• Foreign investors are entitled to open accounts in any commercial bank in
domestic and/or any freely convertible currency on the territory of B&H;
• Foreign investors are entitled to freely employ foreign nationals, subject
to the labor and immigration laws in B&H;
• 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;
• Equipment being imported as part of share capital is exempt from paying
customs duties (with the exception of passenger cars, slot and gambling
machines);
• The rights and benefits of foreign investors granted and obligations
imposed by the Law (mentioned above) cannot be terminated or
14
overruled by subsequent laws and regulations. Should a subsequent

law or regulation be more favorable to foreign investor, the investor will
have the right to choose the regime by which the investment will be
regulated.
• Foreign investors may own real estate in B&H. Foreign investors enjoy
the same property rights in respect to real estate as B&H legal entities.
• Foreign investors are entitled to transfer abroad, freely and without delay,
in convertible currency, proceeds resulting from their investment in B&H.
• Free trade zones in B&H are part of the customs territory of B&H and
have status of legal entity. According to the Law on Free Trade Zones of
B&H, free trade zone founders may be one or more domestic and foreign
legal entities or natural persons and establishment must be economically
justified (the free zone establishment is considered economically justified
if the submitted feasibility study and other evidence can prove that the
value of goods exported from a free zone will exceed at least 50% of
the total value of manufactured goods leaving the free zone within the
period of 12 months). The users of free zone do not pay VAT and import
customs. Investment in the free zone, transfer of profit and transfer of
investment are free of charge.
• Incentives related to the taxes, customs, employment etc. are mentioned
in the other relevant parts of the brochure.
o Are there any customs incentives?
Equipment being imported as part of share capital is exempt from paying customs
duties. This exemption does not refer to passenger vehicles, slot and gambling
machines. In order to enjoy this benefit, the foreign investor should submit a
written request for exemption from paying import duties to the competent
customs authority (according to the place of seat of the company) along with the
following documents:
• contract or other relevant document about the investment on the basis
of which the equipment is being imported,
• proof of registration of the investment at the competent authority,
• specification of equipment with tariff number, tariff mark (with quantity
indication), single and total value, certified by the investor,
• statement of the investor that the equipment is not older than 10 year
age limit,
• certificate of the competent institution confirming that the imported
equipment complies with the environmental and employment protection
standards.
The Customs Office issues a decision within 15 days upon submission of the
request.
15
o Has B&H signed Agreements on Protection of Investments

and with which countries?
Bosnia and Herzegovina has Agreements on Promotion and Protection of

Investments with the following countries:
Belgium and
Albania Austria Belarus Canada China
Luxemburg
Czech
Croatia Denmark Egypt Finland France
Republic
Germany Greece Hungary USA-DFC Iran Italy
Jordan Kuwait Lithuania Macedonia Malaysia Moldova
Netherlands OPEC Fund Pakistan Portugal Qatar Romania
San Marino Serbia Slovakia Slovenia Spain Switzerland
United
Sweden Turkey Ukraine
Kingdom
o Who will insure my investment in B&H?
Foreign investors can insure their investment with the European Union
Investment Guarantee Trust Fund for Bosnia and Herzegovina, administered
by the Multilateral Investment Guarantee Agency (MIGA, member of the World
Bank Group). Also, insurance is possible through insurance (international and
domestic) companies existing in B&H.
16
4. B&H ECONOMY (INDICATORS)

Banking
o What is the current situation in the banking sector of B&H?
After the implementation of the new monetary policy by the Central Bank in 1997
and the market entry of foreign banks, the financial sector - in which the banking
sector dominates - experienced a stabilization and consolidation process. The
consolidation process of the banking sector came mainly on the back of foreign
direct investments through the acquisition of private - or already privatised -
banks. In addition to the acquisition of existing banks, foreign strategic investors
undertook sizeable greenfield investments in the banking sector. Number of
banks has decreased compared to pevious period. At the beginning of 2020 there
are 23 commercial banks. Only one bank in B&H is majority state-owned and
22 banks are predominantly privately owned with majority of foreign ownership.
The stability of the banking sector in B&H has been maintained over a period
of time. The banking legislation are recently adopted by the entities in the aim
to strengthen and harmonize framework for banking operations in the country.
The total deposits at the end of 2019 amounted to 12.2 billion EUR and increased
by 9.5% y-o-y. Growth of deposits was achieved in all sectors. Confidence of
population in the banking sector has been preserved, so households deposits
have reached the highest level in 2019 (6.8 billion EUR) keeping the largest
share in total deposits with commercial banks (55.6% at the end of 2019).
Credit activities were recorded a slight increase of 6.6% in last year. Total loans
at the end of 2020 amounted to 10.62 billion EUR.. The liquidity, profitability and
capitalisation of the banking sector can be assessed as satisfactory, and it can
thus be concluded that the banking sector continues to be stable and safe.
o How many international banks are currently present in the B&H

market?
Many international banks have set up branch banks in B&H including: Addiko
Bank AG, Dubai Islamic Bank, Islamic Development Bank, Komercijalna
banka, NLB Group, Privredna banka Zagreb d.d. (takeover from Intesa
Sanpaolo Group), ProCredit Holding, Raiffeisen Bank International, Sberbank,
Steiermärkische Bank und Sparkassen, Ziraat Bankasi, Zagrebačka banka
d.d. Zagreb (takeover from Unicredit). The list of banks is available on
www.cbbh.ba (Central Bank of B&H). All commercial banks in B&H are included
in the state deposit insurance program. The market entry of foreign banks
supported the reform process in the banking sector and helped deepen financial
intermediation.
17
o What are interest rates of commercial banks?
Commercial banks, which are the most active in lending, had a quite stable
interest rate policy, so there were no large oscillations in the previous years. In
period during 2015-2018, the reduction in total loans interest rate is evident.
Data for 2018 and the beginning of 2019 indicate that the effective interest rates
on loans to both the corporate and households show a slight downward trend.
The decrease in interest rates is mostly due to the high competition on the
banking market and the weak demand for loans in previous periods, which
means that a larger number of banks have opted for lower interest rates policy.
The average effective intrest rate on loans

---
Interest rate on long-term
loans
---
Interest rate on total loan
---
Interest rate on short-term
loans
Source: B&H Directorate for Economic Planning, B&H Economic Trends Annual Report 2018
o What is the international credit rating of B&H?

Bosnia and Herzegovina signed the contract for sovereign credit rating reporting and monitoring
with two international credit rating agencies, Standard & Poor’s and Moody’s Investors Service.
In February 2018, Moody’s Investors Service has affirmed sovereign credit rating on Bosnia and
Herzegovina at „B3 with stable outlook”. Standard & Poor’s has upgraded sovereign credit rating
of Bosnia and Herzegovina to “B with positive outlooks” (March 2019).On April 30, 2020, Standard
and Poor’s published an extraordinary assessment of the credit rating (due to the crisis caused by
the COVID-19 virus pandemic). In comparison with the regular assessment from the beginning of
March, the rating “B” has remained unchanged, while the outlook has been revised from positive
to stable.
o Which accounting and auditing standards must be met by

business operators in B&H?
Companies are liable for keeping financial books, preparing and submitting
accounting statements according to the provisions of the Law on Accounting,
International Accounting Standards (IAS), International Financial Reporting
Standards (IFRS), International Standards on Auditing (ISA).
ž
18
o Which international accounting and auditing companies exist

in B&H?
Major companies operating in B&H are Deloitte, KPMG, Price water house
Coopers (PWC) and others.
o What is the exchange rate policy in B&H?
Central Bank of Bosnia and Herzegovina maintains monetary stability by

issuing domestic currency according to the Currency Board arrangement with
full coverage in freely convertible foreign exchange funds under fixed exchange
rate 1 KM = 0.51129 eur, respectively 1 eur = 1.95583 KM. Central Bank defines
and controls the implementation of monetary policy of Bosnia and Herzegovina.
Central Bank supports and maintains appropriate payment and settlement
systems.
Statistics
o What is the recent GDP trend?
Before global financial and economic crisis Gross Domestic Product (GDP)
in B&H has been raised with average real growth rate of 5%. After the world
economic recovery and progress in 2013, natural disaster and floods in B&H in
May 2014 has affected GDP growth rate that year. The real GDP growth in 2015
increased to 3.1% and keeps the same growth rate both in 2016 and in 2017.
Nominal GDP in 2018 was 17.1 billion EUR, with real growth rate of 3.6%. Data
for 2019 indicate GDP growth rate of 2.7%. B&H is expected to enter a recession
in 2020, forecast to experience negative growth of -3.2% as it continue to grapple
with the economic impacts of the COVID-19 pandemic.
REAL GDP GROWTH RATE (%)
Source: Agency for Statistics of B&H, *preliminary data for 2019
19
o What is the annual inflation rate (%) in B&H?
Source: Agency for Statistics of B&H, International Monetary Fund, April 2020
EDE (Emerging and Developing Europe)
o Volume Index of Industrial Production in B&H – Total Industry
Source: Agency for Statistics of B&H
The recovery of industrial production was recorded in 2013 when the rate
of change in cumulative production, relative to the previous year, was 6.7%.
Because of natural disaster and floods in May 2014, year over year growth rate
in 2014 was only 0.1%.
In the years after the flood, there was the recovery with increasing industrial
production rates of 2.6% (in 2015), 4.3% (in 2016), 3.1% (in 2017) and 1.6% in
2018. Annual change rate of industrial production was negative in 2019.
Monthly statistic about Industrial production has been provided by Agency for
Statistics of Bosnia and Herzegovina - www.bhas.ba.
20
Stock Exchange
o How many stock exchanges operate on the capital market?
There are two stock exchanges in Bosnia and Herzegovina:

• Sarajevo Stock Exchange (SASE) www.sase.ba
• Banja Luka Stock Exchange (BLSE) www.blse.ba
FDI Statistics
o What is the amount of FDI recorded in the past few years?
Flow of FDI in Bosnia and Herzegovina, by years, million EUR
Source: Central Bank of B&H (CBBH),

* Preliminary FDI data for 2019 (Balance of Payments of B&H, March 2020)
In 2007 B&H we attracted 1.3 billion EUR which is absolutely the highest amount
recorded mainly thanks to the privatization of large state-owned enterprises. The
global economic crisis hit the inflow of FDI in B&H in 2009. Unfortunately, mainly
caused by slow economic recovery globally, which also reflected on investment
worldwide, FDI in B&H in the period 2010-2013 were modest. In 2014 with
415 million EUR, FDI is 99.2% higher than in 2013. Unfortunately, FDI in B&H
decreased in 2015 and 2016 and negative trend has stopped in 2017.
Based on preliminary data for 2019 investment growth confirmed positive trend
during 2017 – 2019 and FDI in 2019 is 14,8% higher than in 2018 (Balance of
Payments of B&H).
Regarding on-going projects and announced interest of potential foreign
investors, we could be optimistic regarding FDI amount, but expectations are
that pandemic COVID-19 will have reflected on FDI in B&H also. According the
international institutions forecasts in the time of pandemic COVID-19, global FDI
flows are expected to fall in 2020 and 2021.
21
o FDI by sectors?
May 1994 - Dec 2018 - Stock of FDI in December 2018 was 7.3 billion EUR
Source: Central Bank of B&H, August 2019

* the graph structure is created according to data of FDI stocks classified by industry
Top Investors
o Who are the top foreign investors in B&H?
Top investor countries in B&H

Stock of FDI in December 2018, Total amount was 7,309 million EUR
Source: Central Bank of B&H
22
Top foreign investors in B&H in 2019
According realised projects, the most important investors based on FIPA

Selection of Foreign Investors in B&H for 2019 are:
Foreign company Country Domestic company
Calcedonia Group Italy /Luxembourg Ella Textile d.o.o. Gradiška
ELSTA-Mosdorfer Gesellschaft m.b.H. Austria Elsta Mosdorfer Bosnia d.o.o.Živinice
PASS Automotive East GmbH Germany PASS d.o.o. Bijeljina
PMP Industries Italy PMP Jelšingrad FMG a.d. Gradiška
HIK GmbH Germany HIK-SM d.o.o. Sanski Most
Cotta Collection AG Liechtenstein Sinkro d.o.o.Sarajevo
Adriatic Metals PLC United Kingdom Eastern Mining d.o.o. Sarajevo/Vareš
Al Thani Companies Group UAE Bosmal Arjaan by Rotana Sarajevo
Delta Real Estate Group Serbia Delta Planet Banja Luka
dm drogerie markt Austria dm drogerie markt d.o.o. B&H
In the previous years, main energy projects have been realised by EFT International
Investments Holdings Limited from United Kingdom. Also, significant number of
new employees has been realised within activities of companies: BOXMARK,
Cablex, Lattonedil, MANN+HUMMEL, Megle, Olip S.P.A, PASS Automotive
East GmbH, Steelmin, Veritas AG, Zeraa Investment LLC and others foreign
investors in B&H.
5. SETTING UP BUSINESS
Types of Companies
Setting up a business in B&H is regulated by:

• Company Law of the Federation of B&H
• Company Law of Republic of Srpska
• Law on the Takeover of Joint Stock Companies
• Company Law of the Federation of B&H
• Company Law of Republic of Srpska
• Law on the Takeover of Joint Stock Companies
o What types of companies are permitted by the B&H law?
Types of companies:
• Unlimited Joint Liability Company (d.n.o. / o.d.)
• Limited Liability Company (d.o.o.)
• Joint-Stock Company (d.d. / a.d.)
• Limited Partnership (k.d.)
23
Steps for Establishing Company

The main steps involved in establishing a business based on foreign investment
in B&H are:
Federation of B&H:
1) Establishment Contract (made by notary)
2) Payment of initial capital
3) Registration at the competent court
4) Making a company stamp
5) Opening a bank account in a commercial bank
6) Registration of the company and staff at the Tax Administration
7) The statement of the company founder about fulfilemnt of all requirements
for starting activity (submit to the Competent Inspection Department) /
and start business
Republic of Srpska
1) Verification of the founding act by a notary
2) Payment of initial capital
3) Registration request submit to the APIF RS
4) Making a company stamp
5) Opening a bank account in a commercial bank
6) Registration of the company and staff at the Tax Administration / and
start business
o How long does it take to register a business?
In FB&H, according to the Law, court registration procedure of establishing a

business takes up to 5 days, and in RS up to 3 days.
o What are the costs of registering a business?
The costs are as follows:
Federation of B&H:
Administrative costs: cca. 500 EUR
Lawyer and notary costs: cca. 500 – 1,000 EUR
Republic of Srpska
Administrative and notary costs: cca. 150 EUR (first establishment)
24
Brcko district
Administrative and notary costs: cca. 1,000 EUR
o Can a foreign investor have a representative office in B&H?
A company may choose to set up a representative office in order to gain

experience and gain a better perception of the size and potential of the B&H
market.
It is important to remember that a representative office doesn’t have the status

of a legal entity – it is an extension of its parent company. It may only engage
in non-profit making activities. Accordingly, a representative office may engage
in any of the following functions: market research, promotional and informative
activities representing the company.
A representative office is restricted from signing contracts on behalf of the parent

company.
6. TAX REGIME
Corporate Income Tax
o What is the corporate income tax rate?
Corporate income tax rate is 10% on the whole territory of Bosnia and
Herzegovina.
o Which items are included in the corporate income tax base?
- In RS, for the purpose of computing, the tax base includes all revenue from
whatever source derived whether in cash or in kind or whether related or un-
related to the legal person’s economic activity except for revenues specified in
Law on profit tax of RS. In the case of revenue received in the form of property
(other than cash) or services, the amount of revenue is equal to the market price
of the property or services received.
- In FB&H, the tax base is determined in the tax balance, alignment of of

expenditures and revenues and capital gains / losses reported in the financial
statements. The tax base is calculated as the profit shown in the financial
statements, increased by non-deductible expenses and other non-deductible
items, and reduced by non-taxable items. Any income and capital gains earned
by the taxpayer shall be included in the tax base, except for items that are not
included in accordance with Law on the Corporate Income Tax. Income tax is
calculated by multiplying the tax base with the rate of income tax.
25
Personal Income Tax

o What are the personal income tax rates?
In B&H, personal income tax is regulated at entity level. Brcko district has its own
Law on Personal Income Tax that regulates this type of tax for the district.
In FB&H, personal income tax is 10% on net wage according to gross model.
There is a deduction to the total amount of income for resident taxpayers for
basic personal deduction as set out in the Law on Personal Income Tax, as well
as other bases for basic personal deduction.
In RS personal income tax is 10 % on net wage in accordance with gross model.

Also, in Republic of Srpska there are deductions to the total amount of income
for resident taxpayers for basic personal deduction as set out in the Law on
Personal Income Tax, as well as other bases for basic personal deduction.
Personal income tax in Brcko district is 10% on net wage in accordance with
gross model as well.
Real Estate (Transfer) Tax
o What are Real Estate Tax Rates and Property Transefr Tax
Rate?
Federation of B&H: Property transefr tax rate is 5%. The tax base is the value of the
property estimated by the commission appointed by the local tax administration
office (according to the seat of the property). Payer of property transfer tax is
most often the seller of the property (depending on the location of the property
being sold). Only in Canton Sarajevo and Hercegovačko-neretvanski Canton the
buyer is the payer of property transfer tax.
Republic of Srpska: Real estate tax rate is to 0.10% of the estimated market
value of real estate for real estate which is directly responsible for production
activities (facilities for the production and storage facilities for raw materials,
intermediate products and final products), and the tax rate is to 0.20% of the
estimated market value real estate to other real estate.
Brcko district: The tax rate on real estate cannot be less than 0.05% of the
appraised value of real estate, and shall not exceed 1,0% of the appraised value
26
of real estate. For all administrative units the obligation to pay taxes arises in the
moment of concluding the sale contract.
Value Added Tax
o What is the Value Added Tax rate?
Value added tax (VAT) rate is flat rate of 17% in B&H.
Companies submit the application for VAT at the Indirect Taxation Authority of
Bosnia and Herzegovina (in Headquarters in Banja Luka or in Regional Centers;
Sarajevo, Tuzla, Mostar, Banja Luka).
Double Taxation Treaties

o With which countries has B&H signed Double Taxation
Treaties?
Bosnia and Herzegovina has Agreements on avoidance of double taxation with

the following countries:
Albania Algeria Austria Azerbaijan Belgium
Montenegro Czech Republic Turkey Finland France
Greece Germany Croatia Holland Iran
Ireland Italy Jordan Kuwait Qatar
China Cyprus Hungary Malaysia Macedonia
Moldova Norway Pakistan Poland Romania
Slovakia Slovenia Serbia Spain Sweden
United Kingdom
United Arab
Sri Lanka and
Emirates
Northern Ireland
Depreciation, Accelerated Depreciation
o Do taxpayers have the right to apply accelerated depreciation?
Yes, taxpayers have the right to apply accelerated depreciation.
In the Federation of B&H, accrued depreciation is recognized when determining
27
the tax base by applying proportional method of depreciation on fixed assets.

Tax deductible depreciation rates of fixed assets are as follows:
a) buildings - 5%
b) roads, municipal facilities, railways - 10%
c) equipment, vehicles, plant - 15%
d) equipment for water management, water and sewage systems - 15%
e) hardware, software and equipment for environmental protection - 33.3%
f) growing crops - 15%
g) basic herd - 40% and
h) intangible assets - 20%
Depreciation expenditure is recognized for tax purposes only when own fixed
assets are in use, by which the taxpayer conducts business.
If the purchase price of the property is less than BAM 1,000.00, its purchase
value can be fully deducted in the year in which the property is acquired.
The taxpayer is entitled to accelerated depreciation of fixed assets, serving the
purpose of pollution of air, water, land and noise reduction.
Accelerated depreciation can be up to 50% higher than the rate mentiod in text
above. The total cost of depreciation can not exceed the purchase value.
In RS, the Rule Book prescribes the determination of depreciation deductions,

as well as the guidance regarding the normal period of operation and entry
values of depreciable assets and the treatment of depreciable assets that are
temporarily or permanently removed from operation.
Depreciation is subject to the following means:
- Buildings and facilities
- Plant and equipment
o Which methods are used to calculate the depreciation rates

of fixed assets?
Depreciation rates are calculated according to:

a) Proportional
b) Functional and
c) Digressive method
28
Excises
o What are excises?
An internal tax imposed on the production, sale, or consumption of a commodity

or the use of a service within a country: e.g. excises on tobacco, liquor, coffee.
Tax Incentives
o What are tax incentives in B&H?
In the Federation of B&H:

Law on the Corporate Income Tax enables following incentives.
• 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 EUR, starting with the first year
when taxpayer has to invest at least 2 million EUR, shall be reduced of the
obligations of the calculated income tax for 50% of the amount in the year of
investment.
• The taxpayer is entitled to a tax-deductible expense in the double amount of
the gross wage paid to newly employees if meets the following conditions:
- duration of the employment contract must be at least for a period of 12 months
with full-time working hour,
- New employee was not employed with the taxpayer or a related person in the
previous five years.
In the Republic 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%.
o Are profits transferred abroad taxed in B&H?
Foreign investors are entitled to transfer abroad, freely and without delay, in
freely convertible currency proceeds resulting from their investment in B&H.
29
Other Taxes
o What is the withholding tax regulation?
In FB&H, the taxpayer is obliged to calculate and pay withholding tax on gross
amount of:
• dividends or allocation of profits;
• interest or its functional equivalent under financial instruments and
arrangements;
• royalties and other intellectual property rights;
• for management, technical and educational services (including fees
for market research services, tax consulting, auditing services and
consulting services);
• fee for the lease on the basis of lease movable and immovable property;
• compensation for entertainment and sports events;
• insurance premiums for the insurance or reinsurance of risks in the
Federation;
• charges for telecommunications services;
• Other fees for services, but only for non-residents of countries with
which there is no signed agreement on avoidance of double taxation.
The withholding tax is paid at the tax rate of 10%, and for dividends the rate is 5%,
tax rate may be lower in the case of application of the Agreement on Avoidance of
Double Taxation.
In RS, withholding tax applies to the following revenue payments:

• Payment of interest;
• Payment for entertainment or sporting activities carried out in RS
regardless whether the revenue is received by the entertainer or
sportsman or by another person;
• Payment for the performance of management, consulting, financial,
technical or administrative services, if the revenue is from a resident
or if the revenue is paid by or included in the books and records of
a permanent establishment in RS if such payment is deducted for the
purpose of determining tax base;
• Payment in the form of insurance premiums for the insuring or reinsuring
of risks in Republic of Srpska;
• Payment for telecommunication services between Republic of Srpska
and a foreign state;
• Payment of royalties;
• Payment of lease for movable property;
• Payment for dividends and share in profits.
The tax to be withheld from revenue payments to a foreign legal person is 10% of the
total revenue paid.
30
Social Security Contributions
In the FB&H there are contributions paid by the employer and those paid by the
employee.
In Republic of Srpska as well as in the Federation of B&H, contributions are

calculated on the basis of gross wage. Gross wage includes net wage earned
by regular employment, multiplied by determined coefficient, plus contributions
and taxes.
In Brcko district, pension insurance contributions are regulated by entity laws.
a) Employee’s Share:
• FB&H: 17% for pension insurance, 12.5% for health insurance, 1.5% for
unemployment insurance (in total: 31% on gross wage).
• RS: 18,5% for pension insurance, 12% for health insurance, 0.8 % for
unemployment insurance, 1.7 % for child protection (in total: 33 % on gross
wage)
• Brcko district: 17% for pension insurance for employers who apply
FB&H law and 18% for pension insurance for employers who apply RS
law, 12% for healt insurance and 1.5% for unemployment insurance (in
total 30.5 or 31.5% on gross wage).
b) Employer’s Share:
• FB&H: 6% for pension insurance, 4% for health insurance, 0.50% for
unemployment insurance (in total: 10.50% on gross wage).
• Brcko district: 6% for pension insurance (in total: 6% on gross wage for
employers who apply FB&H Law).
• In RS no such contributions are paid.
31
7. OPPORTUNITIES FOR
INVESTMENT
Privatization
o How is the privatization process regulated in B&H?
A Framework Law on Privatization of Enterprises and Banks in B&H recognized

the right of the Entity to privatize enterprises and banks located in its territory, that
are not privately owned, and to take the proceeds of privatization in accordance
with regulations adopted by respective Entity parliament.
The above-mentioned laws are not applicable in case of natural resources, public
goods, cultural and historical sites or monuments that are lent to enterprises for
their use.
o How is the privatization process managed in B&H?
In the FB&H, privatization process is conducted by the Federation Privatization

Agency and by cantonal privatization agencies, while in the Republic of Srpska
it is the responsibility of the Investment and Development Bank of the Republic
of Srpska.
o Who can be a buyer in the privatization process?
Domestic and foreign natural persons and legal entities may be buyers in
privatization process.
o Which methods of privatization are used?
The privatization methods are as follows:

• sale of shares on the stock exchange,
• sale by means of a tender (the most common method for sale of
company),
• acceptance of a public offer for takeover,
• direct selection of a buyer,
• sale to the employees of the company, and
• combination of the above methods.
32
o What payment instruments are used in the privatization procedure?
In the process of privatization the payment instrument is cash.
o What is the process of restructuring?
Companies prepare their privatization programs that include:

• Background information on company and its business operations;
• Proposal of privatization model;
• Proposal of method of payment;
• Opening balance sheet.
o What results have been achieved in privatization so far?
Privatization of many strategic companies is underway. Privatization of state

monopolies: telecoms, energy: utilities – electricity, etc. is ongoing process.
Bankruptcy
The bankruptcy system has created an array of new opportunities for both
foreign and local investors, offering under extremely convenient conditions an
office and production space for launching new businesses, as well as abundant
opportunities for restructuring and improving of existing businesses or production
programs. Advantages of bankruptcy are:
• The process is predictable, transparent, court-approved, and definitive.
• Bankruptcy laws supersede other competing provisions of law.
• The law works quickly, according to strictly established deadlines.
• It can rehabilitate a reorganized business, reviving or improving its
production and ability to compete, creating work for its managers and
employees, placing ongoing orders for suppliers of goods and services
to the company, periodically purchasing or replacing equipment, and
generally restoring the enterprise to the marketplace
Concessions
o What are concessions?
Concessions in Bosnia and Herzegovina are granted for exploiting natural

resources or constructing infrastructure facilities and other public goods in general
use (such as the use of forests, highways, major roads and accompanying
infrastructure facilities, railroads, water channels, ports and airports, waterways,
exploring and/or use of energy and other mineral raw materials, crude oil and
33
natural gas, use of construction land, use of agricultural land, hotels and other
tourism facilities, etc).
o What is the procedure of obtaining approval for a concession?
Upon proposal from the Commission for Concessions, the Government shall
grant a concession to the most favorable bidder having met and satisfied all the
criteria set in public invitation and being of a higher rank compared to all other
bidders.
The Commission shall, as promptly as possible, be notified of the selection of

successful bidder.
The Commission shall receive a copy of Concession Contract as well as copies

of all project documentation in its final form.
o What is the duration of a concession contract?
Contract may not be concluded for a term exceeding 30 years; however, if there
are special circumstances that involve investments requiring a longer term, the
contract period may be extended, but it may not exceed 50 years. The contract
may be renewed for a term not exceeding the half of the original term.
The supervision, control and monitoring of the entirety of the activities of the
concessionaire over the term of the contract of concession is done by the
Commission for Concessions of B&H.
o Which rights do concessionaires enjoy?
The Concessionaire has the right to own and use the assets and property made
available by the Conceding Party in accordance with the Concession Contract.
o What are the concessionaires’ obligations?
The share capital of the Concessionaire shall be held by persons listed in tender
documentation. Not more than 30% of voting rights can be transferred, directly
or indirectly, without approval of the Commission. The Concessionaire may not
perform any activity other than that described in Concession Contract.
The Concessionaire shall prepare standard services contracts regulating

business relationship between the Concessionaire and users of services, subject
to approval of the Commission.
34
8. LAND/REAL ESTATE
o Can foreign investors acquire property in B&H?
Foreign investors have the same property rights in respect to real estate as the
legal entities of Bosnia and Herzegovina.
o What is the procedure of buying land by a foreign investor?
After the signing of a sales contract and the certification of signatures of the
contracting parties by the public notary, the land and new owner are registered
in the Land Register.
Requests for land registry extracts, as well as requests for alterations in land
register records, are submitted to the land register offices located in courts,
specifically municipal courts in FB&H and district commercial courts in RS.
If some of the data necessary for submitting a request are unknown, e.g. plot
number, land register folder, cadastre municipality name, these can easily be
obtained in the land register office.
o Where can I insure my property?
Foreign investors can insure their properties at many insurance companies. For
a list of leading insurance companies in B&H, please contact FIPA directly.
o Can I rent out my property in B&H?
A foreign investors can rent out their B&H property without any requirement
to obtain a rental license from the authorities, but can be limited by a signed
contract.
35
o What is the price of buying or leasing office space?
Prices od real estate aleays depend on a number of factors such as: location,
condition and equipment, age, current market situation.
Prices of bying/leasing office space are ranging as follows:
Leasing office space (without ground floor):

5 EUR/m2 – 20 EUR/m2 per month
Buying office space:

Central position 1500 EUR/m2 – 3000 EUR/m2
Peripheral position 500 EUR/m2 – 2000 EUR/m2
o What is the price of land?
Price of agricultural land: 2 EUR/m2 – 25 EUR/m2

Price of construction land: 25 EUR/m2 – 700 EUR/m2
o What is the price of leasing or buying workshop (production

building)?
Prices of leasing/buying workshop (production building) are:
Leasing production building: 2 EUR/m2 – 10 EUR/m2 per month

Buying production building: 50 EUR/m2 – 1000 EUR/m2
36
9. FOREIGN TRADE
Customs Rates
o How are imports customs regulated?
Customs Policy Law of B&H regulates import and export customs issues.
Import customs rates are harmonized with the EU Nomenclature. Depending

on the type of products, customs rates are being reduced to 90%, 75% or 50%
of the previous rate, while customs rates will be completely eliminated for some
products. The reduction of customs rates is valid only for goods originating from
the EU, not all the goods being imported from EU. Customs protection is still
provided for agricultural products for which customs rates will mostly be paid as
previously.
o Which products can be imported duty free?
Under the provisions of the Customs Policy Law, the following goods are exempt
from custom duties: equipment being imported as a part of foreign investment,
except for passenger cars, slot and gambling machines; production equipment
that are not produced in Bosnia and Herzegovina, imported for the new or
expansion of existing production, modernization of production, the introduction
of new or modernization of the existing production technology, and carrying out
the direct manufacturing activity, equipment for military and police forces of the
Entities financed entirely by donors; equipment for reconstruction projects in
B&H that have been approved by the Council of Ministers and are fully financed
by donors or by international community.
The equipment that makes part of a foreign investment cannot be lent, pledged
as a guarantee, rented or given up without previous consent of the customs
administration. If such equipment is lent, pledged as a guarantee, rented or
given up, corresponding customs duty would have to be paid on it.
The following items are also exempt from import duties: fixed assets, industrial
inventory and equipment imported on the basis of transfer of business activities
from abroad to B&H, intermediate materials to be used for manufacturing of
goods for export, advertising material, samples, catalogues, goods for charity
and humanitarian agencies, etc.
Incentives and exemptions from payment of custom duties when putting the
goods in free circulation are determined and granted by the Council of Ministers
of B&H. All goods that may be exempt from payment of customs duties are
stated in the Annex 4 to the on Customs Policy Law.
37
o Are there any special import restrictions on equipment that is

part of foreign investment?
Equipment imported as foreign investment must not be older than 10 years.

A certificate issued by the authorized body needs to be provided, confirming
that the equipment meets necessary standards on environmental protection and
protection at work.
Trade Structure
o Which goods dominate B&H exports and imports?
Top Exported Products in the period January - December 2019, classified by

SITC (Standard International Trade Classification) section and division:
• Miscellaneous manufactured articles (27.4%)
• Manufactured goods classified chiefly by material (23.7%)
• Machinery and transport equipment (16.9%)
• Crude materials, except fuels (9.2%)
• Mineral fuels and lubricants (8.1%)
• Chemicals (8.0%)
• Food and Live animals (5.0%)
• Animal and vegetable oils and fats (1.1%)
• Beverages and tobacco (0.7%)

Top Imported Products in the period January - December 2019, classified by
SITC (Standard International Trade Classification) section and division:
• Manufactured goods classified chiefly by material (22.8%)
• Machinery and transport equipment (21.6%)
• Mineral fuels and lubricants (14.0%)
• Chemicals (12.6%)
• Food and Live animals (12.8%)
• Miscellaneous manufactured articles (10.6%)
• Crude materials, except fuels (2.5%)
• Beverages and tobacco (2.2%)
• Animal and vegetable oils and fats (0.9%)
o Which countries are B&H’s major foreign trade partners?
B&H’s major foreign trade partners in the period January – December 2019
are: Germany, Italy, Serbia, Croatia, Slovenia, Austria, China, Turkey, Hungary,
Poland, USA, France, Russia, Czech Republic and the Netherlands.
38
Free Zones
o What are Free Zones?
The free zones are part of the customs territory of B&H managed by the founder
of the free zone.
o Are there any benefits of doing business in Free Zones?
The users of free zone do not pay VAT and import customs. Investment in the
free zone, transfer of profit and transfer of investment are free of charge.
The imports of equipment that will be used for manufacturing within the free
zone are exempt from paying customs duties and fees.
o What is the time period of land and facilities rentals to Free

Zone users?
The Contracting parties agree upon the time period of land and facilities rentals
to free zones users.
39
Free Trade Agreements
o Which countries have signed the Free Trade Agreement with

B&H?
Bosnia and Herzegovina signed the Central European Free Trade Agreement
(CEFTA) with the following countries: Albania, Serbia, Moldova, Montenegro,
Macedonia, UNMIK/Kosovo.
B&H has also signed a Free Trade Agreement with Turkey.
o Does B&H have preferences to export to other countries?
The Stabilization and Association Agreement (SAA) between the EU and B&H
enters into force on Jun 1, 2015. The SAA establishes a close partnership
between the EU and B&H and deepens the political, economic and trade ties
between the two parties. It is from now on the main framework for the relations
between the EU and B&H
B&H also has generalized system of preferences with USA, New Zealand,
Switzerland, Norway, Japan, Russia, Kazakhstan,Belarus, Canada and Australia.
Furthermore, B&H has preferential export regime with Iran.
40
10. EMPLOYMENT
Employment Relations
o Labour Force
B&H benefits from a rather well-educated population and a qualified labor force
that responds to the requirements of the economic structure of the country.
Creativity of the people has been approved many times by winning international
awards for innovations and patents. Bosnia and Herzegovina is one of the most
rewarded countries in this domain per capita.
Of all employees in December 2019, women accounted for 43.3%
o How is the local labor force structured by activities?
December I-XII 2019

Activities
2019 I-XII 2018
Agriculture, forestry and fishing 19,550 100.8
Mining and quarrying 17,966 101.8
Manufacturing 167,374 101.2
Electricity, gas, steam and air conditioning supply 17,777 101.0
Water supply; sewerage, waste management and remediation
13,773 102.8
activities
Construction 40,254 104.2
Wholesale and retail trade; repair of motor vehicles and
154,071 102.7
motorcycles
Transportation and storage 38,860 103.7
Accommodation and food service activities 43,058 105.3
Information and communication 22,574 107.2
Financial and insurance activities 18,353 101.9
Real estate activities 3,951 108.8
Professional, scientific and technical activities 25,311 101.5
Administrative and support service activities 16,280 106.7
Public administration and defence; compulsory social security 75,725 102.2
Education 68,737 101.6
Human health and social work activities 54,933 102.5
Arts, entertainment and recreation 14,698 102.7
Other service activities 17,135 105.0
41
o What is the unemployment rate in B&H? (%)
o Which employment types are stipulated by the law?
Various forms of employment status are admissible within limits under the laws:
permanent (no fixed duration), temporary, fixed duration, casual, seasonal, part-
time and probationary.
o How can we employ a worker?
Employment is based on the employment contract signed for an indefinite or

definite period. After the signing of the contract, the employer is obliged to
register the employee at the Pension-Disability Fund, as well as the Health
Insurance Fund.
o How can we terminate employment?
Employers in B&H are allowed to terminate individual employment for a variety

of reasons, including poor performance, misconduct, and on economic, technical
or organizational grounds.
Small companies with fewer than 30 employees are not required to consult on
dismissals, nor are they required to have works councils. Larger employers have
to consult with their works council or trade unions where five or more employees
face dismissal. In the event of dismissal, severance equal to one-third of monthly
salary for each year of service is payable.
42
o Is it possible to conclude a part time work contract?

Yes, the employment contract may be concluded for part-time work. The
employee is entitled to social insurance and to all the rights arising from the
employment contract in proportion to the time spent at work.
o Can the employer hire trainees or volunteers?

The employer may hire a trainee or volunteer, for the period determined as
the training or volunteering duration by the law for a specific profession. Both
contracts are concluded in written form.
Work and Residence Permits for Foreigners
o How can foreigners obtain residence permits?

Residence and movement of foreign nationals is regulated by the Law on
Foreigners of B&H.
For the purpose of this Law, the residence of foreigners shall refer to:
a) Visa residence,
b) Non-visa residence,
c) Temporary residence,
d) Permanent residence.
A temporary residence permit may be issued for legitimate reasons such as:
family reunification, education. humanitarian reasons, work with work permit,
work without a work permit.
The costs are as follows:

- for issuance of temporary residence permit: 50 EUR;
- for issuance of permanent residence permit: 100 EUR.
43
o How can foreigners obtain work permits?
When a foreigner intends to reside in B&H for the purposes of paid employment,
he/she must have a work permit issued by an authority in charge of foreigner
employment affairs in accordance with the provisions of laws.
Work permit may be issued to a foreigner upon the request of legal or natural
person offering employment.Depending on the place of residence or the seat of
employer, the work permit shall be issued by authority competent for matters of
foreigner employment of the Federation of Bosnia and Herzegovina, Republika
Srpska or Brcko district of Bosnia and Herzegovina.
Work permit shall be issued by the competent authority on the basis of established
work permit quota (Work permit quota) or as permit outside the quota (Work permits
outside the quota), in accordance with the Law on Foreigners of B&H, as well as
in accordance with regulations pertaining to the issuance of work permits.Work
permit shall be issued for a specific post and/or for a specific type of job.Work
permit may not be issued to a period longer than one year.Within the annual quota
of work permits, the Council of Ministers shall determine occupations allowing
for employment of foreigners, as well as the number of work permits for each
occupation and establish the territorial division of work permits according to the
needs.
Collective Contracts
o What are the collective contracts and what do they cover?
Collective contracts regulate the rights, obligations and responsibilities arising

from employment, mutual relationship among the parties to the collective contract
and other matters of importance to the employee and the employer. There is a
General Collective Agreement of FB&H and General Collective Agreement of RS.
There are also Special Collective Agreements concluded for a specific sector or a
group of jobs between the trade union and the representative association of employers.
o Is the employer obliged to conclude a collective contract?
The General Collective Agreements are obligatory, while Special Collective

Agreements are voluntary.
44
Working Hours and Overtime Work
o What are full time working hours?

Full time working hours are limited to 40 hours per week. The working week lasts
5 days (Monday-Friday).
o Are overtime working hours limited?

In case of force major (fire, earthquake, flood) or sudden increase in the volume
of work, as well as in other similar cases of emergency need, an employee, at
the request of the employer, is obliged to work longer hours than his/her full work
hours (overtime work), up to 10 hours weekly.
Annual Leave, Public Holidays
o What is the minimum annual leave?

The minimum annual leave is 20 working days, according to labor laws of B&H.
o How long can a maternity leave last in B&H?

During pregnancy, confinement and care of the baby, the woman is entitled to
maternity leave in the duration of one year without interruption.
Minimum Wages
o Is there a minimum wage?

Minimum net and gross wage is defined by The General Collective Agreement
and the Labor Law for the territory of the Federation of Bosnia and Herzegovina.
The average net wage was 470,90 EUR in the period January – December 2019.
The Labor Law of Republika Srpska specifies that the lowest salary for the
coming year shall be determined by the Government on the proposal of the
Economic and Social Council.
45
o In which cases are employees entitled to increased salaries?

An employee is entitled to increased salary for intensified hardships of work,
overtime work and night work, and for work on Sundays or holidays or any other
day which is in the law determined to be a non-working day, in accordance with
the collective agreement, rulebook or employment contract.
11. WORKFORCE AND EDUCATION

Educational System
o How is the educational system organized in B&H?
Primary education consists of nine compulsory years. High school (secondary)

education consists of three to four years, split into (i) general education providing
access to university; (ii) four-year technical education preparing individuals for
the labour market and providing an opportunity for access to university; and (iii)
three-year vocational education.
o What is the educational structure of unemployed population?
Registered unemployment by qualification in B&H, December 2019
TOTAL, December 2019 401,846

University qualification 34,599
Two-year college 6,622
Secondary 114,053
Highly skilled and skilled 128,565
Semi-skilled 7,237
Unskilled 110,770
46
o What is the annual number of graduated students over the years?
Graduates, Masters of Science, Specialists and Doctors of Science on High Schools

Institutions in B&H, in 2018/2019.
Total graduated Total masters of Total doctors of

students science and specialists science
B&H 14,220 3,336 193
Source: Agency for Statistics of BiH, Education Statistics, November 2019
Number of Universities and Students
o How many educational institutions are there in B&H?
A growing number of young people are entering university; participation in higher

education is comparable with EU levels, and far above levels in other countries
in the region.
Number of institutions
Pre-school education (school year 2018/2019) 359
Primary education (school year 2018/2019) 1,755*
Secondary education (school year 2018/2019) 313
Higher education (school year 2018/2019) 49*
*1,755 active regular basic schools (central and self-contained with satellite schools and departments) and 48 basic schools for
children with special needs. **In the academic year 2018/2019, in the territory of B&H, were 49 higher education institutions,
out of which 10 are public and 39 private. Source: Agency for Statistics of B&H (BHAS); Centre for Information and Recognition
of Qualifications in Higher Education
o How many students are there in B&H?
In the academic year 2018/2019 on the territory of B&H were 87,696 students in
higher education institutions (first cycle, integrated I and II cycle and candidates
for graduation) and 117,475 pupils attended 313 secondary schools..
o Is B&H participating in the Bologna Process?
Yes, B&H is signatory to the Bologna Declaration, thus a part of single European
system of higher education.
47
o Are there any foreign schools?
Investors who would like to come with their family have a choice of international
schools - from kindergartens to MBA studies. Some international universities
also provide a possibility of various distance-learning programs.
Selected international schools:
School Language Contact

QSI International School of
English www.qsi.org
Sarajevo
The International School of English and
www.internationalschool.ba
Sarajevo Bosnian
International Burch
English www.ibu.ebu.ba
University (IBU)
International University of English
www.ius.edu.ba
Sarajevo
American University in
B&H: Sarajevo, Banja Luka, English www.aubih.edu
Mostar and Tuzla
The Sarajevo School of
English www.ssst.edu.ba
Science and Technology
www.mission-laique.asso.fr
French School of Sarajevo French
www.aefe.fr
UWC United World College
English www.uwcmostar.ba
in Mostar (UWCiM)
All information about Higher Education and authorised institutions are available
on www.cip.gov.ba - Centre for Information and Recognition of Qualifications
in Higher Education and www.hea.gov.ba - Agency for Development of Higher
Education and Quality Assurance
48
12. INFRASTRUCTURE
Road and Railway Network
o What is the total road network in B&H?
The total length of the country’s road network is approximately 24,796 km and
the total length of the arterial highway network amounting to 3,970 km (source:
Framework Transport Strategy of Bosnia and Herzegovina 2015-2030). The
length of European roads (E-roads) amounts to a total of 547 km (E-65, E-73,
E-661, E-761 and E-762) and so far, app. 200 km of motorway have been
completed.The construction of the Zenica-Sarajevo-Tarčin, Međugorje-Bijača
and Svilaj-Odžak motorway sections was completed as part of the pan-European
transport Corridor Vc, the most significant transportation project in B&H that goes
from the Port of Ploče, via Sarajevo and Brčko to Budapest, Hungary (335 km).
More than 56% of the population of B&H lives in the zone where the construction
of this Corridor is proposed, while 63% of the total GDP is generated there.
The important connections Banja Luka - Doboj and Bosanska Gradiška – Banja
Luka have been completed, as a parts of other motorway directions.
There are currently ten under-construction highway projects across the country.
o What is the railway transportation potential?

The railway network is made of 1,030 km of railroad track, 9% of which is
double-track and 76% electrified. There are two main railway routes: the north-
south Samac-Sarajevo-Capljina (Ploce) railway route and Bosanski Novi/ Novi
Grad-Doboj-Tuzla-Zvornik route connecting the west to the east of the country.
Bosanski Novi/Novi Grad-Bihac-Martin Brod, on the north corridor, links Central
and Northern Croatia and Northwest B&H with the Port of Split on the Adriatic
Coast. 14 km of Belgrade-Bar line goes through the eastern part of RS.
Airports
o How many airports exist in B&H
B&H has 4 airports – Sarajevo, Tuzla, Mostar and Banja Luka. In 2019, a total of
20,900 airport operations were performed at four international airports in B&H,
of which 13,671 or 65.41% at Sarajevo Airport, 3,928 or 18.79% at Tuzla Airport,
2,563 or 12.26% at Banja Luka Airport and at Mostar airport 738 or 3.53%.
A comparative statistical review of air operations performed during 2018 and
2019 shows an increase in 2019 by 1,036 or 5.21% in total. The total number
of transported passengers is 1,919,592. A comparative overview of transported
passengers during 2018 and 2019 shows an increase of 223,494 or 13.18% in
total during 2019. In 2019 the total cargo transported by air is 2,234.59 t, and
total of 404 tons of mail was transported by air.
(Source: Directorate of Civil Aviation, www.bhdca.gov.ba)
49
The distances between Sarajevo and major European cities are as follows:
Sarajevo – Belgrade 206 km
Sarajevo – Brussels 1310 km
Sarajevo – Budapest 407 km
Sarajevo – Frankfurt 1013 km
Sarajevo – Istanbul 930 km
Sarajevo – Ljubljana 389 km
Sarajevo – London 1620 km
Sarajevo – Munich 708 km
Sarajevo – Paris 1349 km
Sarajevo – Prague 755 km
Sarajevo – Rome 516 km
Sarajevo – Vienna 511 km
Sarajevo – Zurich 859 km
Sarajevo – Zagreb 288 km
River Transport
o What are the possibilities for river transportation in B&H?
The River Sava has 333 km of navigable water; as a tributary to the Danube, it is
part of the European waterway network – VII Trans European Transport Corridor.
Two Sava River ports are operational: Brcko and Bosanski Samac/Samac.
Fixed and Mobile Telephony

o What is the fixed telephony infrastructure?
The telephony infrastructure covers the whole territory of B&H. There are nearly
728,322 fixed direct telephone lines in operation in B&H.The network is of great
quality and high reliability, because there is more than 115 years long tradition
of it in B&H.
o What is the number and coverage of mobile telephony
operators?
There are 3 telecom operators for mobile GSM technology:BH Telecom

(Sarajevo), Telekom Srpske (Banja Luka) and HT Mostar (Mostar). Also, there
are five operators who are registered as providers of public mobile telephone
service and provide mobile telephony services on the basis of commercial
agreements concluded with the licensees for GSM services (Logosoft, Blicnet,
Telrad Net, Elta Kabel and Dasto Semtel) .All providers are present on the whole
50
territory of B&H and they cover more than 98% of the territory and population.
The number of prepaid subscribers (2,785,943) is still several times higher than
the number of postpaid subscribers (969,578). The number of mobile subscribers
in Bosnia and Herzegovina as of December 31st 2019 was 3,755,521 which is
7.84% higher than in 2018.
o Is the fixed telecommunication network digitalized and how

many operators are there?
The fixed telecommunication network is more than 98% digitalized and uses
copper pairs and DECT, as well as optics for large users, while the transfer is
based on optics using PDH and SDH technology. In December 2019, B&H has
three (3) licenced Fixed Telephony operators and twelve (12) licenced providers
of Fixed Public Telephone Services.
o What is the penetration of the mobile telecommunication

network?
The level of penetration (number of mobile subscribers per 100 inhabitants) of

mobile telephony in B&H 106.35% at the end of 2019, based on GSM, UMTS
and LTE technology. UMTS networks (Universal Mobile Telecommunications
System - based on the 3GSM standard in 2019) cover more than 95.0% of
the population in Bosnia and Herzegovina. The number of installed 3G base
stations, as of December 31st 2019, was 3,349 for three main service providers.
Source: Annual report of the Communications Regulatory Agency for the year
2019, March 2020) The introduction of the 4G network is in progress and mainly
refers to covering large urban areas.
Internet
o What is the Internet availability and infrastructure?
Internet as a service has been completely liberalized since 2002 and there are
65 Internet Service Providers (ISP) in addition to existing telecom operators,
providing various services of Internet access using different technologies.
Detailed information of importance to the sector is available within Annual Report

of the Communications Regulatory Agency: www.rak.ba
51
o How many internet users are there in B&H?
IIn 2019, there were 746,271 Internet subscribers in B&H, while the estimates
say that in the same year there were 3.3 million Internet users. There was a
growth in the number of Internet users of 4.23% in 2019 compared to 2018. This
shows that the Internet usage rate in B&H for 2018 was 90.49 and in 2019 was
94.32%.
Internet users penetration diagram
Source: The Communications Regulatory Agency
o What are the possibilities of internet access?
Generally speaking, both smaller and larger cities in B&H are following the trend
of reducing the total number of dial-up subscribers while at the same time, the
total number of broadband Internet access subscribers has seen a rise. The
number of broadband subscribers reached 99.95% of the total number of Internet
subscribers. The structure of broadband connections is still lead by the ADSL
access with 55.46% of broadband internet access subscribers. The number of
fixed wireless connections increased by 28.65% in 2019 compared to 2018.
52
o Internet subscribers by type of access for 2012-2019
Rented
Year Dial-up FWA Cabel ADSL FTTH Other Total
lines
2012. 84.314 62.621 127.424 277.295 1.389 315 353 553.711
2013. 3.219 65.164 153.544 294.505 1.435 297 498 518.662
2014. 2.304 61.367 181.753 360.772 1.318 374 348 608.236
2015. 1.739 59.326 200.972 372.767 1.254 428 240 636.726
2016. 1.447 61.019 213.640 385.316 1.233 960 170 663.775
2017. 231 65.335 234.006 398.136 1.144 1.363 363 700.578
2016. 1.447 61.019 213.640 385.316 1.233 960 170 663.775
2017. 231 65.335 234.006 398.136 1.144 1.363 363 700.578
2018. 319 47,367 244,728 404,795 1,031 17,511 934 716,685
2019. 384 60,936 239,551 413,902 980 30,231 287 746,271
Source: Annual report of the Communications Regulatory Agency for the year 2019, March 2020
o Types of service
The development of broadband Internet and liberalization of the

telecommunications market have conditioned the service package offers that
have merged several offers into a single package: Internet, fixed telephone
services, mobile telephone services and TV. The most subscribers used Triple-
Play bundle (fixed telephony, internet and television).
As of December 31st 2019 in B&H services were provided by 38 licensees

for television broadcasting, which is done via terrestrial broadcasting, and
152 licensees for radio broadcasting. In addition, the audio-visual services
were provided by 61 licensees for television broadcasting, which is done via
other electronic communications networks. Source: Annual report of the
Communications Regulatory Agency for the year 2016, March 2020)
53
13. OPERATIONAL COSTS

We would like to emphasize that it is necessary to check all services expenses
for a specific location and according to the specific requirements. Operational
costs are shown only for approximate estimates. Prices shown are in the range
acording the price lists of the provider, defined in accordance with various
technical specifics.
Monthly review of AVERAGE CONSUMER PRICES IN B&H is available on

www.bhas.ba (Agency for Statistics of B&H) - Montly publication
o What is the price of electricity in B&H?
The price of electricity is defined with tariff and price of kW/h. Tariff rates are
determined by Entities Regulatory Commission for Electricity, and information
are available on:
www.ferk.ba - Regulatory Commission for Electricity in Federation B&H

www.reers.ba - The Regulatory Commission for Energy of Republic of Srpska.
The price of electricity is determinate with tariff groups, season and higher/lower
daily tariffs.
Price of electricity in B&H Higher Lower

with all taxes
May 2020 with all taxes included
included
Average 0,10 EUR/kWh 0,05 EUR/kWh
Source: Agency for Statistics of B&H, Monthly review of Average Consumer Prices in B&H in December
May 2020
The average price of electricity for industry from group of customers IC, without
VAT, in the first half of 2019 amounted to 6.61 EUR cent/kWh. For non-household
consumers (defined as medium-size consumers with an annual consumption
within the range of 500 MWh < consumption < 2 000 MWh) electricity prices
during the first half of 2019 were 0.9% higher compared to the prices from first half
of 2018. (Source: Agency for Statistics of B&H, Multi-domain stats, Environment
and Energy, Prices of electricity and natural gas, January-June 2019).
54
o What is the price of gas in B&H?
The price of natural gas With all taxes included

Average, May 2020* 0.36 EUR/m3
Average, January - June 2019** 11.91 EUR/GJ
Source: * Agency for Statistics of B&H, Monthly review of Average Consumer Prices in B&H
** Multi-domain stats, Environment and Energy, Prices of electricity and natural gas, January-June 2019
On January 1st 2020, Sarajevo gas d.o.o. Sarajevo applies a new, lower invoice
price up to: 0.499 € / Sm3 for large economy, ie 0.505 € / Sm3 for small economy
and 0.397 € / Sm3 for household.
o What are the costs of telephone?
The Communications Regulatory Agency of B&H (CRA) has brought the Decision
on prices of roaming services in public mobile communications networks in
accordance with the Agreement on Reducing the Price of Roaming Services
in Public Mobile Communications Networks in the Western Balkans region.
Reduced tariffs are applied from July 1, 2019, with the entry into force of the
Agreement. From July 1, 2021, all tariffs should be removed, under the concept
“Roam like at Home”.
Mobile telephony, monthly subscription prices are from 2.392 up to 89.731 EUR
with VAT. Call rates within BiH are 0.102 EUR/min with VAT.
International calls are divided into three zones: neighbouring, European and
non-European countries.
International calls to neighbouring countries: from 0.169 to 0.412 EUR/min.
International calls to other European countries: from 0.240 up to 0.412 EUR/min.
International calls to non-European countries: from 2.09 to 5.982 EUR/min
Users in BiH also use integrated service packages (duo, trio and quatro) that
contain landline and mobile telephony, internet and television services, while
the monthly subscription rates range from 20.27 EUR with VAT up to 65.803
EUR with VAT. Source: Communications Regulatory Agency of Bosnia and
Herzegovina (April 2019);
Average prices according Agency for Statistics of B&H, Average consumer

prices in Bosnia and Herzegovina in May 2020:
- Average price of monthly telephone subscription was 6.64 EUR.
- Average price of mobile phone usage within own fixed network was 0.102
EUR/min.
Source: Agency for Statistics of B&H, Average consumer prices in B&H in May
2020;
55
o What are the prices of water in B&H?
Water charges are determined at local level and thus are different from one
municipality to another. The water price consists of: water, sanitation, PVN
(Special Water Compensation) for water consumption and PVN for water
protection (depending of the level of pollution of wastewater).
Average monthly price in May 2020, of Water supply was 0.511 EUR/m3 and
Sewerage services was 0.256 EUR/m3. (Source: Agency for Statistics of B&H,
Average consumer prices in Bosnia and Herzegovina in May 2020).
o What is the quality of water in B&H?
B&H has an exceptionally high quality of drinking water. Water from the tap is
safe to drink as well as most places in the mountains or fountains in towns or
along the side of the road.
56

FIPA - BiH FAQ

Uploaded by

Copyright:

Available Formats

FIPA - BiH FAQ

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

FIPA - BiH FAQ

Uploaded by

Copyright:

Available Formats

FREQUENTLY

1. BOSNIA AND HERZEGOVINA AT A GLANCE...................................................10

3. INVESTING IN B&H .............................................................................................13

4. B&H ECONOMY (INDICATORS) ........................................................................17

7. OPPORTUNITIES FOR INVESTMENT................................................................32

Free Trade Agreements..........................................................................................39

11. WORKFORCE AND EDUCATION.................................................................46

13. OPERATIONAL COSTS ..................................................................... 54

1. BOSNIA AND HERZEGOVINA AT A GLANCE

o What can FIPA do for you?

FIPA helps you seize business opportunities in B&H by:

o What are FIPA activities?

• Generating new investments by promoting B&H as an attractive location

organic food and pure water, construction, textile, auto-components,

There are many reasons for investing in B&H, such as:

o What are the basic laws and regulations encouraging foreign

Status of Foreign Investors

o What is the status of foreign investors?

o What is the status of foreign citizens?

o What incentives does B&H offer to foreign investors?

• National treatment of foreign investors, i.e., foreign investors have the

overruled by subsequent laws and regulations. Should a subsequent

o Are there any customs incentives?

o Has B&H signed Agreements on Protection of Investments

Bosnia and Herzegovina has Agreements on Promotion and Protection of

o Who will insure my investment in B&H?

4. B&H ECONOMY (INDICATORS)

o What is the current situation in the banking sector of B&H?

o How many international banks are currently present in the B&H

o What are interest rates of commercial banks?

The average effective intrest rate on loans

o What is the international credit rating of B&H?

o Which accounting and auditing standards must be met by

o Which international accounting and auditing companies exist

o What is the exchange rate policy in B&H?

Central Bank of Bosnia and Herzegovina maintains monetary stability by

Source: Agency for Statistics of B&H, *preliminary data for 2019

o What is the annual inflation rate (%) in B&H?

o Volume Index of Industrial Production in B&H – Total Industry

Source: Agency for Statistics of B&H

There are two stock exchanges in Bosnia and Herzegovina:

Flow of FDI in Bosnia and Herzegovina, by years, million EUR

Source: Central Bank of B&H (CBBH),

Source: Central Bank of B&H, August 2019

Top investor countries in B&H

Source: Central Bank of B&H

Top foreign investors in B&H in 2019

According realised projects, the most important investors based on FIPA

Setting up a business in B&H is regulated by:

o What types of companies are permitted by the B&H law?

Steps for Establishing Company

o How long does it take to register a business?

In FB&H, according to the Law, court registration procedure of establishing a

o What are the costs of registering a business?

The costs are as follows:

A company may choose to set up a representative office in order to gain

It is important to remember that a representative office doesn’t have the status

A representative office is restricted from signing contracts on behalf of the parent

o Which items are included in the corporate income tax base?