How can a foreigner open a company in Bosnia and Herzegovina

Bosnia and Herzegovina is a country located in the heart of the Balkans and is part of the Western Balkans region of Southeastern Europe. Thanks to their history as part of the Yugoslav state, strong ties still exist between the Balkan countries, which provide excellent business opportunities.

How can a foreigner open a company in Bosnia and Herzegovina

Bosnia and Herzegovina is committed to supporting businesses and creating a favorable environment for growth and innovation, making it a promising market for both local and foreign businesses.

Advantages of doing business in Bosnia and Herzegovina

1. Qualified workforce

On average, the country's workforce is well educated and extremely skilled with good employability. The state also regularly distributes subsidies for the employment of people registered in the unemployment exchange, groups that are more difficult to employ, such as the elderly, young people or those who have been educated in another profession, people with disabilities.

2. Proximity to European markets

Due to its location, Bosnia and Herzegovina attracts many investors who want to build a network of clients in both South-Eastern Europe and Central Europe. With a favorable business environment and entrepreneurial growth in Bosnia and Herzegovina, such a plan is easier to reach potential investors.

3. Developed infrastructure

Bosnia and Herzegovina boasts a modern infrastructure that allows people to quickly move goods and materials from one point to another. Due to the small size of the country, distances are relatively short.

4. Investment climate

In Bosnia and Herzegovina there are no restrictions for foreign investors entering the market. Investments are permitted to both foreign legal entities and individuals, unless otherwise provided by national and international legal regulations. According to the law, there are several free economic zones in Bosnia and Herzegovina, and investors here can carry out their activities on preferential terms. The Ministry of Foreign Trade and Economic Relations is responsible for these special investment zones.

Types of companies in Bosnia and Herzegovina

Limited liability company

LLC is the most common legal entity used by entrepreneurs setting up a business in Bosnia and Herzegovina. This entity requires only 1 director and 1 shareholder, who may be of any nationality and may not be resident in the country. A minimum paid-up share capital of US$1,150 will be required to complete the registration process.

Joint stock company

A joint stock company is similar to a limited liability company (in terms of limited liability of members), but it is designed to meet the needs of large businesses, as it has a larger minimum share capital (approximately 25,000 euros).

Public limited company

To create this Bosnian business, at least 1 shareholder is required, which can be either an individual or a legal entity. The shareholder may be of any nationality and may not be a resident of the country. This entity will require a minimum share capital of $29,000 if the company issues shares to the public.

Branch

A Bosnian company can carry out commercial activities like any other legal entity, although the scope of activity of the branch is determined by the parent company. The branch must appoint at least one Bosnian resident of any nationality to act as the company's representative in the country.

Representation

Foreign legal entities can create representative offices in Bosnia and Herzegovina by registering the entity with the Ministry of Foreign Trade and Economic Relations. Such an entity is not considered a legal entity and has no right to conduct any commercial activities in Bosnia and Herzegovina. The representative office can only conduct marketing research and engage in advertising activities for its parent company.

Foreign entrepreneurs can open the same types of legal entities in Republika Srpska.

Business registration

Creating a company in the country includes a number of steps:

  • Agreement/decision on establishment. This document indicates the company name, address, type of business, ownership and other important information. (must be certified by a notary).
  • Payment of the required capital in the bank (bank of the founder’s choice).
  • Registration of a company in the Register of Business Entities.
  • Making a stamp with the name and address of the company. Don't forget to choose a unique name.
  • Opening a bank account.
  • Registration of the company and employees with the tax office.
  • Obtaining a work permit certificate issued by the Municipal Bureau of Economics and other permits/licenses.

The costs associated with setting up a business include administrative costs of approximately 500 euros and costs for a lawyer and notary of between 500 and 1000 euros. The legal process of setting up a business, as prescribed by law, usually takes 5 days, although in practice the complex procedure can take up to 30-45 days.

Taxes

A taxpayer is any legal entity that receives income from a business in Bosnia and Herzegovina where the company has its registered office. Depending on the location of the registered office, the law of one of the two entities applies (Federation of Bosnia and Herzegovina — FBiH or Republika Srpska — RS).

Corporate income tax is 10%° both in FBiH and RS. The tax rate on dividends is 5% (FBiH)/10% (RS) in case of a foreign corporation, otherwise it is 0%.

Income tax for individuals is paid at a rate of 10% in FBiH and 8% in RS. In both FBiH and RS, self-employed income tax is paid at a rate of 10%.

Tax on income from copyrights, capital, capital gains and other income is paid at a rate of 10% in the Federation of Bosnia and Herzegovina and 13% in the Republika Srpska.

The standard rate of value added tax (VAT) on taxable turnover of goods and services and import of goods into Bosnia and Herzegovina is 17%. Business activities that are of public interest, such as medical care, postal services, education, culture and sports, are exempt from VAT.

Reporting

All companies in Bosnia and Herzegovina are required to file annual financial statements in accordance with the local Accounting and Auditing Law and International Accounting Standards and International Financial Reporting Standards. Some companies are also required to undergo an audit, especially large and medium-sized companies.

Company size is determined by taking into account 2 of 3 criteria for determining company size: a large company has more than 249 employees, income from operations exceeds KM 40,000,000, or book value of assets exceeds KM 20,000,000. Meanwhile, the qualification criteria for a medium-sized enterprise are as follows: number of employees from 49 to 249 people, operating income from 8,000,000 KM to 40,000,000 KM and assets in accounting documents from 4,000,000 KM to 20,000,000 KM.

7/19/24
Julia Taraday, REAB Consortium
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