Bosnia and Herzegovina (BA)
Bosnia and Herzegovina (BiH) is a Balkan gem combining Ottoman heritage, Habsburg architecture, Adriatic mountain scenery, and one of the lowest costs of living in Europe.
Tax & Payslip Guide
Understanding your taxes in Bosnia and Herzegovina — tax year Calendar year, 1 January – 31 December.
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | ∞ | 10% (FBiH) / 8% (RS) | Bosnia and Herzegovina applies flat personal income tax rates that differ by entity: 10% in the Federation of BiH (FBiH) and 8% in Republika Srpska (RS). There is no progressive rate structure in either entity. In FBiH, a personal deduction (lični odbitak) of KM 300/month reduces taxable income. In practice, employees with gross salaries near minimum wage pay little or no income tax after the deduction. |
🏛️ Social Contributions
Mandatory pension contribution in the Federation of BiH. Employee pays 17% on gross salary; employer pays an additional 6%. Combined rate of 23% of gross. Paid to Federalni zavod za penzijsko i invalidsko osiguranje (FZPiO).
Mandatory health insurance contribution in FBiH. Employee 12.5%; employer 4%. Paid to the cantonal Zavod zdravstvenog osiguranja. Combined rate: 16.5% of gross.
Mandatory unemployment insurance in FBiH. Employee 1.5%; employer 0.5%. Paid to cantonal Zavod za zapošljavanje.
In FBiH: employee total social contributions remain 31% of gross salary. Employer contributions were reduced from 10.5% to 5% under the FBiH social contribution reform effective 1 July 2025. Total employer cost: 105% of gross (previously 110.5%). Individual employer contribution rates within the 5% total have been restructured — verify current breakdown with Porezna uprava FBiH.
In Republika Srpska: employee pays 17% pension contribution only. Employers do not pay pension contribution separately — the model differs from FBiH.
In RS: employee pays 12% health insurance. Employer model in RS: contributions are structured differently — the gross salary quoted in RS is typically the all-in basis.
In RS: unemployment and child/parental contributions total approximately 3% employee-side. RS employee total: approximately 32%.
🛒 VAT Rates
VAT (PDV — Porez na dodanu vrijednost) in BiH is administered at the state level by the Indirect Taxation Authority (UIO/ITA), the only truly national tax authority in BiH. The 17% single rate has been in place since 2006 and was a key condition of IMF standby arrangements. All businesses with annual turnover exceeding KM 50,000 must register for VAT.
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Tax residency in BiH is determined by the entity where you are registered as a resident. Tax residency arises after 183+ days of physical presence in BiH in a calendar year, or by having your permanent place of residence or habitual abode in BiH. Tax residents are taxed on worldwide income (in principle) — however, practical enforcement of foreign income taxation is limited. Non-residents are taxed only on BiH-source income. Foreign workers paying taxes in their home country under a double-taxation agreement may be exempt from BiH income tax on foreign-source income. BiH has double taxation agreements (DTAs) with approximately 42 countries including most EU states, USA, UK, Switzerland and Russia.
📋 Double Tax Treaties
BiH has active DTAs with approximately 42 countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, UK, USA, Russia, China, Turkey, UAE and others. Check the RS or FBiH Ministry of Finance for the full list. DTAs generally prevent double taxation on employment income, pensions, dividends and interest — but specific provisions vary. Expats receiving income from their home country should review the applicable DTA before assuming BiH tax exemption.
Tax & Payslip
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