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Bosnia and Herzegovina Investment Guide Series – Foreign Investments

Bosnia and Herzegovina Investment Guide Series – Foreign Investments

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In accordance with the Law on Foreign Direct Investment Policy in Bosnia and Herzegovina, foreign investors are guaranteed the following:

  • Foreign investors have the same rights and obligations as residents of Bosnia and Herzegovina.
  • Foreign investors can open bank accounts in any commercial bank in domestic or freely convertible currency.
  • Foreign investors have the right to freely employ foreign nationals unless otherwise specified by the laws of B&H.
  • Foreign investors have the same property rights over real estate as domestic legal entities.
  • Foreign investors are protected against nationalization, expropriation, requisition, and measures with equivalent effect. Such measures can only be taken in the public interest, in accordance with applicable laws and regulations, and with payment of adequate compensation.
  • Foreign investors have the right to repatriate profits resulting from their work in Bosnia and Herzegovina.
  • The rights and privileges granted to foreign investors, as well as the obligations arising from the Law on Foreign Direct Investment Policy, cannot be abolished or invalidated by subsequently enacted laws and regulations. The rights and privileges granted to foreign investors, as well as the obligations arising from the Law on Foreign Direct Investment Policy, cannot be abolished or revoked upon the enactment of subsequently adopted laws and regulations.

AGREEMENTS ON THE PROTECTION OF FOREIGN INVESTMENTS

 After 2015, by signing the Stabilization and Association Agreement (SAA) between the European Union (EU) and Bosnia and Herzegovina (B&H), and in 2022, by obtaining candidate status for EU membership, Bosnia and Herzegovina is one step closer to aligning its legislative framework with EU legislation. This step has significantly increased the stability of trade and economic relations between the European Union and Bosnia and Herzegovina.

  • In addition to the above, Bosnia and Herzegovina has concluded the Central European Free Trade Agreement (CEFTA) with Macedonia, Serbia, Albania, Moldova, Montenegro, and Kosovo in order to protect foreign investments and facilitate access to other European and global markets.
  • Bosnia and Herzegovina has also entered into a Free Trade Agreement with the European Free Trade Association (EFTA) countries, including Switzerland, Norway, Iceland, and Liechtenstein.
  • Furthermore, Bosnia and Herzegovina has signed a Free Trade Agreement with Turkey, providing access to a market of 70 million people.
  • Bosnia and Herzegovina has a preferential trade system with New Zealand, Japan, Australia, and member countries of the Eurasian Economic Union.

Bosnia and Herzegovina applies Agreements on Promotion and Reciprocal Protection of Investments with: Albania, Austria, Belgium, Luxembourg, Belarus, Czech Republic, Denmark, Egypt, Finland, France, Greece, Croatia, Netherlands, Iran, Italy, Jordan, Canada, Qatar, China, Kuwait, Lithuania, Hungary, North Macedonia, Malaysia, Moldova, Germany, Pakistan, Portugal, Romania, USA, San Marino, Slovakia, Slovenia, Serbia, Spain, Switzerland, Sweden, Turkey, United Kingdom, and Ukraine.

Considering the aforementioned relationships that Bosnia and Herzegovina maintains with other countries, establishing a company in B&H represents an opportunity for exporting to a market of nearly 600 million people without paying customs duties.

CUSTOMS BENEFITS

Foreign investments will be exempt from paying customs duties and obligations, except for passenger vehicles, entertainment machines, and gambling devices.

Imported production equipment that is not produced in Bosnia and Herzegovina, and is imported for new or expanded production, production modernization, introduction of new or upgraded production technology directly related to production activities, is exempt from paying import customs duties.

Production assets and other equipment belonging to a company that definitively ceases its activities in another country and relocates to the customs territory of Bosnia and Herzegovina to engage in similar activities are exempt from paying import customs duties.

FREE ZONES

Currently, there are four free zones in Bosnia and Herzegovina: "Visoko" LLC - Visoko, "Vogošća" LLC - Vogošća, "Hercegovina" LLC - Mostar, and "Holc" LLC - Puračić (near Lukavac).

According to the Law on Free Zones of Bosnia and Herzegovina, a free zone can be established by one or more domestic or foreign legal and natural persons registered in Bosnia and Herzegovina.

The following are the fiscal benefits of a free zone:

  • Free zone users are exempt from paying VAT and import duties on equipment used for production.
  • Investments in free zones, profit transfers, and investment transfers are also free.
  • Establishing a free zone is economically justified if, based on the submitted economic feasibility study of establishing the free zone, it can be assessed that the value of goods exported from the free zone will exceed at least 50% of the total value of produced goods leaving the free zone within a 12-month period.
  • Exemption from paying VAT for the use of goods (excluding energy sources such as electricity, gas, etc.) in free zones, which are used for production and/or further trade of goods intended for export from Bosnia and Herzegovina.
  • Exemption from paying VAT on equipment, facilities, and tools used in free zones for the production and/or further trade of goods intended for export from Bosnia and Herzegovina.
  • Exemption from paying VAT for all services provided to free zone users directly related to the introduction of goods into free zones and the construction of facilities for conducting activities in free zones.

By Leila Salijevic, Attorney at Law, and Marija Plavsic, Business Development Manager, Ibrahimovic & Co 

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