The Official Gazette of the Federation of Bosnia & Herzegovina (FBIH), no. 15/16 as published on February 26th, 2016 included the new Profit tax Law applicable in FBIH. The Law entered into force eight days after its publication.
Some of the most significant amendments in the new law include:
• A taxpayer for income generated in FBiH is now also considered to include a subsidiary or a legal entity from the Republic of Srpska and Brcko District, which is registered in the territory of the Federation.
• Tax incentives previously valid for exports and for the employment of more than 50% of disabled persons have been abolished.
• The provisions which stipulated tax deductions in respect of investments in production and manufacturing have been modified in comparison to the previous version of the law. Consequently, taxpayers investing in production equipment in value up to 50% of the current profits may be eligible for a 30% deduction of the profit tax liability in the year of investment.
• The new law introduces a tax incentive for newly-employed staff.
Expenses from sponsorship are now recognized as tax deductible expenses in the amount not exceeding 3% of total revenues.
• The deduction of member fees for participation in trade chambers has been abolished.
• The terms of recognition of write-offs have been modified. As a result, such expenses are now recognized if claims were included as income of taxpayers in the previous tax period but have not been collected within 12 months from the due date of payment or are under litigation, or are under liquidation or bankruptcy proceedings against the debtor.
• Interest paid by a related party is deductible up to four times the amount of registered capital. Any difference between that amount of interest and the interest paid is treated as a dividend.
The Act stipulates that the Federal Minister of Finance will define and implement the required rules and procedures related to the new income tax law and the transfer pricing rules.
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