Bosnia & Herzegovina: Instruction on indirect tax exemption under Instrument for Pre-Accession Assistance Programme II

Bosnia & Herzegovina | March 2016 |

On November 11th, 2015, a new Instruction issued by the Director of the Indirect Tax Authority of Bosnia and Herzegovina entered into force. The Instruction was published in the Official Gazette of Bosnia and Herzegovina on November 30th, 2015.

Under the title “Instruction on claiming customs duties and taxation payment exemption in accordance with the Framework Agreement between Bosnia and Herzegovina and the Commission of the European Communities on the rules for cooperation to implement EC financial assistance to Bosnia and Herzegovina under the Instrument for Pre-Accession Assistance (IPA II)”, the document defines in detail the rules and procedures for exemption from VAT and other indirect taxes (excises and road fees) in regard to supplies of goods and services financed by the Instrument for IPA II.

IPA II is part of a pre-accession program, which supports structural reforms in pre-defined sectors and areas as well as helps introducing EU standards. IPA II covers the time – period 2014 – 2020 and is a successor of the first IPA program. In taxation terms, the major differences between IPA II and IPA are the following:

• IPA introduced a VAT exemption for goods and services supplied within approved projects. IPA II, in addition to the VAT exemption being available to all suppliers under the projects of IPA II, exempts suppliers of oil for the approved projects from payment of excises and road fees as well.
• IPA II introduces refunds of VAT for businesses, which paid VAT for supplies for projects financed by IPA II during the so-called legal vacuum period preceding the entry into force of the IPA II agreement. Businesses that supplied oil for approved projects will be granted a refund of the VAT, excises, and road fees paid only on supplies performed for projects of IPA II.

Igor Vujasinovic
Senior Accountant