Transfer Pricing in Bosnia and Herzegovina

Bosnia and Herzegovina (BiH) consists of two territorial and administrative entities: the Federation of Bosnia and Herzegovina (FBiH) and the Republic of Srpska (RS), as well as the District of Brcko (BD).

The effective dates for introduction of the initial transfer pricing rules were for FBiH the 1st of January, 2008 and for RS the 1st of January, 2007, although TP rules were not fully developed. The nearest step towards approaching to the OECD rules was made in early 2016, with the adoption of new laws in the field of taxation for legal entities in BiH.

According to articles 31,32,33,34 and 35 of the Income Tax Law of RS and Articles 45 to 48 of the FBiH CPT Law, the transfer pricing legislation in BiH requires a taxpayer to disclose, along with its annual tax return, its transactions with related parties presenting the differences among market and transfer prices which are not in accordance with the arm’s length principle and presenting at the same time the adjusted tax base.

A new Rulebook was introduced on 26 August 2016, published in the Official Gazette of FBiH no, 67/16. Provisions of the Rulebook can be divided in two parts:

• Obligations of companies operating within the FBiH territory, applicable since August 27, 2016;

• Obligations of international groups which will be applicable from January 1, 2018.

Related Party Definition

An entity is considered a related party if there is a possibility of exercising control over or exerting considerable influence on business decisions made. The direct or indirect possession of 25 percent or more of the shares in capital shall mean that control over the taxpayer is possible. The case of direct or indirect possession of at least 25% of the voting rights is considered as having an influence on business decisions (applicable in both FBiH and RS).

The CIT Act and the Rulebook describe in more detail other cases which result in entities being considered as related parties (e.g. significant influence is considered to be mutually high sales turnover, technical dependence, or otherwise gained control over the management).

Transfer Pricing Methods & Data

In accordance with both the FBiH CPT Law and the Income Tax Law of RS, all OECD methods are applicable:

• CUP method

• cost plus method

• resale price method

• profit split method

• transactional net margin method

As far as tax auditors are concerned, the CUP method seems to be the preferred one.

In case that none of the above-mentioned methods can be applied, any other equally applied method can be used, provided that this method is reasonably determined.

Within the FBiH, the forms that need to be prepared and submitted are:

• TP-900 form – Annual return for transfer pricing double taxation avoidance;

• TP-902 – Annual report on controlled transactions between related parties, prepared by the legal entity whose transactions with related parties exceed BAM 500,000 during the financial year (approximately 255.000 EUR);

• CBC-901 form – Annual report on controlled transactions of an international legal entity – submitted by 31 of March of the current year for the previous year (applicable from 1.1.2018)

 Transfer Pricing Audit and Penalties

Additional taxable income assessed is subject to the standard corporate profit tax rate of 10% increased by the penalty interest of 0.04% (in the FBiH) and 0.03 % (in the RS) per day of delayed payment.

In the FBiH, the taxpayer is obliged to submit the transfer pricing documentation within 45 days of a request from the tax authorities.

Statute of Limitations Period

The statute of limitations is 5 years and it commences from the date when the tax return was submitted or from the date when the tax liability arose.

Thin Capitalization Rule

In the RS, no thin capitalization rules apply. In the FBiH, financial expenses for interest per financial agreements and instruments to related parties are generally recognized for tax purposes. In case of a loan or credit between related parties, the amount of interest and other expenses related to the loan or credit that is deductible for tax purposes must not exceed a debt to equity ratio of 4:1. Those financial expenses that exceed the specific ratio cannot be transferred to another tax period. However, this does not apply to banks and insurance companies.

Dajana Topic (
Anastasia Sagianni (
Tel:  +387 51 961 610