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Hiring in Bosnia and herzegovina
Bosnia and Herzegovina (BiH or B&H) is a country on the Balkan Peninsula in Southern Europe. Sarajevo is the capital and the largest city. Its economy mainly relies on aluminum and metal industry, tourism, and banking services. Bosnia and Herzegovina’s main trading partners are Germany, Croatia, Serbia and Italy. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Bosnia and Herzegovina’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code Stipulates that employees are generally entitled to 20 days of paid annual leave and probation period may not exceed 6 months. Resident individuals are subject to personal income tax at a flat rate of 10%. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with the Labor Code and tax laws.
statutory labor requirements
Probation Period
RS:
- The employment contract may provide for a trial period for workers, which can be up to three months (contract for a trial period).
- Exceptionally, this period may be extended by mutual agreement for up to three months (Art. 21 ZOR).
FBiH:
- The Labor Code provides the possibility of contracting the probation period may not exceed six months (Art. 18 Labor Law)
Annual Leave
- Employees are generally entitled to 20 days of paid annual leave, and in FBiH, no more than 30 days of leave.
Public Holidays
- New Year's Day (1st January)
- Bosnian Independence Day (1st March)
- Good Friday (Eastern) (17th April)
- Orthodox Easter
- Labor Day (1st May)
Maternity Leave
- Female employees are generally entitled to one year of maternity leave.
- In FBiH, the employee must take at least 42 days of leave, and in RS she must take at least 60 days of leave.
- In FBiH, following her leave, she may work half-time until her children are 2 years old.
- In RS, the employee is also entitled to an additional 6 months of leave if she has twins or for every child from her third child on.
- In FBiH, the employee is entitled to compensation under law, and employers often make up the difference to her full salary.
- In RS, the employee is entitled to compensation of the equivalent of her average salary over the prior 12 months or the time she worked before her maternity leave if it is less than 12 months.
Sick Leave
- Employees are eligible for compensation for at least 5 sick days per year.
Work Hours
- Companies in Bosnia and Herzegovina typically follow a standard Monday to Friday, 40-hour work week.
Overtime
- Overtime is allowed but cannot exceed eight hours per week.
- The premium rate at which an employer pays overtime is decided by collective agreement and can vary by the industry.
Notice Period
RS:
- The notice period may not be shorter than 30 calendar days if the employer is the one terminating the employment contract.
FBiH:
- The notice period shall not be less than 15 days nor more than six months, and the specific length of the notice period shall be regulated by the collective agreement and the rulebook.
- The notice period begins to run from the date of the delivery of notice to the employee or the employer
Severance
RS:
- A worker who has concluded a contract of indefinite duration, and where employment was terminated by the employer, after at least two years of continuous employment with the employer, the employer is obliged to pay a severance.
- The amount of severance pay shall be determined by the collective agreement, rule book and employment contract, but cannot be less than one third of the average monthly wages of the last three months for each full year of service with the employer (Art. 141 ZOR), and depends on the length of service of the employee with the employer.
FBIH:
- The right to severance pay in the event of termination of employment with employees who have a contract for an indefinite period, provided that the contract is terminated after at least two years of work, and the reasons for dismissal are not breaches of obligation or non-fulfillment of obligations under the employment contract.
- Severance pay is determined by the collective agreement, rule book and employment contract but cannot be set at an amount less than one-third of the monthly salary paid to the employee in the last three months before retirement, for each year of work with the employer (Article 100 of the Labor Act).
- The law permits the employee and the employer agree on another form of compensation.
13th / 14th Month Pay
- Yes
- There is no statutory requirement to pay the 13th or 14th month.
- However, it is customary for companies to give Christmas bonus for up to 78% of the basic salary.
income tax
- Bosnia and Herzegovina consists of two entities: Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS), with a third region, the Brčko District (BD), being administered by both.
- In the Federation of Bosnia and Herzegovina, personal income tax (PIT) payers are considered to be:
-
- Residents, subjecting them to tax on their worldwide income.
- Non-residents who perform independent business activity through a permanent place of business activities in the territory of the Federation of Bosnia and Herzegovina, subjecting them to tax on income generated from such permanent place of business.
- Non-residents who perform dependent business activity in the territory of the Federation of Bosnia and Herzegovina, subjecting them to tax on income generated from such dependent business activity.
- Non-residents who earn income from movable and immovable property, royalties, patents, licenses, and capital investments where ownership of the underlying property is in the territory of the Federation of Bosnia and Herzegovina, subjecting them to tax on income earned from such property.
- In Republika Srpska, PIT payers are residents, as well as non-residents who earn income in the territory of Republika Srpska.
- The PIT rate in the Federation of Bosnia and Herzegovina is a flat rate of 10%.
- The PIT rate in Republika Srpska is a flat rate of 10%. Small entrepreneurs are taxed at a 2% rate on their total annual revenue, while foreign-source income is taxed at the prescribed absolute amount.
- The PIT rate in Brčko District is a flat rate of 10%.
|
Income Tax |
|
|
FBiH PIT rates |
10% |
|
RS PIT rates |
10%; Small entrepreneurs: - 2% |
|
BD PIT rates |
10% |
deductible expenses
FBiH deductions
- Interest paid on a mortgage loan is deductible up to the full amount.
- Premium pad on life insurance is deductible up to the full amount.
|
Allowances |
Monthly (BAM) |
|
Personal allowance |
300 |
|
Dependent family member - spouse |
150 |
|
Dependent family member - first child |
150 |
|
Dependent family member - second child |
270 |
|
Dependent family member - third and every next child |
90 |
|
Dependent family member - parent (whose monthly income does not exceed BAM 300) |
90 |
RS deductions
- Interest paid on a mortgage loan is deductible up to the full amount.
- Premium pad on life insurance to an insurance company licensed in Republika Srpska is deductible up to BAM 1,200.
- The paid contribution for voluntary retirement insurance is deductible up to BAM 1,200.
|
Allowances |
Annually (BAM) |
|
Personal allowance |
2400 |
|
Dependent family members |
900 |
BD deductions
- Additional pension insurance is deductible up to BAM 1,800.
|
Allowances |
Annually (BAM) |
|
Personal allowance |
3600 |
|
Dependent family members and persons receiving aliment based on the agreement on life-long aliment (50% of personal allowance) |
1800 |
|
Deduction for invalidity of taxpayer or dependent family member |
10% of personal allowance for every determined 20% of invalidity |
immigration
- When a foreign national intends to stay in B&H for employment, he/she must obtain a work permit issued by the authority responsible for the employment of foreigners in accordance with applicable regulations.
- Depending on the place of residence, or in other words, the location of the employer, a work permit is issued by the authorities responsible for the employment of foreigners in Federation of Bosnia and Herzegovina, Republic of Srpska or Brcko District.
- In Federation of Bosnia and Herzegovina, work permits are issued by Cantonal Employment Services upon approval of the Federal Employment Service.
- In Republika Srpska, work permits for foreign nationals are issued by the RS Employment Service regional offices responsible for the region of employer’s head office.
- In Brcko District work permits for foreign nationals are issued by Department for Professional and Administrative Affairs in the Government of the Brcko District.
- Work permit for employment of a foreigner shall be issued within the specified work permit quota.
- Work permit quota is the number of work permits that may be issued to foreigners in certain occupations in B&H, during one year.
- The annual quota is determined by the Council of Ministers of B&H in accordance with the migration policy and the situation in the labor market.
- A working permit allows foreigners the right to work in Bosnia and Herzegovina, in the same way as Bosnia and Herzegovina citizens, with equal rights and obligations.
- The employment service issues the working permit, based on the Law of foreigner’s employment.
- A work permit cannot be issued for a period longer than 1 (one) year.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Work Permit |
|
1 year |
|
value added tax
- The standard VAT rate is 17%, and the VAT regime applies equally throughout the country of Bosnia and Herzegovina.
- There is no reduced VAT rate in Bosnia and Herzegovina.
|
VAT |
|
|
Standard Rate |
17% |
withholding tax
Dividends
- Dividends paid to a nonresident company are subject to withholding tax at 55% or 10% where the payer company is resident in the FBiH or RS, respectively, unless the rate is reduced under a tax treaty.
- Dividends paid to residents or to nonresident individuals are exempt from withholding tax
Interest
- Interest paid to a nonresident company is subject to a 10% withholding tax, unless the rate is reduced or the payment is exempt from withholding tax under a tax treaty
- Interest paid to residents or to nonresident individuals are exempt from withholding tax
Royalties
- Royalties paid to a nonresident company are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty
- Royalties paid to residents or to nonresident individuals are exempt from withholding tax
Fees for Technical Services
- Fees for technical services paid to a nonresident company are subject to a 10% withholding tax, unless the rate is reduced or the payment is exempt from withholding tax under a tax treaty
- Fees for technical services paid to residents or to nonresident individuals are exempt from withholding tax
|
Type of Payment |
Residents |
Nonresidents |
||
|
Company |
Individual |
Company |
Individual |
|
|
Dividends |
0% |
0% |
5% (FBiH)/ 10% (RS) |
0% |
|
Interest |
0% |
0% |
10% |
0% |
|
Royalties |
0% |
0% |
10% |
0% |
|
Technical Service Fee |
0% |
0% |
10% |
0% |
termination
- In RS the notice period may not be shorter than 30 calendar days if the employer is the one terminating the employment contract.
- In FBiH The notice period shall not be less than 15 days nor more than six months, and the specific length of the notice period shall be regulated by the collective agreement and the rulebook.
- In RS the amount of severance pay shall be determined by the collective agreement, rule book and employment contract, but cannot be less than one third of the average monthly wages of the last three months for each full year of service with the employer (Art. 141 ZOR), and depends on the length of service of the employee with the employer.
- In FBiH severance pay is determined by the collective agreement, rule book and employment contract but cannot be set at an amount less than one-third of the monthly salary paid to the employee in the last three months before retirement, for each year of work with the employer (Article 100 of the Labor Act).
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, and severance pay.
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
Federation of Bosnia and Herzegovina (FBiH) tax administration
- The deadline for submission of the annual tax return is 31 March of the following year.
- In the Federation of Bosnia and Herzegovina, monthly social security contributions have to be paid along with salary payment, but no later than by the end of the following month for the previous month.
- Salary taxation specifications have to be submitted to the tax authorities on the same day when payment of salary and contributions was made, but no later than one day after payment was made.
Republika Srpska (RS) tax administration
- Annual tax returns have to be submitted by 31 March of the following year for previous year.
- In Republika Srpska, monthly salary taxation specifications have to be submitted to the tax authorities by the 10th day of the following month for the previous month.
Brčko District (BD) tax administration
- In Brčko District, the period for reporting withheld PIT is one month.
- An annual tax return is not required in the event when the entire PIT due is considered to be calculated and paid through monthly withholdings from income.
- If this is not the case, annual tax returns have to be submitted by 28 February of the following year.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Bosnia and Herzegovina ranked 90th in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% | Note, Some employers give up to 78% of extra salary as a Christmas bonus but it is not compulsory) 0% |
| Christmas Bonus Over Vacations % | 0% |
| Severance per Year % | Employees are entitled to severance pay that equals 1/3rd of monthly salary after 2 years of service (2.77% of annual salary) |
| Vacations % | Employees are generally entitled to 20 days of paid annual leave (5.49% of annual salary) |
| Notice % | Employees are entitled to 30 days of notice period for one year of service or more (8.24%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 16.5% |
employer accruals
Additional information (Country Accruals)
| Pension |
6.00% |
| Health Insurance |
4.00% |
| Unemployment insurance |
0.50% |
| Vacations |
11.23% |
| Description |
|
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Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | Employees are generally entitled to 20 days of paid annual leave, and in FBiH, no more than 30 days of leave. | Assuming maximum Holidays. This equals 8.22% (30/365 days) of annual income |
| Maternity Leave | In FBiH, the employee must take at least 42 days of leave, and in RS she must take at least 60 days of leave. | Assuming maximum Holidays. This equals 16.4% (60/365 days) of annual income |
| Sick Leave | Employees are eligible for compensation for at least 5 sick days per year. | This equals 1.37% (5/365 days) of annual income |
| Overtime | Overtime is allowed but cannot exceed eight hours per week. The premium rate at which an employer pays overtime is decided by collective agreement and can vary by the industry. |
Rate is subjective |
| Severance | The amount of severance pay shall be determined by the collective agreement, rule book and employment contract, but cannot be less than one third of the average monthly wages of the last three months for each full year of service with the employer (Art. 141 ZOR), and depends on the length of service of the employee with the employer. | Subjective |
| Social Security | Employers must make the following social security contributions:- Pension and Invalid Insurance 17%; Health Insurance 12.5%; Unemployment Insurance 1.5% | This equals 31% of annual income |
