Bosnia and Herzegovina
Corporate - Income determinationLast reviewed - 21 April 2023
Taxable profit is profit determined by adjusting the accounting profit as stated in the profit and loss statement and determined in accordance with International Financial Reporting Standards/International Accounting Standards (IFRS/IAS) and accounting legislation, in accordance with the provisions of the CIT law.
Taxable income in the Federation of Bosnia and Herzegovina is the income determined in the financial statements, increased for tax non-deductible costs and other tax non-deductible items and decreased for non-taxable items in accordance with the CIT Law of the Federation of Bosnia and Herzegovina.
Income on the basis of collected written-off debt, in the event that it was included in income in a previous period and was not subject to tax allowable or recognised expenditure, shall not be included in the tax base.
FBiH inventory valuation
Expenses of production in accordance with accounting regulations and IFRS/IAS shall be recognised in the value of stocks of unfinished production, semi products, and finished products for the calculation of taxable profit.
The inventory is valued by using the average price method.
FBiH capital gains
Capital gains that increase the CIT base are all amounts that directly increase the accumulated or current profit in the balance sheet in accordance with IAS.
Capital gains that increase the CIT base are also considered to be gains from transactions of sales or transfers of assets if such profit is not included in the balance sheet. Such capital gains are determined as the difference between the value of the transaction and the purchase value, deducted for tax depreciation. If such difference is negative, it is considered as a capital loss.
For the purpose of determining the capital gains, the price of the transaction is the price stipulated in the contract, or the market price of the transaction if the stipulated price is lower than the market price.
Increase or decrease of taxpayer's equity performed in accordance with the Company Law is not considered as capital gain or loss.
FBiH dividend income
Dividends realised based on participation in the capital of other taxpayers shall not be included in the tax base. Shares in the profit of a business association will be considered dividends.
FBiH interest income
Interest income is generally included in the taxable base. The exception, as per FBiH government decision, is for interest income realised from state bonds issued for war claims, which should not be included in the taxable base (the CIT law does not explicitly allow for this, which may lead to discussion with the tax authority).
FBiH royalty income
Royalty income in the Federation of Bosnia and Herzegovina is generally included in the taxable base.
FBiH foreign income
The Federation of Bosnia and Herzegovina taxes resident corporations on a worldwide basis. There are no deferral or anti-deferral provisions in the Federation of Bosnia and Herzegovina.
Taxable revenue for the purpose of computing the tax base in Republika Srpska includes total revenue presented in the income statement, with the exemption of revenue that has different tax treatment under the CIT Law.
RS inventory valuation
Inventory includes goods used for resale, final goods produced by the taxpayer, semi-final goods used for further production, as well as main and auxiliary materials for production.
Purchase value of inventories at the beginning and end of a fiscal year has to be expressed using the same method for determination of purchase value of inventories.
The costs of material and purchase value of sold goods can be determined by using the weighted average cost method or the first in first out (FIFO) method.
RS capital gains
Capital gain is realised through the sale or other type of transfer of capital or investment assets and represents a difference between the sales price and adjusted base of an asset. The sales price is the contracted price (i.e. the market price established by the competent tax authority in case it finds the contracted price to be lower than the market price).
Capital gains or losses realised during the fiscal year can be offset, and the realised net gain or loss is added or subtracted from the taxable base, if they are not already included in the income or expense.
RS dividend income
Income from dividends is not included in the taxable base.
RS interest income
Interest income is generally included in the taxable base.
Income in the form of interest or its functional equivalent from securities issued by Republika Srpska or by local authority is excluded from the taxable base.
RS royalty income
Royalty income in Republika Srpska is generally included in the taxable base.
RS foreign income
Republika Srpska taxes resident corporations on a worldwide basis. There are no deferral or anti-deferral provisions in Republika Srpska.
Taxable income in Brčko District includes all income from any source (domestic or foreign), whether in cash or in kind, independent of the relationship to the business activity of the legal person.
BD inventory valuation
The purchase value of inventories can be determined by using the FIFO method or the average cost method.
BD capital gains
Capital gain is realised by sale or transfer of capital and investment goods and represents the positive difference between the sales price and adjusted property base.
Capital gains or losses realised during the fiscal year can be offset, and the realised net gain or loss added or subtracted from the taxable base, if they are not already included in the income or expense.
BD dividend income
Income from dividends is not included in the taxable base.
BD interest income
Income from securities issued by or guaranteed by the state authority, Central Bank BiH, or local authority is excluded from the taxable base.
BD royalty income
Royalty income in Brčko District is generally included in the taxable base.
BD foreign income
Brčko District taxes resident corporations on a worldwide basis. There are no deferral or anti-deferral provisions in Brčko District.