Bosnia & Herzegovina Amends Law On Tax Incentives For Employers

• Published date: 05 April 2021
• Subject Matter: Employment and HR, Tax, Employee Benefits & Compensation, Employee Rights/ Labour Relations, Tax Authorities
• Law Firm: Eurofast
• Author: Ms Dajana Topic

In order to clarify the application of tax incentives, on 22 July 2020, the National Assembly of the Republic of Srpska (RS) adopted amendments to the Law on Incentives in the Economy.

In the Law on Incentives in the Economy of the RS (Official Gazette No.52/19), after the Article 5, a new Article 5a is added with a provision which clarifies that incentives for economic development are not granted to private entities in which the RS (eg. through a local self-government body) owns more than 50% of the capital.

However, the main amendment relates to the methodology used for calculating the starting salary of an employee and the incentive granted to the employer who has decided to increase it. According to the Law, taxpayers that opt to increase the salaries of their employees may be entitled to a refund equal to the amount of social security contributions paid on the salary increase. A salary increase is defined to mean the difference between the new salary paid and the starting salary of the employee.

The amount of the incentives granted for salary increases is determined according to the following criteria:

• If the initial amount of the employee's salary (starting salary) is higher than 281 EUR, the legal entity is entitled to funds in the amount equal to 70% of the paid contributions on the salary increase.
• If the employee's starting salary is equal to or higher than the minimum monthly...