ENVIRONMENT FOR INVESTMENT
Bosnia and Herzegovina is a forward-moving country that has achieved astonishing progress in improving the business climate. Through its strong reforms, the adopting and approving of strategic documents, laws and regulations, Bosnia and Herzegovina has significantly improved its business environment and created better conditions for foreign investors. Bosnia and Herzegovina is open to foreign investors, especially in terms of balancing their rights and obligations with the rights and obligations of domestic investors.
Bosnia and Herzegovina has signed the Central European Free Trade Agreement (CEFTA), creating a free trade zone with access to a large consumer market. Also, the process of negotiation to join the World Trade Organization is underway.
STABLE FINANCIAL SECTOR
Bosnia and Herzegovina has the most stable currency in the South East Europe, which is directly linked to the Euro. Central Bank of Bosnia and Herzegovina maintains monetary stability by issuing domestic currency according to the Currency Board arrangement with full coverage in freely convertible foreign exchange funds under fixed exchange rate 1 KM: 0, 51129 EUR.
The banking sector dominates the financial system in BiH with 84% of the total assets of the financial sector (end 2010). Privatization of the banking sector is almost completed, 95% of total assets and 82% of equity is concentrated in banks with majority foreign ownership. B&H was assigned B credit rating by Standard & Poor’s Agency with stable outlook (March 2012) and B3 sovereign credit rating with stable outlook by Moody’s Investors Service (July 2012).
FAVOURABLE TAX SYSTEM
One of the main reasons for investing in B&H is also favorable tax system. Bosnia and Herzegovina has one of the lowest rates of VAT (17%) in the region and Europe, as well as the very acceptable corporate tax rates that are also among the lowest in the region and Europe (10%).
INCENTIVES FOR FOREIGN INVESTORS
In Bosnia and Herzegovina there are numerous privileges and incentives at disposal for foreign investors
Favorable Legislation
Law on the Policy of Foreign Direct Investments of Bosnia and Herzegovina (Official Gazette of BiH, 17/98, 13/03 and 48/10) ensures:
National treatments of foreign investors, i.e., foreign investors have the same rights and obligations as residents of BiH.
Foreign investors are entitled to open accounts in any commercial bank in domestic and/or any freely convertible currency on the territory of BiH.
Foreign investors are entitled to freely employ foreign nationals, subject to the labor and immigration laws inBiH.
Foreign investors are entitled to transfer abroad, freely and without delay, in convertible currency, proceeds resulting from their investment in BiH
Foreign investors may own real estate in BiH. Foreign investors enjoy the same property rights in respect to realestate as BiH legal entities.
Foreign investors are protected against nationalization, expropriation, requisition or measures having similar effects; such measures may take place only in the public interest in accordance with the applicable laws and regulations and against the payment of an appropriate compensation, i.e. compensation that is adequate, effective and prompt.
The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment (mentioned above) cannot be terminated or overruled by subsequent laws and regulations.Should a subsequent law or regulation be more favorable to foreign investors, the investor will have the right to choose the regime by which the investment will be regulated.
The BiH government supports foreign investments with a number of measures, including:
1. CUSTOMS BENEFITS
Equipment of the foreign investor being imported as part of share capital is exempt from paying customs duties (with the exception of passenger vehicles, slot and gambling machines).
Equipment of the foreign investor being imported as part of share capital is exempt from paying customs duties (with the exception of passenger vehicles, slot and gambling machines). In order to enjoy this benefit, the foreign investor should submit a written request for exemption from paying import duties to the competent customs authority (according to the place of seat of the company) along with the following documents:
-contract or other relevant document about the investment on the basis of which the equipment is being imported,
-proof of registration of the investment at the competent authority,
-specification of equipment with tariff number, tariff mark (with quantity indication), single and total value, certified by the investor,
-statement of the investor that the equipment is not older than 10 years age limit,
-Certificate of the competent institution confirming that the imported equipment complies with the environmental and employment protection standards.
The Customs Office issues a decision within 15 days upon submission of the request.
2. FREE TRADE ZONES IN BIH are part of the customs territory of BiH and have status of legal entity. According to the Law on Free Trade Zones of BiH, Free trade zone founders may be one or more domestic and foreign legal entities or natural persons. The free zone establishment is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50% of the total value of manufactured goods leaving the free zone within the period of 12 months. There is possibility to use the space out of the zone (the same owner) for warehousing.
ENTITY LEVEL INCENTIVES
Republic of Srpska
Tax and other benefits
The Law Amending the Law on Profit Tax RS introduced tax base reduction in the value of investment for: Investment in equipment intended for the company production activity -Investments in plants and immovable property used for manufacturing and processing activities Tax base reduction in amount of paid personal income tax and mandatory constitution is provided also for employing 30 workers year (workers who were on the official evidence of Employment Office of RS) during a calendar year.
Government of the Republic of Srpska adopted the Regulation on Requirements and Manner of Implementation of the Investment and Employment Support Program (Official Gazette of The Republic of Srpska no. 70/12).
The Regulation sets forth requirements for and manner of encouraging and supporting direct investments and employment growth in the territory of the Republic of Srpska, criteria for award of funding, schedule of payment of awarded funding, and other issues relevant to competitiveness growth of the Republic of Srpska through inflow of direct investments aimed at employment in new jobs, transfer of new knowledge and technologies and balancing of regional development of the Republic of Srpska.
Total funding to be awarded shall be set in proportion to the value of investment and number of the newly employed, taking into account also the place of investments and fulfillment of criteria set forth by this Regulation. The funds are intended for investments in manufacturing sector of minimum investment value of BAM 2,000,000 and providing employment for at least 20 workers, i.e.:
•in the territory of the developed and medium-developed local self-governance units in the Republic, in the amount of BAM 3,500 (per new employee)
•in the territory of the underdeveloped and extremely underdeveloped local self-governance units in the Republic, in the amount of BAM 5,000 (per new employee)
Exempt from the above, investment projects with investment value over BAM 25,000,000, which provide employment to at least 100 new employees, regardless of the level of development of the local self-governance unit where the investment takes place, will receive the funds in the amount of 15% of the total value of investment.
Criteria for Allocation of Funds:
1. Number of new employees
2. Reference of investors
3. Share of domestic suppliers
4. Durability of investment or business
5. New technology and transferability of skills and knowledge to the local suppliers
6. Economic effects of the investment project
7. Letter of support or letter of intention of the municipality or the city, which provide incentives and benefits to the applicant, in accordance with the regulations of the Republic of Srpska, in the areas in which the investor intends to invest.
Each of the criteria is awarded a certain number of points, and the total number of points is up to 160.
Allocation of funds is conducted in accordance with the public notice, which is published by the Ministry of Finance of the Republic of Srpska.
Also, there are different incentives on Entity and Municipal level for employment new workers, then incentive for exporters etc.
Federation BiH
Tax Benefits
-The Federation Law on Corporate Income Tax enables the taxpayer, who in the year for which the corporate income tax is being determined, has achieved 30% of their total revenue by export to be exempted from the tax payment for that year.
-The taxpayer who in the period of five consequent years invests into production in the value of minimum 20 million BAM, on the territory of the Federation of Bosnia and Herzegovina, is being exempted from the payment of corporate income tax for the period of five years beginning from the first investment year, in which minimum four million BAM must be invested.
FAVOURABLE TRADE AND OTHER AGREEMENTS
One of the reasons for investing in BiH is also the favorable geographical position. Due to the position that BiH has in the South Eastern and Central Europe, if you place your production in BiH you can focus it in all directions, further more numerous markets are becoming available, such as the EU market, Turkey, USA, Japan, Canada and many others.
With the purpose of facilitating trade, creating preconditions for the increase in exchange of goods (and particularly export), the creation of a favorable environment for domestic and foreign investments, Bosnia and Herzegovina concluded certain number of bilateral/multilateral free trade agreements.
As a result, and due to the position that B&H has in the South Eastern and Central Europe, starting a business in Bosnia and Herzegovina means the opportunity of exporting to a market of app. 600 million people without paying any customs duties!
Bosnia and Herzegovina has signed the Central European Free Trade Agreement (CEFTA), in effect as of November 2007, with the following countries:
B&H has also signed a Free Trade Agreement with Turkey which provides additional free access to this consumer market with 70 million people.
The Interim Agreement on Trade and Trade-related Matters (IA) between EU and BIH entered into force on July 1, 2008, and will be in force until the Stabilization and Association Agreement (SAA), signed in Luxemburg on June 16, 2008, is ratified by all EU member states. The IA effectively creates a free trade area, with progressive opening of the market of Bosnia and Herzegovina facilitating economic and social development.
Bosnia and Herzegovina has profited from EU autonomous trade measures since 2000. Following the entry into force of the Interim Agreement, access of products from Bosnia and Herzegovina to the EU expanded, and EU exports to the country have been granted trade preferences.
BIH has generalized system of preferences with: : USA, New Zealand, Japan, Russia, Kazakhstan and Belarus. Furthermore, BIH has preferential export regime with Iran.
EFTA
Free Trade Agreement between Bosnia and Herzegovina and EFTA (Switzerland, Norway, Iceland and Liechtenstein) was signed on 24 June 2013 in Norway, and after ratification of this agreement will come to a complete abolition of customs duties on imports of goods between the Parties.
AGREEMENTS ON AVOIDANCE OF DOUBLE TAXATION
Bosnia and Herzegovina has 37 Agreements on Avoidance of Double Taxation with the following countries:
Albania, Algeria, Austria, Belgium, China, Croatia, Czech Republic, Cyprus, Denmark, Egypt, Finland, France, Germany, Hungary, Iran, Ireland, Italy, Jordan, Kuwait, Malaysia, Moldova, Montenegro, Netherlands, Norway, Pakistan, Poland, Qatar, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Sri Lanka, Turkey, United Arab Emirates, United Kingdom and Northern Ireland.
AGREEMENTS ON PROMOTION AND PROTECTION OF INVESTMENTS
Bosnia and Herzegovina has 40 Agreements on Promotion and Protection of Investments with the following countries:
Albania, Austria, Belgium and Luxemburg, Belarus, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Finland, Germany, Greece, Hungary, India, Iran, Italy, Jordan, Kuwait, Lithuania, Macedonia, Malaysia, Moldova, Netherlands, OPEC Fund, Pakistan, Portugal, Qatar, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Switzerland, Sweden, Turkey, Ukraine, United Kingdom, USA – OPIC.
FDI INSURANCE INSTRUMENTS IN BOSNIA AND HERZEGOVINA
Foreign investors concerned about risks of transfer restrictions, expropriation, war and civil disturbances and denial of justice, can be insured against these risks with the European Union Investment Guarantee Trust Fund for Bosnia and Herzegovina, administered by the Multilateral Investment Guarantee Agency (MIGA, member of the World Bank Group)
ATTRACTIVE SECTORS
AGRICULTURE & FOOD PROCESSING
Abundant natural resources and optimal climate conditions make BiH an ideal place for agriculture and food processing industry. Significant part of the country's land area is agriculture land, including arable land, mountain pastures, improved grazing land, orchards and vineyards. Investors can enjoy various investment opportunities: vegetable and fruit growing, wine production, field crops, medical and aromatic herbs, livestock and forage production, fish farming and food processing. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/investment%20projects%20-%20agriculture.htm or contact amir.kazic@fipa.gov.ba
TOURISM SECTOR
Bosnia and Herzegovina, a land of breath-taking natural beauties and everlasting historical and cultural heritage, largely matches the new market travel trends particularly requirements of the travelers who are looking for new destinations, adventure and authenticity. Investment opportunities in the tourism sector are various, including: ski and mountain tourism, ecotourism, spa tourism, sea tourism, cultural heritage and religious tourism, adventure and sport tourism. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/investment%20projects%20-%20tourism.htm or contact nina.pobric@fipa.gov.ba
METAL PROCESSING INDUSTRY
The metal processing industry in BiH is quite large, covering the processing of ferrous and nonferrous metals, particularly iron, steel and aluminium, lead, zinc and copper. This sector has permanent and high growth rate of over 10% within past years, being the largest exporter in Bosnia and Herzegovina. BiH metal processing offers strong human and resources base and long tradition enabling sustainable development of various value-added businesses, export oriented in particular. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/investment%20projects%20-%20metal%20-%20metal.htm
or contact Tanja.Bojovic-Simic@fipa.gov.ba
TEXTILE AND FOOTWEAR
Bosnia and Herzegovina has a long tradition and an international reputation as a former supplier of textile and footwear based consumer products to the German and Italian markets. Labour force is skilled under a very low cost and that attracts foreign companies who moved complete production to BiH. Investment opportunities include both engagement in so-called “Lohn businesses” or creation of the new products and collections. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/index.htm or contact drago.vucic@fipa.gov.ba
AUTOMOTIVE INDUSTRY
Numerous foreign companies that have invested in automotive industry of BiH (metal production and processing, tool making, plastic processing, mechanical and electrical engineering, automotive textile products) experienced dynamic development and achieved international standards, enabling export in average 90% of their production. With highly qualified labour force and strategic location, BiH can be an excellent supplier base for reputable automotive producers. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/investment%20projects%20-%20metal%20-%20automotive.htm
or contact Tanja.Bojovic-Simic@fipa.gov.ba
ENERGY SECTOR
Based on enormous potentials of coal, hydro and renewable energy sources as well as long tradition, energy sector is one of the most attractive sectors in the country. The investors can benefit from foreseen investment projects including: large thermal power generation projects, large, small and mini hydropower projects or wind energy potentials. The electricity, currently mostly produced in hydro and thermal plants, exceeds the domestic demand and it is largely exported. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/investment%20projects%20-%20energy.htm or contact amir.kazic@fipa.gov.ba
WOOD INDUSTRY
Out of all natural resources of BiH, its timber is best known and 53% of the country is covered in forests that can serve the wood and furniture processing industry. Beech, oak, ash, pine and fir as well as more specialized woods such as walnut, apple and cherry, are exported as raw material, half fabricates and finished products. The abundance of both hard and softwood, the price competitive and skilled labour force and manufacture facilities make this sector very attractive for investors. To see projects in this sector click on following link.
http://www.fipa.gov.ba/investinbih/investment%20projects%20-%20wood%20sector.htm or contact drago.vucic@fipa.gov.ba
ICT
Three main telecom operators with multiple international connectivity share majority of ICT infrastructure, operate fixed and mobile telephony networks as well as Internet and data transmission networks. Only one of those three operators is privatized, while privatization of remaining two is expected in the near future. Additionally, number of IT companies and various service providers offer an array of opportunities to potential investors wishing to exploit know-how, sophistication, and new business ideas. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/index.htm or contact nina.pobric@fipa.gov.
CONSTRUCTION INDUSTRY
The BiH companies have already acquired a good international reputation for quality and reliability in all aspects of construction industry, ranging from design to structural engineering, building construction, civil engineering and the production of high-quality building materials. It is also expected that this sector - and thus opportunities for investment - will grow even further with the construction of the Corridor Vc highway that will connect Budapest with the Adriatic Sea. To see projects in this sector click on following link.
http://fipa.gov.ba/investinbih/index.htm or contact Tanja.Bojovic-Simic@fipa.gov.ba
FIPA support
What we can do for you?
To inform you on
FDI related legislation
Macroeconomic indicators
Business environment
Investment projects, privatisation opportunities, available tenders
To advice you:
How to set up a company
To identify location for Greenfield investment or business service providers
To support you to:
Implement projects
Cooperate with local private sector
Organise meeting with responsible authorities
ALL FIPA SERVICES ARE
CLIENT-ORIENTED AND FREE OF CHARGE!
For more detailed information on all attractive sectors in Bosnia and Herzegovina and interesting Investment Projects please visit FIPA web site www.fipa.gov.ba or contact us directly at the following address:
Grbavička 4, 71000 Sarajevo
Phone. +387 33 278 080
Fax +387 33 278 081
