Foreign investors may invest in real estate in Bosnia and Herzegovina (BiH) by acquiring all or part of an existing local legal entity, or by establishing a new company in BiH. The rights of foreign individuals acquiring real estate in Bosnia and Herzegovina are regulated in different ways depending on the specific circumstances.
After acquiring an existing legal entity, a foreign investor becomes the owner of the real estate held by that company. A foreigner can own real estate in Bosnia and Herzegovina based on reciprocity with the foreigner's own country which is always presumed. The Ministry of Justice of Federation of Bosnia and Herzegovina issues a list of countries with whom Bosnia and Herzegovina does not have reciprocity related to the acquisition of real estate each year by 31 January at the latest. By establishing a new company, even where this is owned exclusively by a foreign individual or entity, foreign investors can acquire property in Bosnia and Herzegovina directly, without any restrictions since they will effectively acquire the same legal rights and obligations as any local BiH legal entity.
Occasionally there may be limits on foreign investors' rights to acquire real estate in certain parts of the territory of the FBiH, or they may require special written consent from the Ministry of Justice.
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Yes, the concept applies. The costs for setting up a permanent establishment are estimated at up to KM 1,000 in the Federation of Bosnia and Herzegovina (FBiH), while in the Republika Srpska (RS) the minimum share capital is KM 1. It usually takes 30 days to set up a permanent establishment. A new legal entity must be set up. Although very similar, the procedures for establishing legal entities are governed by separate laws in the FBiH and the RS, and there are some important differences.
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Four types of structure are available to the real estate investor:
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A limited liability company is a company whose initial capital is divided into shareholdings and is set up by a written agreement signed by the founders. Members of the company are liable for the company's debts up to the level of their shareholding. Shareholdings can vary in size and are proportional to the size of members' contributions to the initial capital. Each founder can acquire only one shareholding. Profits are distributed in proportion to the size of shareholding, unless otherwise agreed.
In the Federation of Bosnia and Herzegovina (FBiH): a limited liability company may be established by one or more owners.
In the Republika Srpska (RS): a limited liability company may be established by between one and 30 people.
A joint-stock company is a company whose share capital is divided into stock. The stock can be transferred without restriction, except in cases determined by the company's articles of association or by law, and carries with it rights to participate in the company's management, profit distribution and distribution of any property that remains following insolvency or liquidation. A joint-stock company is not liable for the liabilities of its stockholders.
In the FBiH and in the RS a joint-stock company can be established by one or more stockholders, either with or without a public offering.
In the FBiH an unlimited partnership is a partnership that has at least two partners with unlimited liability.
In the RS a partnership is established between two or more individuals and/or legal entities with unlimited liability unless otherwise agreed with the relevant creditor.
In the FBiH, a limited partnership is a partnership which has one partner with unlimited liability and at least one partner with limited liability.
In the Republika Srpska, a limited partnership has one individual partner (the general partner, GP), with unlimited liability and at least one other partner (the limited partner, LP) whose liability is limited to the amount of the agreed deposit.
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KM 1,000 in the Federation of Bosnia and Herzegovina and KM 1 in the Republika Srpska
In the Federation of Bosnia and Herzegovina the minimum capital requirement is KM 50,000, while in the Republika Srpska, it is KM 20,000 without a public offering and KM 50,000 with a public offering.
Partnerships do not have minimum or maximum capital requirements.
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Court fees of approximately KM 100 for registering with the registry court. The cost of publishing the company's administrative registration in the Official Gazette of the relevant administrative body depends on the number of printed lines.
The costs for partnerships are not currently available since, in practice, partnerships are very rare in Bosnia and Herzegovina.
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Following the execution of the Articles of Association in the presence of a public notary/attorney an application must be filed with the relevant court: which depends on the location of the company's corporate seat. The time taken for registration varies between registry courts, taking up to 30 days once all the required registration documents have been submitted.
Following the execution of the Articles of Association in the presence of a public notary/attorney an application must be filed with the relevant court: which one depends on the location of the company's corporate seat. The time taken for registration varies between registry courts, taking up to 30 days once all the required registration documents have been submitted.
The company founders are required to convene a general meeting of shareholders no later than 60 days after receiving the decision from the Commission that the issuance of shares was successful. If the founding general meeting of shareholders is not convened within this period, the issuance of shares is void and the company is deemed not to have been established.
Following the execution of the Articles of Association in the presence of a public notary an application must be filed with the relevant court for the area containing the partnership's corporate seat. The time taken for registration varies between registry courts, taking up to 30 days once all the required registration documents have been submitted.
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The governing bodies of a limited liability company are:
In the Federation of Bosnia and Herzegovina:
The shareholders' assembly is the main governing body and is entitled to make decisions regarding any issue relating to the company's activities. It must be convened at least once a year in order to approve the annual financial statement and make decisions about the company's profits/losses. The assembly is given the right to make decisions by the Law on Business Companies, the statutes of the company and the articles of association. All shareholders have a designated number of votes in proportion to the size of their shareholding.
The management board is authorized to represent the company. It can have one or more members who are appointed by the shareholders' assembly. If there is more than one member, the company may be represented either by an individual member or by the board collectively. A sole shareholder may also act as a manager. A foreign individual can be appointed as a member of the company's management board.
The supervisory board is the controlling body of the company. Establishing a supervisory board is mandatory for a limited liability company only if:
In the Federation of Bosnia and Herzegovina:
The shareholders' assembly must be convened at least once a year. Under law and statute this assembly has the right to make decisions on certain issues, but can only make decisions if shareholders with more than 30% of the shares and voting rights are present either in person or via a representative.
The management board is authorized to represent the company and consists of a director and one or more executive directors. It is appointed by the supervisory board.
The supervisory board is the main supervising body of the company.
The audit board is obliged to audit the half-yearly and yearly balance sheets and at the same time verify corporate compliance and the functioning of the relevant corporate bodies in accordance with the FBiH Business Act, other relevant legislation and the basic principles of corporate governance. It must submit a report to the Assembly and the Supervisory Board no later than eight days after the completion of the audit.
Shares can be freely transferred, except if otherwise decided by law or statute.
In the Republika Srpska:
The corporate bodies of a joint-stock company founded without a public share offering are:
The corporate bodies of a joint-stock company founded with a share offering are:
The shareholders' assembly must be convened at least once a year. According to law and statute the assembly has the right to make decisions on certain issues. The shareholders' assembly can make decisions on the basis of a majority of paid voting shares.
The director represents the company, manages the business and performs other duties determined by law, the statutes and other by-laws.
The management board of a joint-stock company established by means of a share offering consists of at least three members and the 15 largest shareholders and can make decisions if the majority of the board members are present, unless a larger number is required by the relevant constitutional documents.
A board of executive directors may also be established by the constitutional documents. This will consist of one or more executive directors.
The audit board will consist of at least 3 members. The number of the audit board members must be odd.
An independent auditor must be elected at the Annual General Meeting of the Shareholders to carry out the audit of financial statements for the following business year.
The partnership is set up by a contract of establishment. All members have the right and responsibility to manage the partnership in accordance with this contract. Every partner has authority to represent the unlimited partnership and share profits and losses in equal amounts, unless the contract specifies otherwise. Voting rights and profit shares can be freely allocated.
For limited partnerships, in both the FBiH and the RS:
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Management and accounting costs depend on the size of the company, its business activities and the number of employees.
Management and accounting costs depend on the size of the partnership, its business activities and the number of employees.
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In both the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS) corporation tax is payable at the rate of 10%.
All company profits as shown in its tax statement are subject to tax. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.
Resident shareholders pay tax on the company's profits both in the territory of the FBiH and abroad.
They also pay withholding tax on dividends, interest and other amounts paid to non-residents.
Non-resident shareholders pay tax on company profits realized in the territory of the FBiH. They also pay withholding tax on dividends, interest and other amounts received.
Profits are taxed at the rate of 10% and withholding tax is also payable at the rate of 10%. Withholding tax on dividends applies at the rate of 5%.
Resident and non-resident shareholders are subject to tax on company profits.
All of a company profits as shown in its tax statement are subject to tax at the rate of 10%. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.
Individuals are subject to personal income tax at the rate of 10%. Withholding tax is payable on net income at the rate effective on the date of payment.
Taxable income includes capital gains.
In the FBiH each canton has its own tax laws relating to the transfer of property. For example, under the Canton of Sarajevo's Law on Taxes applicable to Transfers of Property and Rights, tax is payable at 5% of the market value of the property.
In the RS, the tax rate for transfers of property has been abolished for all contracts for the purchase of real estate concluded after 31 December 2011. A transfer of property effected before that date still attracts a tax at 3% of the market value of the property.
Property transfers are generally exempt from VAT. VAT at 17% is only payable on the first transfer of ownership rights, or rights to dispose of, newly constructed property.
Corporation tax is payable in the FBiH and the RS at the rate of 10%.
All profits made by the partnership as shown in its tax statement are subject to tax. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.
Resident partners pay tax on the company's profits both in the territory of the FBiH and abroad. They also pay withholding tax on dividends, interest and other amounts paid to non-residents.
Non-resident partners pay tax on company profits realized in the territory of the FBiH. They also pay withholding tax on dividends, interest and other amounts paid to non-residents.
Profits are taxed at the rate of 10% and withholding tax is also payable at 10%. Withholding tax on dividends is 5%.
Resident and non-resident partners are subject to tax on partnership profits.
All profits made by the partnership as shown in its tax statement are subject to tax at the rate of 10%. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.
Individuals are subject to personal income tax at the rate of 10%. Withholding tax is payable on net income at the rate effective on the date of payment.
Taxable income includes capital gains.
In the FBiH, each canton has its own tax laws relating to the transfer of property so tax varies from one canton to another. For example, under the Canton of Sarajevo's Law on Taxes on the Transfer of Property and Rights, tax is payable at 5% of the market value of the property.
In the RS, the tax rate for transfers of property has been abolished for all contracts for the purchase of real estate concluded after 31 December 2011. A transfer of property effected before that date still attracts a tax at 3% of the market value of the property.
Property transfers are generally exempt from VAT. VAT at 17% is only payable on the first transfer of ownership rights, or rights to dispose of, newly constructed property.
Last modified 13 Mar 2025
Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
Yes, the concept applies. The costs for setting up a permanent establishment are estimated at up to KM 1,000 in the Federation of Bosnia and Herzegovina (FBiH), while in the Republika Srpska (RS) the minimum share capital is KM 1. It usually takes 30 days to set up a permanent establishment. A new legal entity must be set up. Although very similar, the procedures for establishing legal entities are governed by separate laws in the FBiH and the RS, and there are some important differences.
Last modified 13 Mar 2025