Withholding tax is a tax calculated on income earned by a non-resident within the territory of the Federation of Bosnia and Herzegovina. This tax applies to various types of income, and it is important to understand how to calculate it correctly.
Income subject to withholding tax includes payments or transfers of income by a resident of the Federation of Bosnia and Herzegovina to a non-resident. This includes income from occasional activities, work on construction sites or installation projects, the provision of services, and consultancy services by legal entities. Withholding tax applies to different types of income such as royalties, interest, fees for entertainment and sports events, management fees, technical services, telecommunications services, income from the sale of property, and rental fees.
The obligation to pay withholding tax arises at the moment the payment is made to the non-resident. The payer is required to submit a report to the Tax Administration on the calculated and paid withholding tax within 10 days from the date of payment.
When calculating withholding tax, a formula is applied that converts the gross amount of income to a net amount after tax deduction. In the calculation, any applicable double taxation avoidance agreements should also be considered, as they may prescribe a lower rate or exemption from withholding tax.
It is important for the payer to provide proof that the legal entity – the non-resident – is a tax resident in a country with which Bosnia and Herzegovina has a valid double taxation avoidance agreement. Proper completion of forms and timely submission of reports are key steps in calculating withholding tax.
Our team of experts can provide you with support in calculating withholding tax and ensure that the process is carried out correctly. Contact us to learn more about withholding tax calculations and your tax obligations.
Through this blog post, we aim to provide useful information on calculating withholding tax and how to apply it correctly in Bosnia and Herzegovina.
