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Investing in BiH

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In the past several years, Bosnia and Herzegovina has made considerable efforts to open its economy to more foreign investment. However, the global economic crisis, coupled with increasing internal political struggles has led to a significant slowdown in necessary reforms since 2008. Previous initiatives included a liberal state-level foreign investment policy, a value-added tax and a uniform trade and customs policy. Foreign investors continue to face a number of obstacles, including a complex legal and regulatory framework, non-transparent business procedures and weak judicial structures.

The BIH Law on Foreign Direct Investment provides a generic framework for foreign investment. The law gives foreign investors the same rights as domestic investors, including bidding on privatization tenders. With the exception of the defence industry and the media sector, where foreign control is limited to 49 percent, there are no restrictions on investment. Investors are also protected from changes in laws regarding foreign investment. The Law on Foreign Direct Investment also guarantees the immediate right to transfer and repatriate profits and remittances and allows local and foreign companies to hold accounts in one or more banks authorized to initiate or receive payments in foreign currency

BiH’s Foreign Investment Promotion Agency (FIPA) provides some assistance to foreign investors, but is constrained by limited staff and financial resources.

According to FIPA, the value of foreign direct investments in 2010 was Euro 359 million. Investments from Austria, Serbia, Croatia, Saudi Arabia, Slovenia and Turkey dominated in 2010. The manufacturing sector received the highest percentage of FDI, followed by banking and telecommunications.

There are several incentives for foreign direct investment, including exemptions from BiH’s Foreign Investment Promotion Agency (FIPA) provides some assistance to foreign investors, but is constrained by limited staff and budgetary resources.

According to FIPA, the value of foreign direct investments in 2010 was Euro 359 million. Investments from Austria, Serbia, Croatia, Saudi Arabia, Slovenia and Turkey dominated in 2010. The manufacturing sector received the highest percentage of FDI, followed by banking and telecommunications (Source: FIPA)

There are several incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees. Bosnia and Herzegovina is divided into three jurisdictions for direct tax purposes: the Federation of BiH, the Republika Srpska and the Brčko District. The corporate income tax in the Federation allows tax relief to foreign investors who invest KM 20 million over a five year period. In the Brčko District, the corporate income tax allows offsetting of profits against losses over a five-year period. Foreign investors can open bank accounts in all jurisdictions and transfer abroad the funds acquired from their profits, without any restrictions.

 

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