Tax Residency Criteria in Bosnia and Herzegovina
Determining tax residency in Bosnia and Herzegovina is crucial for individuals and entities to fulfill their tax obligations. The country's tax laws establish specific criteria to define tax residency, and international tax treaties may introduce modifications or exceptions to these criteria.
Domestic Tax Residency Criteria
According to Article 3 of the Law on Income Tax of Bosnia and Herzegovina, an individual is considered a tax resident if they meet any of the following conditions:
- Having a permanent residence in Bosnia and Herzegovina
- Staying in Bosnia and Herzegovina for more than 183 days in a calendar year
- Having the center of their vital interests (family, economic, and social ties) in Bosnia and Herzegovina
For entities, tax residency is determined based on their place of registration or the location of their management and control.
Impact of International Tax Treaties
Bosnia and Herzegovina has entered into several tax treaties with other countries to avoid double taxation and promote cross-border economic activities. These treaties may modify or provide exceptions to the domestic tax residency criteria.
For example, the tax treaty between Bosnia and Herzegovina and Serbia defines tax residency based on the following criteria:
- An individual is considered a resident of Bosnia and Herzegovina if they have a permanent home in Bosnia and Herzegovina or if their habitual abode is in Bosnia and Herzegovina.
- An entity is considered a resident of Bosnia and Herzegovina if it is incorporated or managed and controlled in Bosnia and Herzegovina.
The treaty also includes tie-breaker rules to determine tax residency in cases where an individual or entity is considered a resident of both Bosnia and Herzegovina and Serbia under their respective domestic laws.
Rationale and Objectives
The criteria for determining tax residency in Bosnia and Herzegovina aim to ensure that individuals and entities with significant ties to the country contribute to its tax revenues. By establishing clear residency rules, the government seeks to prevent tax evasion and ensure fairness in the tax system.
International tax treaties play a crucial role in modifying or providing exceptions to these criteria to avoid double taxation and facilitate cross-border economic activities. These treaties reflect the mutual agreement between Bosnia and Herzegovina and its treaty partners to promote cooperation and prevent tax disputes.
Call to Action
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