VAT Refund in Bosnia and Herezgovina 2025: Fast & Reliable Guide for Foreign Business

At its heart, the VAT refund for foreign businesses is a powerful government incentive that lets foreign companies claim back the Value-Added Tax (KDV) they’ve paid on their business expenses in Bosnia and Herzegovina. The whole point is to ensure this tax burden doesn’t get passed on to international customers, making goods and services from Bosnia and Herzegovina more competitive on the world stage.

Table of Contents

• Understanding the VAT Refund System for Foreign Businesses

• Confirming Your Eligibility for a VAT Refund

• A Practical Walkthrough of the Application Process

• Getting Your Paperwork in Order

• Avoiding Common Pitfalls in Your VAT Refund Claim

• Frequently Asked Questions About VAT Refunds for Foreign Businesses

• Disclaimer

Understanding the VAT Refund System for Foreign Businesses

The VAT refund process for foreign businesses is conducted through direct claims to tax offices, rather than through VAT returns. To obtain the refund, the foreign company must appoint a VAT agent who will handle all the necessary tasks, receive the funds into their account, and then transfer the money to the foreign company.

Confirming Your Eligibility for a VAT Refund

To maximize your VAT refunds, you first need to know if you are eligible. Generally, foreign businesses can reclaim VAT if they meet specific criteria:

• purchases or imports goods, or receives services for the purpose of carrying out an activity that the foreign taxpayer carries out abroad, provided that the foreign taxpayer would be entitled to a deduction of input tax on that activity if it were carried out in Bosnia and Herzegovina;.

• during the period in which the right to a refund of input tax is recognized, does not carry out a supply of goods and services that would be considered a supply carried out in Bosnia and Herzegovina, except:.

  • a) services related to the import of goods related to Article 21, paragraph 2, item 2 of the VAT Law;

    b) services related to imports in accordance with Article 26 and exports in accordance with Article 27 of VAT Law;

    c) services on which VAT has been paid by the person for whom those services were performed.

• VAT that is either baseless or miscalculated is not eligible for a refund, including VAT assessed because of not fulfilling the criteria for VAT exemption ("zero" rate). This is particularly significant concerning services rendered.

A Practical Walkthrough of the Application Process

When submitting the first refund request, the representative submits a completed Questionnaire for registering a foreign taxpayer, based on which a registration number is assigned under which the foreign taxpayer will be registered with the Administration for VAT refund purposes.

After the registration procedure is completed, the Tax Administration issues Registration certificate, which is an integral part of this instruction.

The right to a refund is exercised by means of a request / cliam. The information in the request must be complete, sufficient, understandable and accurate, in particular with regard to the purpose of using the goods purchased and/or services received, in order to verify whether the conditions for granting a VAT refund upon request are met.

The following documentation shall be attached to the request:

• original power of attorney, certified by the competent authority, which the foreign taxpayer, for the purposes of VAT refund, gave to the representative, not older than one year from the date of issue,

• original tax invoices for goods purchased and services received in Bosnia and Herzegovina, which are issued to the foreign taxpayer and which were issued in accordance with Article 55 of the Law,

• original single customs documents under which the goods were imported, if it is an import,

• original VAT certificate from the tax authority of the country in which the foreign taxpayer has its registered office, which contains the taxpayer's identification number for VAT purposes (VAT number), that he exercises the right to a full deduction of input tax, as well as information on the type of activity carried out by the foreign taxpayer, which cannot be older than six months from the date of issue.

Getting Your Paperwork in Order

The documentation must be formally translated into one of the official languages of Bosnia and Herzegovina.Amounts for which a VAT refund is requested must be expressed in convertible marks (BAM).

If more than 30 tax invoices, the representative is obliged to, in addition to the same,

in electronic form, submit the specification of tax invoices, s data from the specification form "PDV-SPO", in the format "excel" on a suitable medium or removable memory.

Avoiding Common Pitfalls in Your VAT Refund Claim

When dealing with VAT refunds for foreign taxable persons in Bosnia and Herzegovina, several common pitfalls can arise:

• Misunderstanding of Supply made in Bosnia and Herzegovina: There may be confusion about what qualifies as supplies of goods supplied and services rendered in Bosnia and Herzegovina, which is a key criterion for obtaining a refund. This is particularly true when purchasing goods in the country (and selling them). It is crucial to have a clear understanding of what is considered a supply under local VAT regulations. See our practical examples bellow for more information.

• Technical Errors in Invoice Lists: Mistakes in the compilation of invoice lists can lead to issues in the refund process. Ensuring accuracy in these documents is crucial.

• Misclassification of Services: Incorrectly classifying services, particularly regarding the place of supply, can result in complications. Proper classification is necessary to determine VAT obligations accurately.

• Misunderstanding of Recharges: There may be confusion surrounding recharges and how they should be treated for VAT purposes. Clarity on this matter is essential to avoid errors.

• Missing Mandatory Data: Official documents must include all required data. Missing information can lead to delays or rejection of VAT refund claims.

Frequently Asked Questions About VAT Refunds for Foreign Businesses

How Long Does the VAT Refund Process Typically Take?

The VAT refund process usually takes 1-6 months, provided all paperwork is completed accurately and all criteria are met. The sooner you submit the request, the quicker you will receive the refund.

Can I Claim a VAT Refund for Services provided in Bosnia and Herzegovina?

Yes, foreign taxable persons can request a VAT refund for services rendered in Bosnia and Herzegovina (services to which the place of supply rule applies).

Is There a Time Limit for Filing a VAT Refund Claim?

Yes, VAT refund claims should be made at least to June 30 in current year for the invoices received in the past year.

Who is eligible for a VAT refund on in Bosnia and Herezgovina

In Bosnia and Herzegovina, foreign taxable persons may be eligible for a VAT refund under certain conditions. The following criteria typically apply:

• Non-Resident Status: The applicant must be a taxable person established outside Bosnia and Herzegovina.

• Business Activities: The foreign entity must engage in taxable transactions in Bosnia and Herzegovina.

• VAT Registration: The applicant may need to be registered for VAT purposes in their home country.

• Proof of Expenses: The applicant must provide evidence of VAT paid on business-related expenses incurred in Bosnia and Herzegovina.

• No Reciprocity Principle: The applicant's country is not required to provide Bosnian entities with equivalent VAT refund opportunities.

It is advisable for foreign taxable persons to consult with a local tax advisor or legal expert to ensure compliance with all requirements and to facilitate the refund process.

What documents are required for the VAT Refund in Bosnia and Herezgovina?

• original power of attorney, certified by the competent authority, which the foreign taxpayer, for the purposes of VAT refund, gave to the representative, not older than one year from the date of issue,

• original tax invoices for goods purchased and services received in Bosnia and Herzegovina, which are issued to the foreign taxpayer and which were issued in accordance with Article 55 of the Law,

• original single customs documents under which the goods were imported, if it is an import,

• original VAT certificate

Real-Life Examples

To illustrate the benefits of VAT refunds for foreign businesses, consider the following examples:

Example 1: Cost of conference held in Bosnia and Herzegovin

The VAT refund application was submitted by a representative on time, with a complete set of prescribed documentation

• Tje biggest part of the VAT refund is claimed based on invoices from domestic suppliers related to the costs of a conference held in Bosnia and Herzegovina (BiH). The services include: "conference hall rental, technical equipment rental, guest accommodation, catering services, hostess services..." The requested refund amount for this part is 50,000.00 KM.

• The business purpose of the procured services is "for the business purposes of event organization, event management activities, and for the costs of the representative office in BiH."

• The foreign taxable person is registered as a marketing agency and an event organization agency.

• The domestic suppliers have reported the VAT from the subject invoices in their VAT returns.

• The foreign taxable person submitted a statement explaining that it organized the conference for a client from the same country (both are VAT taxpayers), and invoiced this service with VAT displayed.

Key Question:

Does the foreign taxable person have the right to a VAT refund under Article 53 of the Law?

Answer:

The taxpayer is not eligible for a VAT refund on the conference costs because they re-invoiced them. Pursuant to Article 10 of the VAT Law, this action is deemed a service supplied by the foreign taxable person. As this is considered a domestic service transaction within BiH, the taxpayer fails to meet the requirements for a VAT refund.

Example 2: Purchase of goods (corn)

The VAT refund application was submitted by a representative on time, with a complete set of prescribed documentation

• The Foreign Taxable Person (FTP) purchased large quantities of corn in Bosnia and Herzegovina (BiH).

• The corn seller is a VAT taxpayer; however, they do not have an approved export license and set a condition for the sale: exclusively for the BiH market.

• The FTP has an invoice with VAT for the corn purchase and is requesting a VAT refund for it.

• The FTP is engaged in the wholesale gold trade business.

• The domestic taxpayer is also engaged in the wholesale corn trade business and has duly reported the issued invoice in their VAT return.

• The representative submitted a statement confirming that the corn in question left BiH, i.e., was exported by another domestic taxpayer for the FTP, along with the relevant customs documentation.

Key Question:

Does the Foreign Taxable Person have the right to a VAT refund under Article 53 of the Law?

Answer:

Since the cron was exported by a different taxpayer from Bosnia and Herzegovina (BiH) – and not by the taxpayer from whom the foreign taxable person purchased the gold – it is considered that a transaction occurred between the buyer of the gold and the exporter of the gold. This violates the criterion for a VAT refund to the foreign taxable person who purchased the gold.

Example 2: Telecomunication services

The VAT refund application was submitted by a representative on time, with a complete set of prescribed documentation.

• The VAT refund is claimed based on an invoice from a domestic supplier for "equipment maintenance and correct functioning services," with a requested refund amount of 500,000.00 KM.

• The business purpose of the procured services is "for business purposes to ensure the provision of telecommunications services."

• Both the buyer and the supplier are engaged in the business of providing telecommunications services.

• The domestic supplier has reported the VAT from the subject invoices in its VAT return.

• The equipment is located in BiH and is owned by the domestic supplier.

• The foreign taxable person is a 100% owner of the domestic taxable person.

• A Contract was submitted, which reveals that the equipment is used to transmit signals from BiH to a satellite owned by the foreign taxable person, while the service cost price is formed based on the equipment maintenance costs.

Key Question:

Does the foreign taxable person have the right to a VAT refund under Article 53 of the Law?

Answer:

The foreign taxable person is not entitled to a VAT refund. It has been determined that, in this specific case, the services fall under Article 15, Paragraph 2, Item 4 of the Law, for which the place of taxation is the customer’s place of establishment.  Consequently, the VAT was calculated without legal basis.

Disclaimer

This article is intended for informational purposes only and does not constitute legal, tax, or financial advice. While every effort has been made to ensure accuracy, VAT refund regulations in Bosnia and Herzegovina are subject to change and may vary depending on the specific circumstances of each business. Readers are strongly advised to consult with a qualified tax advisor or certified public accountant (CPA) before making any decisions related to export VAT refunds or compliance procedures. Prime Consulting does not assume any responsibility for actions taken based solely on the information provided in this guide.